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What changed in Mastech Digital, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Mastech Digital, Inc.'s 2023 and 2024 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 2024 report.

+223 added−219 removedSource: 10-K (2025-03-14) vs 10-K (2024-03-15)

Top changes in Mastech Digital, Inc.'s 2024 10-K

223 paragraphs added · 219 removed · 186 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAdditionally, we have made investments in our domestic recruitment structure, primarily to support our branch service model. On June 15, 2015, we completed the acquisition of Hudson Global Resources Management, Inc.’s U.S. IT staffing business (“Hudson IT”). Hudson IT was a domestic IT staffing business with offices in Chicago, Boston, Tampa and Orlando.
Biggest changeIT staffing business (“Hudson IT”). Hudson IT was a domestic IT staffing business with offices in Chicago, Boston, Tampa and Orlando. Hudson IT deployed a branch service business model that targeted clients that are direct end-users of IT staffing services.
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.
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. 5 Table of Contents • Holistic data strategy: We develop data strategies that encompass governance, acquisition, quality, and integration, laying a foundation for effective data-driven decision-making. • 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.
Long-standing relationships with corporate clients, blue-chip IT integrators and MSPs are a core component of our future growth strategy for our staffing business, while good relationships with customer influencers and C-level decision makers drives our Mastech InfoTrellis business. These relationships, exemplified by our consistently low customer attrition rate, reflect our focus and commitment to our customers.
Long-standing relationships with corporate clients, blue-chip IT System Integrators and MSPs are a core component of our future growth strategy for our staffing business, while good relationships with customer influencers and C-level decision makers drives our Mastech InfoTrellis business. These relationships, exemplified by our consistently low customer attrition rate, reflect our focus and commitment to our customers.
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.
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, data, analytics, cloud-based technologies and automation.
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.
With our October 2020 acquisition of AmberLeaf, we gained complementary capabilities in customer experience consulting and managed services, as well as a roster of existing clients. Today, professional service firms have increasingly focused their efforts on partnering with their clients on enterprise-wide Digital Transformation.
For clients with a need to supplement their own abilities to attract highly qualified temporary IT personnel and prefer a low-touch sales model, such as integrator and staffing clients, we generally deploy a centralized telesales model, complemented with client visits.
For clients with a need to supplement their own abilities to attract highly qualified temporary IT personnel and prefer a low-touch sales model, such as Systems Integrator and staffing clients, we generally deploy a centralized telesales model, complemented with client visits.
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.
Our geographical 8 Table of Contents 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. We provide these services across a broad spectrum of industry verticals, including: financial services, government, healthcare, retail, technology and telecommunications.
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.
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 175 recruiters and sourcers who focus on recruiting U.S.-based candidates to service a geographically diverse client base in the U.S.
We have access to a large and differentiated recruiting pool due to our brand recognition with both U.S. citizens and H1-B visa holders in the U.S. Unlike most staffing firms that have a high concentration of either H1-B workers or W-2 hourly U.S. citizens, we have historically maintained a balance of H1-B and W-2 hourly employees.
We have access to large and differentiated recruiting pools due to our brand recognition with both U.S. citizens and H1-B visa holders in the U.S. Unlike most staffing firms that have a high concentration of either H1-B workers or W-2 hourly U.S. citizens, we have historically maintained a balance of H1-B and W-2 hourly employees.
Attractive financial profile We have historically enjoyed a lower operating cost structure than our industry peers due to our low cost telesales in our IT Staffing Services segment and our offshore delivery models in both of our operating segments. These business models are cost-effective and allow us to quickly adjust our cost structure to changes in our business environment.
Attractive financial model We have historically enjoyed a lower operating cost structure than our industry peers due to our low cost telesales in our IT Staffing Services segment and our offshore delivery models in both of our operating segments. These business models are cost-effective and allow us to quickly adjust our cost structure to changes in our business environment.
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.
Together with our operating subsidiaries, we have over 37 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.
We are also re-aligning ourselves to be a more dynamic, globally integrated organization across our traditional services offerings and to support our goal of expanding beyond niche services and providing full Data Modernization support to a wide range of organizations — from a $10 million start up to a Fortune 100 enterprise.
We are also re-aligning ourselves to be a more dynamic, globally integrated organization across our traditional services offerings and to support our goal of expanding beyond niche services and providing full Data Modernization support to a wide range of organizations — from a $10 million start up to a Fortune 500 enterprise.
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.
The combination of our offshore recruiting capabilities, investment in sourcing and recruiting processes, expanded search coverage, around-the-clock sourcing, and extensive candidate pools, 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.
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.
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, as well as expanding existing client relationships. • Our typical credit terms require our invoices to be paid within 45 to 60-days of receipt by the client.
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.
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 the intellectual property and possess deep proprietary knowledge of the frameworks and products that we have built in our Mastech InfoTrellis business.
This cost-effective model is aimed at integrator and other staffing clients, with a need to supplement their abilities to attract highly qualified temporary IT personnel. Additionally, we use a branch service sales model in select geographies within the U.S. The branch services model employs local sales and recruitment resources, aimed at establishing strong relationships with both end-clients and candidates.
This cost-effective model is aimed at System Integrators and other staffing clients, with a need to supplement their abilities to attract highly qualified temporary IT personnel. Additionally, we use a branch service sales model in select geographies within the U.S. The branch services model employs local sales and recruitment resources, aimed at establishing strong relationships with both end-clients and candidates.
Geographic Presence & Industry Verticals All of our IT staffing services revenues are generated from services provided in the U.S. We market our services on a national basis and have the ability to provide services in all 50 U.S. States.
Geographic Presence & Industry Verticals All of our IT staffing services revenues is generated from services provided in the U.S. We market our services on a national basis and have the ability to provide services in all 50 U.S. States.
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.
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 $8 million.
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.
Additionally, we have considerable industry experience by serving some of the world’s most-respected brands in financial services, manufacturing, retail and healthcare. 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.
For example, we use artificial intelligence and web-based tools to expand the reach of our candidate searches. We also employ a state-of-the-art applicant tracking system that has recently been enhanced with proprietary tool-kits and job board / internet interfacing capabilities, resulting in further operational efficiencies.
For example, we use artificial intelligence and web-based tools to expand the reach of our candidate searches. We also employ a state-of-the-art applicant tracking system that has recently been enhanced with proprietary toolkits and job board / internet interfacing capabilities, resulting in further operational efficiencies.
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.
We recruit for both segments through global recruitment centers largely located in India that deliver a full range of recruiting and sourcing services. Our centers employ approximately 175 recruiters and sourcers that focus on recruiting U.S.-based candidates to service a geographically-diverse client base in the U.S.
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.
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.
With rich experience and proven success in handling several learning and performance engagements across industries, Mastech Digital’s team combines digital and physical modes of learning methods to ensure unified organizational behavior and augmented performance across teams. Mastech Digital’s learning paradigm consists of web-based learning, mobile learning, social learning, hybrid learning and virtual learning.
With rich experience and proven success in handling several learning and performance engagements across industries, Mastech Digital’s team combines digital and physical learning modalities to ensure unified organizational behavior and augmented performance across teams. Mastech Digital’s learning paradigm consists of web-based learning, mobile learning, social learning, hybrid learning and virtual learning.
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. As of December 31, 2023, approximately 37% of our employee workforce was working under Mastech Digital sponsored H1-B temporary work visa.
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. As of December 31, 2024, approximately 40% of our employee workforce was working under Mastech Digital sponsored H1-B temporary work visa.
Our ability to respond to client requests faster than the competition is critical for success in our industry as most staffing firms access the same candidate pool via job boards and websites.
Our ability to respond to client requests faster than the competition is critical for success in our industry as most staffing firms access the same candidate pool via job boards, websites and other recruitment tools.
Headquartered near Pittsburgh, Pennsylvania, we have approximately 1,300 consultants that provide services across a broad spectrum of industry verticals.
Headquartered near Pittsburgh, Pennsylvania, we have approximately 1,500 consultants that provide services across a broad spectrum of industry verticals.
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.
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) client partners who largely focus on new business development; and 2) technical relationship managers (principals) who focus on growing strong relationships within existing clients.
We rely upon a combination of nondisclosure and other arrangements to protect our intellectual property. Seasonality Our operations are generally not affected by seasonal fluctuations. However, our consultants’ billable hours are affected by national holidays and vacation trends. Accordingly, we typically have lower utilization rates during the fourth quarter.
We rely upon a combination of nondisclosure and other arrangements to protect our intellectual property. Seasonality Our consultants’ billable hours are affected by national holidays and vacation trends. Accordingly, we typically have lower utilization rates during the fourth quarter.
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.
Employees At December 31, 2024, we had 902 North American employees and 623 employees offshore, in addition to 291 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.
(“InfoTrellis”), a project-based consulting services company with specialized capabilities in data management and analytics. In 2018 and 2019, we significantly expanded our service offerings and capabilities within our Data and Analytics Services segment. In 2020, we launched a new service offering in our IT Staffing Services segment branded as MAS-REMOTE.
In 2018 and 2019, we significantly expanded our service offerings and capabilities within our Data and Analytics Services segment. In 2020, we launched a new service offering in our IT Staffing Services segment branded as MAS-REMOTE.
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.
Below is a breakdown of customer revenue percentages for each industry vertical in 2024: Financial Services 29 % Retail 13 % Healthcare 27 % Other 8 % Manufacturing 23 % 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 must be able to do this efficiently to provide speed to market with pricing that is competitive and represents value to our clients. The principal competitive factors in attracting qualified personnel are compensation, availability, location, quality of projects and schedule flexibility. We believe that many of the professionals included in our database may also pursue other employment opportunities.
We must be able to do this efficiently to provide speed to market with pricing that is competitive and represents value to our clients. The principal competitive factors in 9 Table of Contents attracting qualified personnel are compensation, availability, location, quality of projects and schedule flexibility.
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.
In late 2023, we expanded our staffing services to include an engineering service offering. In 2024, engineering revenues were less than 5% of IT staffing services revenues. 6 Table of Contents Sales and Marketing We target much of our marketing efforts toward businesses and institutions with significant budgets, recurring IT staffing and Digital Transformation needs, or new transformation efforts.
Technology and Client Focus of our IT Staffing and Digital Transformation Services Our staffing delivery teams, spread across the U.S. and India, are segmented 1) by technologies, allowing us to reach deep and wide in our understanding of technology domains; and 2) by client relationships which gives us a keen understanding of our clients’ needs and preferences.
We believe that this balanced mix allows us to access a broader candidate pool than our primary competition. 7 Table of Contents Technology and Client Focus of our IT Staffing and Digital Transformation Services Our staffing delivery teams, spread across the U.S. and India, are segmented by 1) technologies, allowing us to reach deep and wide in our understanding of technology domains; and 2) client relationships which gives us a keen understanding of our clients’ needs and preferences.
In 2003, we launched our offshore global recruitment center model in an effort to meet an increase in industry demand with lower cost recruiting resources. Over the last nineteen years, we have made significant investments in our offshore center to improve infrastructure, processes and effectiveness.
In 2003, we launched our offshore global recruitment center model in an effort to meet an increase in industry demand with lower cost recruiting resources. Over the last twenty years, we have made significant investments in our offshore center to improve infrastructure, processes and effectiveness. On June 15, 2015, we completed the acquisition of Hudson Global Resources Management, Inc.’s U.S.
The name change was part of our rebranding initiative that reflects our transformation into a digital technologies company. The rebranding also included a logo change and a refreshed corporate website. In 2017, we added specialized capabilities in delivering data management and analytics services to a global customer-base through the acquisition of the services division of InfoTrellis, Inc.
The rebranding also included a logo change and a refreshed corporate website. In 2017, we added specialized capabilities in delivering data management and analytics services to a global customer-base through the acquisition of the services division of InfoTrellis, Inc. (“InfoTrellis”), a project-based consulting services company with specialized capabilities in data management and analytics.
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.
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 opportunities.
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.
We work to increase our engagements with our existing client relationships as well as continually developing new clients. 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.
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.
Additionally, we have an existing credit facility to support our organic and inorganic growth aspirations. 10 Table of Contents 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.
Our blue-chip client base has resulted in high quality accounts receivable and a strong and predictable cash flow conversion metric. Additionally, we have an existing credit facility to support our organic and inorganic growth aspirations.
Our blue-chip client base has resulted in high quality accounts receivable and a strong and predictable cash flow conversion metric.
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.
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.
Hudson IT deployed a branch service business model that targeted clients that are direct end-users of IT staffing services. Additionally, as part of the Hudson IT acquisition, we acquired a digital learning services practice which became one of our technology practices. In 2016, we changed our name to Mastech Digital, Inc.
Additionally, as part of the Hudson IT acquisition, we acquired a digital learning services practice which became one of our technology practices. In 2016, we changed our name to Mastech Digital, Inc. The name change was part of our rebranding initiative that reflects our transformation into a digital technologies company.
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.
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. 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.
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.
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. In 2024, we started a ServiceNow practice and focused on artificial intelligence technologies and applications across all of our businesses.
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.
Below is a breakdown of our IT Staffing Services revenues for the year ended December 31, 2024: Financial Services 54 % Telecom 5 % Government 8 % Retail 5 % Technology 7 % Other 14 % Healthcare 7 % Mastech Digital, Inc.
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.
Furthermore, prospective clients reach us through referrals from our existing client base, our reputation in the data & analytics domain, and through our industry partners. 4 Table of Contents Once engaged with a prospect, our approach to value-delivery starts with the definition of a discrete business problem.
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We believe that this balanced mix allows us to access a broader candidate pool than our primary competition.
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Operating Segments Our revenues are generated from two business segments: Data and Analytics Services and IT Staffing Services.
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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.
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We believe that many of the professionals included in our database may also pursue other employment opportunities. Therefore, our responsiveness to the needs of these professionals is an important factor in our ability to be successful.
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Our IT staffing management team is comprised of business leaders with deep industry experience, is a unique blend of executives with significant Mastech Digital experience and others who have held leadership roles in other companies.
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We believe this talent, together with combined experience across a variety of industries, allows us to capitalize on the positives of our existing business models and, at the same time, improve our service offerings, internal processes and long-term strategy for future growth.

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. 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.
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 could occur; • 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.
Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties, disrupt our operations and the services we provide to customers, and damage our reputation, and cause a loss of confidence in our services, which could adversely affect our operating results and competitive position.
Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties, disrupt our operations and the services we provide to customers, damage our reputation, and cause a loss of confidence in our services, which could adversely affect our operating results and competitive position.
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.
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. 23 Table of Contents Negative economic or business conditions brought on by a global health pandemic, epidemic or outbreak may adversely affect demand for our services.
Our failure to hire, train and retain employees with such skills could have a material adverse impact on our future revenues. Our “preferred vendor” contracts generally result in lower margins.
Our failure to hire, train and retain employees with such skills could have a material adverse impact on our future revenues. Our Client’s “preferred vendor” contracts generally result in lower margins.
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.
The Tax Cuts and Jobs Act of 2017 continues to require interpretation, and the new administration could modify key aspects of the tax code, which could materially affect our tax obligations and effective tax rate.
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.
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 current 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.
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.
Although we believe the immediate impact of the COVID-19 pandemic has been assessed and largely reflected in our 2024 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.
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.
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. 26 Table of Contents
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.
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 possible due to past terrorist incidents in India, troop mobilizations along the border, and the geopolitical situation in the region.
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.
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.
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.
As of December 31, 2024, 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.
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.
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; 15 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.
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 for the Company, which could have a negative impact on our operating results, cash flows and financial condition .
In recent years, the vast majority of our H1-B hires were not subject to the annual quota limiting H1-B visas because they were already in the U.S. under H1-B visa status with other employers. As a result, the negative impact on recruiting due to the exhaustion of recent H1-B quotas was not substantial.
In recent years, the vast majority of our H1-B hires were not subject to the annual quota limiting H1-B visas because they were already in the U.S. under H1-B visa status with other employers. As a result, the negative 20 Table of Contents impact on recruiting due to the exhaustion of recent H1-B quotas was not substantial.
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.
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. 14 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.
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.
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.
Generally, climate risks and opportunities for companies and their investors fall into four categories: • Physical risk from climate change; • Regulatory risks and opportunities related to existing or proposed greenhouse gas (“GHG”) emissions limits; • Indirect regulatory risks and opportunities related to products or services from high emitting companies; and • Litigation risks for emitters of greenhouse gases.
Generally, climate risks and opportunities for companies and their investors fall into four categories: • Physical risk from climate change; • Regulatory risks and opportunities related to existing or proposed greenhouse gas (“GHG”) emissions limits; 19 Table of Contents • Indirect regulatory risks and opportunities related to products or services from high emitting companies; and • Litigation risks for emitters of greenhouse gases.
If our estimates or the assumptions underlying such estimates are incorrect, actual results may differ materially from our estimates and we may need to, among other things, revise revenues or recognize additional charges that could adversely impact our results of operations and our financial condition.
If our estimates or 22 Table of Contents the assumptions underlying such estimates are incorrect, actual results may differ materially from our estimates and we may need to, among other things, revise revenues or recognize additional charges that could adversely impact our results of operations and our financial condition.
Our multi-year Center of Excellence service offering may be early terminated with a short notice from the client, which could materially impact our backlog and adversely affect our business and future revenues. Our Data and Analytics Services segment markets a multi-year service offering known as a Center of Excellence.
Our multi-year Center of Excellence service offering may be early terminated on short notice from the client, which could materially and adversely affect our business, backlog and future revenues. Our Data and Analytics Services segment markets a multi-year service offering known as a Center of Excellence.
Congress and the Trump administration made substantial changes to U.S. policies, which included comprehensive corporate and individual tax reform. In addition, the Trump administration called for significant changes to U.S. trade, healthcare, immigration and government regulatory policy. With the transition to the Biden administration in early 2021, changes to U.
Congress and the then-current administration made substantial changes to U.S. policies, which included comprehensive corporate and individual tax reform. In addition, the administration called for significant changes to U.S. trade, healthcare, immigration and government regulatory policy. With the transition to the Biden administration in early 2021, changes to U.
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 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 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.
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.
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.
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 25 Table of Contents these limitations, internal control over financial reporting might not prevent or detect all misstatements or fraud.
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.
A significant number of organizations is attempting to migrate their IT business applications to advanced technologies, such as artificial intelligence, cloud services, data science-based solution, 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.
Until we know what policy changes are made and how those changes impact our business and the business of our competitors over the long term, we will not know if, overall, we will benefit from them or be negatively affected by them. Adverse results in tax audits or interpretations of tax laws could have an adverse impact on our business.
Until we know what policy changes are made and how those changes impact our business and the business of our competitors over the long term, we will not know if, overall, we will benefit or be negatively affected by them. 21 Table of Contents Adverse results in tax audits or interpretations of tax laws could have an adverse impact on our business.
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.
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.
Acquisitions, such as our acquisitions of Hudson IT, the services division of InfoTrellis, Inc., and AmberLeaf Partners, Inc., involve numerous risks, including the possibility that: • we do not successfully integrate the operations, systems, technologies, products, offerings and personnel of the acquired company or companies; • we do not generate sufficient revenues to offset increased expenses associated with our acquisitions; • our management’s attention is diverted from normal daily operations of our business and the challenges with managing larger and more widespread operations resulting from our acquisitions; • we experience difficulties entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions; and • we lose key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans.
Acquisitions involve numerous risks, including the possibility that: • we do not successfully integrate the operations, systems, technologies, products, offerings and personnel of the acquired company or companies; • we do not generate sufficient revenues to offset increased expenses associated with our acquisitions; • our management’s attention is diverted from normal daily operations of our business and the challenges with managing larger and more widespread operations resulting from our acquisitions; • we experience difficulties entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions; and • we lose key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans.
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 18 Table of Contents seeking damages or other remedies concerning our operations, products, services, employees and other matters.
Additionally, there is uncertainty as to the position the U.S. will take with respect to immigration under the Biden administration or any new administration.
Additionally, there is uncertainty as to the position the U.S. will take with respect to immigration under the current administration or any new administration.
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.
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 58% of Mastech Digital’s outstanding common stock as of December 31, 2024. Accordingly, 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 16 Table of Contents 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 will be successful in the marketplace.
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.
At December 31, 2024, we had no outstanding borrowings under our Credit Agreement with PNC Bank and certain other lenders (the “Credit Agreement”) and unused borrowing capacity of $22.6 million under the revolving credit facility established by the Credit Agreement.
Lack of success in recruitment and retention of IT and data and analytics professionals may decrease our revenues and increase the costs needed to maintain our workforce. Our business involves the delivery of professional services and is labor-intensive.
Risks Related to the Company’s Business and Operation Lack of success in recruitment and retention of IT and data and analytics professionals may decrease our revenues and increase the costs needed to maintain our workforce. Our business involves the delivery of professional services and is labor-intensive.
Over the last several years, we have experienced turnover in the leadership of our Data and Analytics Services segment, and the loss of the services of any of our key executives for any reason could have a material adverse effect on our business.
Over the last several years, we have experienced turnover in the leadership of our businesses, and the loss of the services of any of our key executives for any reason could have a material adverse effect on our business.
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.
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, 2024, approximately 54% of our revenues were derived from our top ten clients and approximately 49% of revenues came from financial services clients.
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.
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; 24 Table of Contents • 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.
As of December 31, 2023, approximately 37% of our employee workforce was working under Mastech Digital sponsored H1-B temporary work visas.
As of December 31, 2024, approximately 40% of our employee workforce was working under Mastech Digital sponsored H1-B temporary work visas.
Our business depends on the overall demand for IT and data and analytics professionals and on the economic health of our clients. Our business could be adversely affected by the effects of the COVID-19 virus or another pandemic, epidemic or outbreak on the economic and business climate.
Our business depends on the overall demand for IT and data and analytics professionals and on the economic health of our clients. Our business could be adversely affected by the effects of a pandemic, epidemic or other outbreak on the economic and business climate.
Furthermore, the impact of the COVID-19 virus outbreak and the actions taken to curtail the spread of the virus could disrupt or materially impair the ability of our clients to operate their businesses.
Furthermore, the impact of a virus or other outbreak and actions taken to curtail its spread could disrupt or materially impair the ability of our clients to operate their businesses.
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.
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 2021through 2024.
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.
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.
However, the subject of H1-B visas has recently become a major political discussion point and there are indications that the entire H1-B visa program may be significantly overhauled.
However, the subject of H1-B visas has recently become a political discussion point and the entire H1-B visa program could be significantly overhauled.
For example, the spread of the COVID-19 virus and the efforts taken to control its spread may cause companies to reduce their staffing and data and analytics budgets and adversely affect demand for our services, thus reducing our revenues.
For example, the spread of the COVID-19 virus and the efforts taken to control its spread resulted in companies reducing their staffing and data and analytics budgets and adversely affected demand for our services.
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.
Certain institutional investors, investment funds, other influential investors, customers, suppliers and other third parties are also increasingly focused on ESG practices.
There can be no assurance that our Indian operations will support our growth strategy. The risks inherent in our Indian business activities include: • unexpected changes in regulatory environments; • foreign currency fluctuations; • tariffs and other trade barriers; • difficulties in managing international operations; and • the burden of complying with a wide variety of foreign laws and regulations.
The risks inherent in our Indian business activities include: • unexpected changes in regulatory environments; • foreign currency fluctuations; • tariffs and other trade barriers; 12 Table of Contents • difficulties in managing international operations; and • the burden of complying with a wide variety of foreign laws and regulations.
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.
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 36% of our IT Staffing Services Segment’s 2024 revenues and increased marginally in recent years.
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.
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.
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.
In addition, the terms of existing or future debt agreements and other factors may restrict us from pursuing any of these alternatives.
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.
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. 16 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.
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.
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.
Any such disruption or impairment could lower the demand for our services, result in collection issues on our outstanding accounts receivable and have a material adverse impact on our revenues and profitability.
Any such disruption or impairment could lower the demand for our services, result in collection issues on our outstanding accounts receivable and have a material adverse impact on our revenues and profitability. We are unable to predict the extent to which the global COVID-19 pandemic may adversely impact our business operations, financial performance and results of operations.
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.
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.
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.
Congress, the current administration or any new administration have impacted and 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. Although we cannot predict the impact, if any, of these changes to our business, they could adversely affect our business.
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.
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. 13 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.
In the event of an unfavorable resolution of a dispute over our intellectual property rights, we may incur substantial costs or liabilities, which would decrease our operating margins. Our business is certified as a minority-owned business, and loss of that certification may impact our ability to gain new customers or expand our business with existing customers.
In the event of an unfavorable resolution of a dispute over our intellectual property rights, we may incur substantial costs or liabilities, which would decrease our operating margins. 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.
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 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.
We incurred an expense charge of $450,000 in 2022 related to this event, which included the cost of engaging external advisors.
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. 17 Table of Contents 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. 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.
If we are unable to acquire and invest in attractive businesses, our strategy for growth may be impaired.
Removed
Risks Related to the Company’s Business and Operation We are unable to predict the extent to which the global COVID-19 pandemic may adversely impact our business operations, financial performance and results of operations.
Added
There can be no assurance that our Indian operations will support our growth strategy.
Removed
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.
Added
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.
Removed
We are a large minority-owned staffing and data analytics services firm and have been certified as minority-owned by the National Minority Supplier Development Council (the “NMSDC”). NMSDC certification has helped us to expand our business with existing clients as well as obtain new customers.
Added
Issues relating to our use of artificial intelligence and machine learning technologies, combined with an uncertain legal and regulatory environment, could materially and adversely affect our business, financial condition and results of operations. We use artificial intelligence and machine learning technologies in our operations and services.
Removed
While we cannot quantify the effect of the loss of this status, its loss could adversely affect our ability to expand our business or cause us to lose existing business. Because the NMSDC certification relies in large part upon Messrs.
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These technologies are subject to evolving laws, regulations, guidance, and industry standards, which may expose us to legal liability or regulatory risk, including with respect to third-party intellectual property, privacy, publicity, contractual, or other rights.
Removed
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.
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The use of artificial intelligence and machine learning technologies also presents emerging ethical and social issues and may draw public scrutiny or controversy, and may also create or assist in producing unexpected results, errors or inadequacies, any of which may not be easily detectable.
Removed
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.
Added
Issues relating to our use of artificial intelligence and machine learning technologies and the evolving legal and regulatory landscape applicable to such technologies may adversely affect our business, prospects, financial condition, and results of operations.
Removed
Although we cannot predict the impact, if any, of these changes to our business, they could adversely affect our business.
Added
S. policy have occurred and, since the start of the current administration in 2025, U.S. policy changes have been implemented at a rapid pace and additional changes are likely. Changes to U.S. policy implemented by the U.S.
Added
Issues in the development and use of artificial intelligence, combined with an uncertain regulatory environment, may result in reputational harm, liability, or other adverse consequences to our business operations. We use machine learning and AI technologies in our offerings and business and we are making investments in expanding our AI capabilities.
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AI technologies are complex and rapidly evolving, and we face significant competition from other companies as well as evolving legal and regulatory landscapes. Laws and regulations applicable to AI continue to develop and may be inconsistent from jurisdiction to jurisdiction.
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For example, some U.S. states have proposed, and in certain cases enacted, legislation addressing aspects of the use and deployment of AI.
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The use of AI technologies in new or existing products may result in new or enhanced governmental or regulatory scrutiny, new or modified laws or regulations, claims, demands, and litigation, confidentiality, privacy, data protection, or security risks, ethical concerns, or other complications that could adversely affect our business, financial condition, results of operations and prospects.
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Uncertainty around new and emerging AI technologies may require additional investment in the obtaining, developing and maintaining of proprietary datasets and machine learning models, development of new approaches and processes to provide attribution or remuneration to creators of training data, and development of appropriate protections, safeguards, and policies for handling the processing of data with AI technologies, which may be costly and could impact our expenses.
Added
AI technologies also present emerging legal, ethical and social issues, including with respect to potential or actual bias reflected in, or flawed outputs of, models.
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AI technologies that we make use of may produce or create outputs that appear correct but are factually inaccurate or otherwise flawed, which may expose us to brand or reputational harm, competitive harm, regulatory scrutiny, and/or legal liability.
Added
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.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

8 edited+5 added−0 removed15 unchanged
Biggest changeBoard of Directors Oversight The Audit Committee is central to the Board’s oversight of cybersecurity risks and bears the primary responsibility for this domain. The Audit Committee is composed of board members with diverse expertise including risk management, technology, and finance, equipping them to oversee cybersecurity risks effectively.
Biggest changeThe Audit Committee is composed of board members with diverse expertise including risk management, technology, and finance, equipping them to oversee cybersecurity risks effectively. Management’s Role Managing Risk Our CIO / CISO and the Chief Executive Officer (“CEO”) play a pivotal role in informing the Audit Committee on cybersecurity risks.
This ensures that the highest levels of management are kept abreast of the cybersecurity posture and potential risks facing Mastech Digital, Inc. Furthermore, significant cybersecurity matters, and strategic risk management decisions are escalated to the Board of Directors, ensuring that they have comprehensive oversight and can provide guidance on critical cybersecurity issues. 28 Table of Contents
This ensures that the highest levels of management are kept abreast of the cybersecurity posture and potential risks facing Mastech Digital, Inc. Furthermore, significant cybersecurity matters, and strategic risk management decisions are escalated to the Board of Directors, ensuring that they have comprehensive oversight and can provide guidance on critical cybersecurity issues.
This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. The CIO / CISO implements and oversees processes for the regular monitoring of our information systems. This includes the deployment of advanced security measures and regular system audits to identify potential vulnerabilities.
This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. The CIO / CISO implements and oversees processes for the regular monitoring of our information systems. This includes the 28 Table of Contents deployment of advanced security measures and regular system audits to identify potential vulnerabilities.
For any such PII data determined to have been compromised, our advisors assisted us in determining the appropriate compliance steps. Governance The Board of Directors is acutely aware of the critical nature of managing risks associated with cybersecurity threats.
For any such PII data determined to have been compromised, our advisors assisted us in determining the appropriate compliance steps. 27 Table of Contents Governance The Board of Directors is acutely aware of the critical nature of managing risks associated with cybersecurity threats.
The Board has established robust oversight mechanisms to ensure effective governance in 26 Table of Contents managing risks associated with cybersecurity threats because we recognize the significance of these threats to our operational integrity and stakeholder confidence.
The Board has established robust oversight mechanisms to ensure effective governance in managing risks associated with cybersecurity threats because we recognize the significance of these threats to our operational integrity and stakeholder confidence. Board of Directors Oversight The Audit Committee is central to the Board’s oversight of cybersecurity risks and bears the primary responsibility for this domain.
This plan includes immediate actions to mitigate the impact and long-term strategies for remediation and prevention of future incidents. 27 Table of Contents Reporting to Board of Directors The CIO / CISO, in his capacity, regularly informs the Chief Financial Officer (CFO); our General Counsel; as well as the Chief Executive Officer (CEO) of all aspects related to cybersecurity risks and incidents.
Reporting to Board of Directors The CIO / CISO, in his capacity, regularly informs the Chief Financial Officer (CFO); our General Counsel; as well as the Chief Executive Officer (CEO) of all aspects related to cybersecurity risks and incidents.
Management’s Role Managing Risk Our CIO / CISO and the Chief Executive Officer (“CEO”) play a pivotal role in informing the Audit Committee on cybersecurity risks. They provide comprehensive briefings to the Audit Committee on a regular basis, with a minimum frequency of twice per year.
They provide comprehensive briefings to the Audit Committee on a regular basis, with a minimum frequency of twice per year.
In the event of a cybersecurity incident, the CIO / CISO is equipped with a well-defined incident response plan.
In the event of a cybersecurity incident, the CIO / CISO is equipped with a well-defined incident response plan. This plan includes immediate actions to mitigate the impact and long-term strategies for remediation and prevention of future incidents.
Added
Cybersecurity Threats / Incidents Effect on the Company Business Strategy Results of Operations and Financial Position Cybersecurity is a business risk that the Company takes seriously. Since our 2022 cybersecurity incident, we have improved our processes; upgraded cybersecurity leadership and supporting personnel; and have committed significant investment dollars to cybersecurity risk mitigation efforts.
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These investments have had an impact on our results of operations in 2023 and 2024, as disclosed further in the “Results of Operations” section of Item 7 of this Form 10-K. However, our business objectives and strategic priorities have not been materially altered by the risk of cybersecurity threats.
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Furthermore, we do not believe that any risks we have identified since our 2022 cybersecurity incident have materially affected us or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
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Despite our cybersecurity risk mitigation efforts, however, there can be no guarantee that we will not be the subject of future successful attacks, threats or incidents.
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Additional information on cybersecurity risks we face can be found in Item 1A “Risk Factors” under the heading “Risks Related to the Company’s Business and Operation,” which should be read in conjunction with the foregoing information. 29 Table of Contents

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, 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
Biggest changePROPERTIES Information regarding the principal properties leased by us and our subsidiaries as of December 31, 2024 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 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 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDuring 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.
Biggest changeDuring the year ended December 31, 2024, the Company repurchased 9,222 shares of common stock at an average price of $8.70 per share under this program. On February 19, 2025, the Company announced that the Board of Directors had authorized an extension of its previously announced share repurchase program for an additional year through February 8, 2026.
On 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.
On March 1, 2025, we had 80 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.
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.
A summary of our common stock repurchased during the quarter ended December 31, 2024 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, 2024 — October 31, 2024 — $ — — 423,079 November 1, 2024 — November 30, 2024 — $ — — 423,079 December 1, 2024 — December 31, 2024 — $ — — 423,079 Total — $ — — 423,079 (1) The Company did not repurchase any shares of its common stock during the quarter ended December 31, 2024.
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
For the year ended December 31, 2024 and December 31, 2023, stock purchases under the Stock Purchase Plan totaled 34,860 and 25,646 shares at an average purchase price of $6.40 and $8.03, respectively. At December 31, 2024, there were 432,059 shares available for purchases under the Plan. 31 Table of Contents ITEM 6. RESERVED
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.
Common shares available for share repurchase under this program totaled 423,079 on December 31, 2024. 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.
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During 2024, the Company did not purchase any shares to satisfy such employee tax obligations.

Item 7. Management's Discussion & Analysis

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

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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.
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 2024 2023 2022 Data and Analytics Services $ 36.6 $ 34.4 $ 40.6 IT Staffing Services 162.3 166.7 201.6 Total Revenues $ 198.9 $ 201.1 $ 242.2 Gross Margin % Data and Analytics Services 49.1 % 43.5 % 41.5 % IT Staffing Services 23.2 % 21.6 % 23.0 % Total Gross Margin % 27.9 % 25.4 % 26.1 % 33 Table of Contents 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 and a cybersecurity breach for the periods discussed: Selling, General & Administrative (“SG&A”) Expense Details (Amounts in millions) Years Ended December 31, Selling, General & Administrative Expenses 2024 2023 2022 Data and Analytics Services Segment Sales and Marketing $ 7.3 $ 6.5 $ 5.9 Operations 0.7 1.3 2.3 General & Administrative 6.7 8.9 5.4 Subtotal Data and Analytics Services $ 14.7 $ 16.7 $ 13.6 IT Staffing Services Segment Sales and Marketing $ 9.1 $ 8.3 $ 9.5 Operations 8.8 8.6 11.0 General & Administrative 14.4 13.1 12.5 Subtotal IT Staffing Services $ 32.3 $ 30.0 $ 33.0 Amortization of Acquired Intangible Assets $ 2.7 $ 2.8 $ 3.0 Employment-related Claim, net of Recoveries — 3.1 — Goodwill Impairment — 5.3 — Severance Expense 2.1 2.4 1.0 Cybersecurity Breach — — 0.4 Total SG&A Expenses $ 51.8 $ 60.3 $ 51.0 2024 Compared to 2023 Revenues Revenues for the year ended December 31, 2024 totaled $198.9 million, compared to $201.1 million for the year ended December 31, 2023.
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.
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, data, analytics, mobility, automation) is providing opportunities within our IT Staffing Services segment.
Unbilled receivables represent amounts recognized as revenues based on services performed and, in accordance with the terms of the client contract, will be invoiced in a subsequent period. Accounts receivable are reviewed periodically to determine the probability of loss.
Unbilled receivables represent amounts recognized as revenues based on services performed and, in accordance with the terms of the client contract, will be invoiced in a subsequent period. Accounts receivables are reviewed periodically to determine the probability of loss.
In 2021, we were encouraged by the global roll-out of vaccination programs and signs of economic improvement, however, the proliferation of COVID-19 variants have caused some uncertainty and disruption in the global markets.
In 2021, we were encouraged by the global roll-out of vaccination programs and signs of economic improvement, however, the proliferation of COVID-19 variants caused some uncertainty and disruption in the global markets.
In 2023, 2022 and 2021, we performed quantitative impairment tests related to our IT Staffing Services segment, which includes our June 2015 acquisition of Hudson Global Resources Management, Inc.’s U.S. IT staffing business (“Hudson IT”). The results of each of these testing’s indicated no impairment associated with the carrying amount of goodwill.
In 2024, 2023 and 2022, we performed quantitative impairment tests related to our IT Staffing Services segment, which includes our June 2015 acquisition of Hudson Global Resources Management, Inc.’s U.S. IT staffing business (“Hudson IT”). The results of each of these testing’s indicated no impairment associated with the carrying amount of goodwill.
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.
In 2022 and 2023, COVID-19-related concerns seemed to subside, however, increased inflation, challenges in the 32 Table of Contents 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.
Additionally in 2023, 2022 and 2021, we performed quantitative impairment tests related to our Data and Analytics Services segment which includes the July 2017 acquisition of InfoTrellis and the October 2020 acquisition of AmberLeaf. The results of the 2022 and 2021 testing’s indicated no impairment associated with the carrying amount of goodwill.
Additionally in 2024, 2023 and 2022, we performed quantitative impairment tests related to our Data and Analytics Services segment which includes the July 2017 acquisition of InfoTrellis and the October 2020 acquisition of AmberLeaf. The results of the 2024 and 2022 testing’s indicated no impairment associated with the carrying amount of goodwill.
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.
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 Credit Losses The Company extends credit to clients based upon management’s assessment of their creditworthiness.
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.
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.
On October 1, 2023, our annual impairment testing date, we did not identify an impairment. However, due to a triggering event in the fourth quarter related to declining revenue trends and 40 Table of Contents lower future revenue projections, our December 31, 2023 testing results indicated impairment associated with the carrying amount of goodwill of $5.3 million.
On October 1, 2023, our annual impairment testing date, we did not identify an impairment. However, due to a triggering event in the fourth quarter related to declining revenue trends and lower future revenue projections, our December 31, 2023 testing results indicated impairment associated with the carrying amount of goodwill of $5.3 million.
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.
As part of this engagement, these advisors assisted us with a forensic analysis to determine whether any personally identifiable 39 Table of Contents 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.
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. 2024 Primentor, Inc.
The guidance further provides that: (1) in-process research and development will be recorded at fair value as an indefinite-lived intangible asset; (2) acquisition-related transaction costs will generally be expensed as incurred; (3) restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and (4) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will effect income tax expense.
The guidance further provides that: (1) in-process research and development will be recorded at fair value as an 42 Table of Contents indefinite-lived intangible asset; (2) acquisition-related transaction costs will generally be expensed as incurred; (3) restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and (4) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense.
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.
Below is a tabular presentation of cash flow activities for the periods discussed: Years Ended December 31, Cash Flows Activities 2024 2023 2022 (Amounts in millions) Operating activities $ 7.2 $ 16.0 $ 12.6 Investing activities (0.9 ) (0.2 ) (0.8 ) Financing activities 0.7 (1.6 ) (10.4 ) Operating Activities Cash provided by (used in) operating activities for the years ended December 31, 2024, 2023 and 2022 totaled $7.2 million, $16.0 million and $12.6 million, respectively.
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”).
As of December 31, 2024 and 2023, the Company provided a valuation allowance of $452,000 and $628,000, respectively, related to the uncertainty of the realization of foreign net operating losses (“NOL”).
The effect of a change in tax rates on deferred taxes is recognized in the period that the change is enacted. The Company evaluates its deferred tax assets and records a valuation allowance when, in management’s opinion, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Company evaluates its deferred tax assets and records a valuation allowance when, in management’s opinion, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
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.
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. 41 Table of Contents Excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired are recorded as goodwill.
The Company recognizes revenue on fixed price contracts over time as services are rendered and uses a cost-based input method to measure progress. Determining a measure of progress requires management to make judgments that affect the timing of revenue recognized.
Revenue recognition is negatively impacted by holidays and consultant vacation and sick days. The Company recognizes revenue on fixed price contracts over time as services are rendered and uses a cost-based input method to measure progress. Determining a measure of progress requires management to make judgments that affect the timing of revenue recognized.
This 140-basis point decline was due to lower permanent placement revenues in 2023 (80-basis point impact on gross margins) and higher medical claims related to our self-insured program in 2023 compared to 2022.
Gross margins in our IT Staffing Services segment were 21.6% in 2023, compared to 23.0% in 2022. This 140-basis point decline was due to lower permanent placement revenues in 2023 (80-basis point impact on gross margins) and higher medical claims related to our self-insured program in 2023 compared to 2022.
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.
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. Additionally, our largest industry vertical, financial services, represented approximately 50% of total revenues in 2023 and 2022.
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).
In 2024, cash flows from operating activities included net income of $3.4 million, non-cash charges of $6.1 million and an increase in operating working capital of ($2.3 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 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.
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 million) of capital expenditures, primarily related to system upgrade expenditures.
See the Notes to the Consolidated Financial Statements, contained in Item 8, of this Annual Report on Form 10-K for a complete description of our significant accounting policies. Revenue Recognition The Company recognizes revenue on time-and-material contracts over time as services are performed and expenses are incurred. Time-and-material contracts typically bill at an agreed-upon hourly rate, plus out-of-pocket expense reimbursement.
See the Notes to the Consolidated Financial Statements, contained in Item 8, of this Annual Report on Form 10-K for a complete description of our significant accounting policies. 40 Table of Contents Revenue Recognition The Company recognizes revenue on time-and-material contracts over time as services are performed and expenses are incurred.
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
Recently Issued Accounting Standards Recent accounting pronouncements are described in Note 1 to the Consolidated Financial Statements contained in Item 8, herein. 44 Table of Contents
Accordingly, we typically have lower utilization rates and higher benefit costs during the fourth quarter. Additionally, assignment completions tend to be higher near the end of the calendar year, which largely impacts our revenue and gross profit performance during the subsequent quarter.
Additionally, assignment completions tend to be higher near the end of the calendar year, which largely impacts our revenue and gross profit performance during the subsequent quarter.
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.
In 2025 and 2026, the Company expects to pay Primentor approximately $0.4 million and $0.2 million, respectively. 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.
Our average IT staffing bill rate for 2022 totaled $80.64 per hour, a 6.6% increase compared to $75.66 per hour in 2021. This bill rate increase was due to higher rates on new assignments and was reflective of the type of skill sets that we deployed.
Our average IT staffing bill rate for 2024 totaled $82.77 per hour compared to $78.84 per hour in 2023. This bill rate increase was due to higher rates on new assignments and was reflective of the type of skill sets that we deployed.
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.
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. 2025 Finance and Accounting Functions to be Transitioned to India from the U.S.
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.
Time-and-material contracts typically bill at an agreed-upon hourly rate, plus out-of-pocket expense reimbursement. 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.
The 2023 charge pertained to our Data and Analytics Services segment. • Severance expense totaled $2.4 million in 2023, compared to $1.0 million in 2022.
The 2023 charge pertained to our Data and Analytics Services segment. • Severance expense totaled $2.4 million in 2023, compared to $1.0 million in 2022. Severance in both years largely related to executive leadership departures in our Data and Analytics Services segment. • Cybersecurity breach expenses totaled $0.4 million in 2022, compared to no expense in 2023.
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 and increase in interest income was largely due to no outstanding borrowings in 2023 and a higher balance of cash on hand in 2023. Net foreign exchange gains (losses) in 2023 compared to 2022 reflected exchange rate variations between the Indian rupee and the Canadian dollar compared to the U.S. dollar.
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.
Goodwill is not amortized but is tested for impairment at least on an annual basis. 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.
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.
Cash provided by operating activities, our cash and cash equivalent balances on hand at December 31, 2024 and current availability under our existing credit facility are expected to be adequate to fund our business needs over the next 12 months, including our share repurchase program, which was extended by our Board of Directors through February 8, 2026, but excluding any major acquisition-related activities.
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.
Accordingly, an increase in operating working capital would result in a reduction in cash generated from operating activities.
Risk factors” in this annual report on Form 10-K for a discussion about risks that inflation directly or indirectly may pose to our business. Seasonality Our operations are generally not affected by seasonal fluctuations. However, our consultants’ billable hours are affected by national holidays and vacation patterns.
Risk factors” in this annual report on Form 10-K for a discussion about risks that inflation directly or indirectly may pose to our business. Seasonality Our consultants’ billable hours are affected by national holidays and vacation patterns. Accordingly, we typically have lower utilization rates and higher benefit costs during the fourth quarter.
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 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.
In 2021, capital expenditures related primarily to system upgrades and improvements to our data and analytics delivery center in Chennai, India. 37 Table of Contents Financing Activities In 2023, cash (used in) financing activities totaled ($1.6 million) and included ($1.1 million) of debt repayments, ($0.6 million) of common stock repurchases, partially offset by proceeds from our issuance of common shares under our employee stock purchase plan.
In 2023, cash (used in) financing activities totaled ($1.6 million) and included ($1.1 million) of debt repayments, ($0.6 million) of common stock repurchases, partially offset by proceeds from our issuance of common shares under our employee stock purchase plan.
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.
The increase in SG&A as a percentage of revenues, excluding these items mentioned above, was largely due to higher sales expense in both business segments, partially offset by lower general and administrative expenses. Fluctuations within SG&A expense components during 2024 compared to 2023 included the following: • Sales expense was $1.6 million higher in 2024 compared to the previous year.
Gross Margin Gross profit increased to $63.2 million in 2022, compared to $59.4 million in 2021, an increase of 6% on a year-over-basis. Gross profit as a percentage of revenue totaled 26.1% in 2022, compared to 26.8% in 2021.
Gross Margin Gross profit increased to $55.6 million in 2024, compared to $51.0 million in 2023, an increase of 8.9% on a year-over-basis. Gross profit as a percentage of revenue totaled 27.9% in 2024, compared to 25.4% in 2023.
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.
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.
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.
Gross margins from our Data and Analytics Services segment in 2024 were 49.1%, which was 560-basis points higher than the 43.5% gross margins that we achieved in 2023. The increase reflected higher utilization and improved delivery efficiencies during 2024 when compared to 2023. Gross margins in our IT Staffing Services segment were 23.2% in 2024, compared to 21.6% in 2023.
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.
The 2023 reduction in operating working capital was due to lower accounts receivable, reflecting significant revenue declines during the year. The 2022 increase in operating capital largely reflected a $2.3 million repayment of the COVID-19 payroll tax deferment program. 38 Table of Contents We would expect operating working capital levels to increase should revenue grow in 2025.
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.
Financing Activities In 2024, cash provided by financing activities totaled $0.7 million and included $0.2 million of proceeds from the issuance of common shares under our employee stock purchase plan and $0.5 million of proceeds from the exercise of stock options, partially offset by the repurchase of common stock under the Company’s share repurchase program.
Net foreign exchange gains (losses) in 2023 compared to 2022 reflected exchange rate variations between the Indian rupee and the Canadian dollar compared to the U.S. dollar.
The increase in interest income was due to a higher balance of cash on hand in 2024 compared to 2023, partially offset by interest rate reductions in 2024. Net foreign exchange gains (losses) in 2024 compared to 2023 reflected exchange rate variations between the Indian rupee and the Canadian dollar compared to the U.S. dollar.
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.
When excluding the amortization of acquired intangible assets and severance expenses in 2024, and the amortization of acquired intangible assets, severance expenses, an employment-related claim, net of recoveries, and goodwill impairment in 2023, the adjusted SG&A expenses related to operations as a percentage of revenues was 23.6% in 2024 versus 23.2% in 2023.
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 $2.2 million of this decline due to lower executive leadership staff and professional services expense related to an employment-related claim in 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. • General & administrative expenses increased by $2.2 million in 2022 compared to 2021.
Operations expense in our IT Staffing Services segment increased $0.2 million in 2024, due to higher commission expenses largely during the second half of the year. • General & administrative expenses decreased by $0.9 million in 2024 compared to 2023.
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.
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 / (losses) in 2024 totaled $27,000; in 2023 we incurred losses of ($75,000) and we incurred $650,000 foreign exchange gains in 2022.
During 2024, the Company will incur consulting expenses of approximately $1.0 million related to these services, which will impact our income from operations and cash flows.
During 2024, the Company incurred consulting expenses of approximately $1.1 million related to these services.
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.
This 160-basis point increase was due to higher gross margins on new assignments and favorable medical claim experience related to our self-insured program during 2024 when compared to 2023. Selling, General and Administrative (“SG&A”) Expenses SG&A expenses in 2024 totaled $51.8 million and represented 26.0% of total revenues, compared to $60.3 million or 30.0% of revenues in 2023.
Income Tax Expense Income tax expense for 2022 was $3.8 million and represented an effective tax rate on pre-tax income of 30.3%, compared to $4.7 million in 2021, which represented an effective tax rate on pre-tax income of 27.6%.
Income Tax Expense Income tax expense (benefit) for 2024 was $1.0 million and represented an effective tax rate on pre-tax income of 23.1%, compared to ($1.9 million) in 2023, which represented an effective tax rate on pre-tax (loss) of (21.0%).
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.
The IT Staffing Services segment had higher general and administrative expenses in 2024 of $1.3 million compared to 2023, largely due to strategic consulting expenses related to our Primentor agreement and higher bonus expenses. • Amortization of acquired intangible assets was $2.7 million in 2024 versus $2.8 million in 2023, as a portion of our intangible assets became fully amortized in 2024. • Severance expense totaled $2.1 million in 2024 versus $2.4 million in 2023.
Permanent placement / fee revenues totaled $2.1 million in 2022, up 75% from a year ago. In both 2022 and 2021, we had one client that exceeded 10% of total revenues (CGI = 22.2% in 2022 and 15.0% in 2021, respectively). Our top ten clients represented 53% of total revenues in 2022 compared to 48% of total revenues in 2021.
Permanent placement / fee revenues totaled $0.9 million in 2024, compared to $0.8 million a year ago. 34 Table of Contents In 2024, we had two clients that exceeded 10% of total revenues (CGI = 14.5% and Allegis = 10.7%). In 2023, we had one client that exceeded 10% of total revenues (CGI = 22.5%).
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.
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.
In the Data and Analytics Services segment, sales expense decreased by $0.3 million due to lower variable compensation expense in 2022. IT staffing sales expense increased by $1.7 million and largely related to higher compensation, marketing and business travel expenses. • Operations expense increased by $1.6 million compared to 2021.
In the Data and Analytics Services segment, sales expense increased by $0.8 million due to an increase in marketing and event expenses and higher compensation expenses.
In our Data and Analytics Services segment, operations expense decreased by $0.3 million due to lower staff headcount.
IT staffing sales expense increased by $0.8 million due to higher commissions and bonus expense of $0.5 million and higher variable expense items due to increased activity levels in 2024. • Operations expense decreased by $0.4 million compared to 2023. In our Data and Analytics Services segment, operations expense decreased by $0.6 million due to lower staff headcount.
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.
The unfavorable 2023 effective tax rate was largely due to shortfalls in expected tax benefits on stock options and state income taxes. Liquidity and Capital Resources Financial Conditions and Liquidity On December 31, 2024, we had cash balances on hand of $27.7 million, no bank debt outstanding and approximately $22.6 million of borrowing capacity under our existing credit facility.
Severance in both years largely related to executive leadership departures in our Data and Analytics Services segment. • Cybersecurity breach totaled $0.4 million in 2022, compared to no expense in 2023. 34 Table of Contents Other Income / (Expense) Components In 2023, other income / (expense) consisted of net interest income of $319,000 and foreign exchange losses of ($75,000).
The 2023 charge pertained to our Data and Analytics Services segment. Other Income / (Expense) Components In 2024, other income / (expense) consisted of net interest income of $606,000 and foreign exchange gains of $27,000. In 2023, other income / (expense) consisted of interest income of $319,000 and foreign exchange losses of ($75,000).
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).
Other Income / (Expense) Components In 2023, other income / (expense) consisted of net interest income of $319,000 and foreign exchange losses of ($75,000). In 2022, other income / (expense) consisted of interest expense of ($358,000) and foreign exchange 37 Table of Contents gains of $650,000.
The Company accounts for uncertain tax positions in accordance with ASC Topic 740-10, “ Accounting for Uncertainty in Income Taxes ”. Accordingly, the Company has reported a liability for unrecognized tax benefits resulting from uncertain tax positions taken, or expected to be taken, in a tax return.
The Company accounts for uncertain tax positions in accordance with ASC Topic 740-10, “ Accounting for Uncertainty in Income Taxes ”. The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained under audit.
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.
We believe that 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, as solution businesses generally experience a higher DSO measurement than IT staffing organizations.
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.
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). The 2024 increase in operating working capital reflected higher activities levels as accounts receivable and prepaid expenses increased.
The unfavorable 2023 effective tax rate was largely due to shortfalls in expected tax benefits on stock options and state income taxes. 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.
The 2024 effective tax rate compared to 2023 reflected a worthless stock deduction recognized on the dissolution of our Singapore entity in 2024. 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.
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.
This 1.1% decline in total revenues reflected an increase in revenues of 6.6% in our Data and Analytics Services segment and a 2.6% revenue decrease in our IT Staffing Services segment. Both segments showed revenue run-rate improvements when comparing the fourth quarter of 2024 to the fourth quarter of 2023.
Removed
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.
Added
In 2024, economic conditions in North America improved over the course of the year as job market growth and inflationary outlooks showed positive signs of improvement.
Removed
In 2022, other income / (expense) consisted of interest expense of ($358,000) and foreign exchange gains of $650,000. The decline in interest expense and increase in interest income was largely due to no outstanding borrowings in 2023 and a higher balance of cash on hand in 2023.
Added
As we enter 2025, a new level of uncertainty and caution has returned to the marketplace, largely related to unknowns with respect to the incoming administration and the impact of the policies it is adopting. Currently, it is difficult to predict how market conditions are going to unfold over the course of 2025 and beyond.
Removed
Bookings in 2022 approximated $36 million, a marked decline over 2021. Our IT Staffing Services segment had 10% revenue growth, despite a 53-consultant decrease during the year compared to a 198-consultant increase in 2021. The 2022 consultant decline largely occurred during the fourth quarter. We ended 2022 with 1,208 consultants-on-billing versus 1,261 consultants-on-billing at year-end 2021.
Added
Our Data and Analytics Services segment’s 2024 revenues increased to $36.6 million from $34.4 million in 2023. This increase was largely due to an increase in client spending on existing projects and a strong bookings performance in the fourth quarter of 2023. Bookings in 2024 totaled $41 million, in-line with full year 2023’s bookings performance.
Removed
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.
Added
Our IT Staffing Services segment’s 2024 revenues declined modestly, compared to 2023 revenues due to a lower average level of billable consultants during the first half of 2024 compared to the first half of 2023. However, we ended 2024 with 1,008 billable consultants, compared to 946 billable consultants at the end of 2023, an increase of 6.6%.
Removed
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.
Added
Our top ten clients represented 54% of total revenues in 2024 and 53% of total revenues in 2023. Additionally, our largest industry vertical, financial services, represented approximately 49% of total revenues in 2024, compared to approximately 50% in 2023.
Removed
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.
Added
Severance in both years largely related to executive leadership departures. 35 Table of Contents • An employment-related claim expense, net of recoveries, totaled $3.1 million in 2023, compared to no expense in 2024. • A goodwill impairment charge totaled $5.3 million in 2023, compared to no impairment charge in 2024.
Removed
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.
Added
Gross profit as a percentage of revenue totaled 25.4% in 2023, compared to 26.1% in 2022. 36 Table of Contents Gross margins from our Data and Analytics Services segment were 43.5%, which was 200-basis points higher than the 41.5% gross margins that we experienced in 2022. The increase largely reflected higher utilization in the 2023 period.
Removed
During 2023, we paid off our final $1.1 million of term loans, in addition to funding $0.3 million of capital expenditures and $0.6 million of common stock repurchases under our 500,000 share repurchase program announced by our Board of Directors in the first quarter of 2023. 36 Table of Contents Historically, we have funded our business needs with cash generation from operating activities.
Added
Controlling our operating working capital levels by closely managing our accounts receivable balance is an important element of cash preservation. Our accounts receivable “days sales outstanding” measurement (“DSO”) at year-end 2024 improved to 52-days compared to 53-days at year-end 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs 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
Biggest changeAs our international operations grow, we will continue to evaluate and reassess our approach to managing the risks relating to fluctuations in currency rates. 45 Table of Contents
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.
Interest Rates At December 31, 2024, 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.
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.
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 2024 would not have a material impact on our consolidated financial statements.
A 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.
A hypothetical 10% increase in interest rates would have no impact on our annual interest expense. As of December 31, 2024, 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.

Other MHH 10-K year-over-year comparisons