QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
A |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Large accelerated filer | ☐ | ☒ | ||||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
Emerging growth company |
Page |
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PART 1 |
3 | |||||||
Item 1. |
3 | |||||||
(a) |
3 | |||||||
(b) |
4 | |||||||
(c) |
5 | |||||||
(d) |
6 | |||||||
(e) |
7 | |||||||
(f) |
8 | |||||||
Item 2. |
21 | |||||||
Item 3. |
28 | |||||||
Item 4. |
28 | |||||||
PART II |
30 | |||||||
Item 1. |
30 | |||||||
Item 1A. |
30 | |||||||
Item 2. |
30 | |||||||
Item 6. |
31 | |||||||
32 |
ITEM 1. |
FINANCIAL STATEMENTS |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
2021 |
2020 |
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Revenues |
$ | $ | $ | $ | ||||||||||||
Cost of revenues |
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Gross profit |
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Selling, general and administrative expenses: |
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Operating expenses |
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Revaluation of contingent consideration liability |
— | — | ( |
) | — | |||||||||||
Total selling, general and administrative expenses |
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Income from operations |
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Interest income (expense), net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Other income (expense), net |
( |
) | ( |
) | ( |
) | ||||||||||
Income before income taxes |
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Income tax expense |
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Net income |
$ | $ | $ | $ | ||||||||||||
Earnings per share: |
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Basic |
$ | $ | $ | $ | ||||||||||||
Diluted |
$ | $ | $ | $ | ||||||||||||
Weighted average common shares outstanding: |
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Basic |
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Diluted |
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Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
2021 |
2020 |
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Net income |
$ | $ | $ | $ | ||||||||||||
Other comprehensive income (loss): |
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Net unrealized gain (loss) on interest-rate swap contracts |
— | ( |
) | |||||||||||||
Foreign currency translation adjustment |
( |
) | ( |
) | ||||||||||||
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Total pretax net unrealized gain (loss) |
( |
) | ( |
) | ||||||||||||
Income tax expense (benefit) |
— | ( |
) | |||||||||||||
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Total other comprehensive gain (loss), net of taxes |
( |
) | ( |
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Total comprehensive income |
$ | $ | $ | $ | ||||||||||||
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September 30, 2021 |
December 31, 2020 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, net of allowance for uncollectible accounts of $ |
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Unbilled receivables |
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Prepaid and other current assets |
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Total current assets |
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Equipment, enterprise software, and leasehold improvements, at cost: |
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Equipment |
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Enterprise software |
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Leasehold improvements |
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Less – accumulated depreciation and amortization |
( |
) | ( |
) | ||||
Net equipment, enterprise software, and leasehold improvements |
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Operating lease right-of-use |
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Deferred income taxes |
— | |||||||
Non-current deposits |
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Goodwill, net of impairment |
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Intangible assets, net of amortization |
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Total assets |
$ | $ | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Current portion of long-term debt |
$ | $ | ||||||
Accounts payable |
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Accrued payroll and related costs |
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Current portion of operating lease liability |
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Other accrued liabilities |
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Deferred revenue |
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Total current liabilities |
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Long-term liabilities: |
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Long-term debt, less current portion, net |
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Contingent consideration liability |
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Long-term operating lease liability, less current portion |
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Long-term accrued income taxes |
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Deferred income taxes |
— | |||||||
Long-term payroll tax liabilities |
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Total liabilities |
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Commitments and contingent liabilities (Note 6) |
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Shareholders’ equity: |
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Preferred Stock, |
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Common Stock, par value $ |
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Additional paid-in-capital |
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Retained earnings |
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Accumulated other comprehensive income (loss) |
( |
) | ( |
) | ||||
Treasury stock, at cost; |
( |
) | ( |
) | ||||
Total shareholders’ equity |
||||||||
Total liabilities and shareholders’ equity |
$ | $ | ||||||
Common Stock |
Additional Paid-in Capital |
Accumulated Retained Earnings |
Treasury Stock |
Accumulated Other Comprehensive Income (Loss) |
Total Shareholders’ Equity |
|||||||||||||||||||
Balances, December 31, 2020 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
Net income |
— | — | — | — | ||||||||||||||||||||
Other comprehensive gain, net of taxes |
— | — | — | — | ||||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
Stock options exercised |
— | — | — | — | ||||||||||||||||||||
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Balances, March 31, 2021 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
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Net income |
— | — | — | — | ||||||||||||||||||||
Employee common stock purchases |
— | — | — | — | ||||||||||||||||||||
Other comprehensive (loss), net of taxes |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
Stock options exercised |
— | — | — | |||||||||||||||||||||
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Balances, June 30, 2021 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
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Net income |
— | — | — | — | ||||||||||||||||||||
Other comprehensive gain, net of taxes |
— | — | — | — | ||||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
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Balances, September 30, 2021 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
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Common Stock |
Additional Paid-in Capital |
Accumulated Retained Earnings |
Treasury Stock |
Accumulated Other Comprehensive Income (loss) |
Total Shareholders’ Equity |
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Balances, December 31, 2019 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
Net income |
— | — | — | — | ||||||||||||||||||||
Other comprehensive (loss), net of taxes |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
Stock options exercised |
— | — | — | |||||||||||||||||||||
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Balances, March 31, 2020 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
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Net income |
— | — | — | — | ||||||||||||||||||||
Employee common stock purchases |
— | — | — | — | ||||||||||||||||||||
Other comprehensive (loss), net of taxes |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
Stock options exercised |
— | — | — | |||||||||||||||||||||
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Balances, June 30, 2020 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
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Net income |
— | — | — | — | ||||||||||||||||||||
Other comprehensive gain, net of taxes |
— | — | — | — | ||||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
Stock options exercised |
— | — | — | |||||||||||||||||||||
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Balances, September 30, 2020 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
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Nine Months Ended September 30, |
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2021 |
2020 |
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OPERATING ACTIVITIES: |
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Net income |
$ | $ | ||||||
Adjustments to reconcile net income to cash provided by (used in) operating activities: |
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Depreciation and amortization |
||||||||
Bad debt expense |
— | |||||||
Interest amortization of deferred financing costs |
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Stock-based compensation expense |
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Deferred income taxes, net |
( |
) | ||||||
Revaluation of contingent consideration liability |
( |
) | — | |||||
Operating lease assets and liabilities, net |
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Loss on disposition of fixed assets |
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Working capital items: |
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Accounts receivable and unbilled receivables |
( |
) | ||||||
Prepaid and other current assets |
( |
) | ( |
) | ||||
Accounts payable |
( |
) | ||||||
Accrued payroll and related costs |
||||||||
Other accrued liabilities |
( |
) | ( |
) | ||||
Deferred revenue |
( |
) | ( |
) | ||||
Net cash flows provided by (used in) operating activities |
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INVESTING ACTIVITIES: |
||||||||
Recovery of (payment for) non-current deposits |
( |
) | ||||||
Capital expenditures |
( |
) | ( |
) | ||||
Proceeds from the sale of fixed assets |
— | |||||||
Net cash flows (used in) investing activities |
( |
) | ( |
) | ||||
FINANCING ACTIVITIES: |
||||||||
(Repayments) borrowings on revolving credit facility, net |
— | ( |
) | |||||
(Repayments) on term loan facility |
( |
) | ( |
) | ||||
Proceeds from the issuance of common shares |
||||||||
Proceeds from the exercise of stock options |
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Net cash flows provided by (used in) financing activities |
( |
) | ( |
) | ||||
Effect of exchange rate changes on cash and cash equivalents |
( |
) | ( |
) | ||||
Net change in cash and cash equivalents |
( |
) | ||||||
Cash and cash equivalents, beginning of period |
||||||||
Cash and cash equivalents, end of period |
$ | $ | ||||||
1. |
Description of Business and Basis of Presentation: |
2. |
Revenue from Contracts with Customers |
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
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(Amounts in thousands) |
(Amounts in thousands) |
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Data and Analytics Services Segment |
||||||||||||||||
Time-and-material |
$ | $ | $ | $ | ||||||||||||
Fixed-price Contracts |
||||||||||||||||
Subtotal Data and Analytics Services |
$ |
$ |
$ |
$ |
||||||||||||
IT Staffing Services Segment |
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Time-and-material |
$ | $ | $ | $ | ||||||||||||
Fixed-price Contracts |
— | — | — | — | ||||||||||||
Subtotal IT Staffing Services |
$ |
$ |
$ |
$ |
||||||||||||
Total Revenues |
$ |
$ |
$ |
$ |
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Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
2021 |
2020 |
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(Amounts in thousands) |
(Amounts in thousands) |
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United States |
$ | $ | $ | $ | ||||||||||||
Canada |
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India and Other |
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Total revenues |
$ | $ | $ | $ | ||||||||||||
3. |
Business Combinations |
(in thousands) |
Amounts |
|||
Cash purchase price at closing |
$ | |||
Working capital adjustments |
||||
Estimated payout of contingent consideration (1) |
||||
Total Fair Value of Consideration |
$ | |||
(1) | Based on a valuation conducted by an independent third party, the fair value of contingent consideration at the closing date was determined to be $ |
(in thousands) |
Amounts |
|||
Cash balances on hand |
$ | — | ||
Increase in term loan debt facility |
||||
Revolving line of credit |
( |
) | ||
Cash Paid at Closing |
$ | |||
(in thousands) |
Amounts |
|||
Cash on hand |
$ |
|||
Working capital assets, net of liabilities |
||||
Identifiable intangible assets: |
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Client relationships |
||||
Covenant not-to-compete |
||||
Trade name |
||||
Technology |
||||
Total identifiable intangible assets |
||||
Goodwill |
||||
Net Assets Acquired |
$ |
|||
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 Actual |
2020 Pro Forma |
2021 Actual |
2020 Pro Forma |
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(Amounts in thousands, except per share data) |
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Revenue |
$ | $ | $ | $ | ||||||||||||
Net income |
$ | $ | $ | $ | ||||||||||||
Earnings per share—diluted |
$ | $ | $ | $ |
4. |
Goodwill and Other Intangible Assets, net |
As of September 30, 2021 |
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(Amounts in thousands) |
Amortization Period (In Years) |
Gross Carrying Value |
Accumulative Amortization |
Net Carrying Value |
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IT Staffing Services: |
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Client relationships |
$ | $ | $ | |||||||||||||
Covenant-not-to-compete |
— | |||||||||||||||
Trade name |
— | |||||||||||||||
Data and Analytics Services: |
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Client relationships |
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Covenant-not-to-compete |
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Trade name |
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Technology |
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Total Intangible Assets |
$ |
$ |
$ |
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As of December 31, 2020 |
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(Amounts in thousands) |
Amortization Period (In Years) |
Gross Carrying Value |
Accumulative Amortization |
Net Carrying Value |
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IT Staffing Services: |
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Client relationships |
$ | $ | $ | |||||||||||||
Covenant-not-to-compete |
— | |||||||||||||||
Trade name |
— | |||||||||||||||
Data and Analytics Services: |
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Client relationships |
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Covenant-not-to-compete |
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Trade name |
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Technology |
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Total Intangible Assets |
$ |
$ |
$ |
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Years Ended December 31, |
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2021 |
2022 |
2023 |
2024 |
2025 |
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(Amounts in thousands) |
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Amortization expense |
$ | $ | $ | $ | $ |
5. |
Leases |
September 30, 2021 |
December 31, 2020 |
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(Amounts in thousands) |
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Assets: |
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Long-term operating lease right-of-use |
$ | $ | ||||||
Liabilities: |
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Short-term operating lease liability |
$ | $ | ||||||
Long-term operating lease liability |
||||||||
Total Liabilities |
$ | $ | ||||||
Amount as of September 30, 2021 |
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(in thousands) |
||||
2021 (For remainder of year) |
$ | |||
2022 |
||||
2023 |
||||
2024 |
||||
2025 |
||||
Thereafter |
||||
Total |
||||
Less: Imputed interest |
( |
) | ||
Present value of operating lease liabilities |
$ | |||
6. |
Commitments and Contingencies |
7 |
Employee Benefit Plan |
8. |
Stock-Based Compensation |
9. |
Credit Facility |
10. |
Income Taxes |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
2021 |
2020 |
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(Amounts in thousands) |
(Amounts in thousands) |
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Income before income taxes: |
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Domestic |
$ | $ | $ | $ | ||||||||||||
Foreign |
( |
) | ||||||||||||||
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Income before income taxes |
$ | $ | $ | $ | ||||||||||||
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|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
2021 |
2020 |
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(Amounts in thousands) |
(Amounts in thousands) |
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Current provision: |
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Federal |
$ | $ | $ | $ | ||||||||||||
State |
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Foreign |
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Total current provision |
$ | $ | $ | $ | ||||||||||||
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Deferred provision (benefit): |
||||||||||||||||
Federal |
( |
) | ( |
) | ||||||||||||
State |
( |
) | ( |
) | ||||||||||||
Foreign |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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Total deferred provision (benefit) |
( |
) | ( |
) | ||||||||||||
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Change in valuation allowance |
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Total provision for income taxes |
$ | $ | $ | $ | ||||||||||||
|
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|
|
Three Months Ended September 30, 2021 |
Three Months Ended September 30, 2020 |
|||||||||||||||
Income taxes computed at the federal statutory rate |
$ | % | $ | % | ||||||||||||
State income taxes, net of federal tax benefit |
||||||||||||||||
Excess tax benefit from stock options/restricted shares |
( |
) | ||||||||||||||
Difference in income tax rate on foreign earnings |
( |
) | ( |
) | ||||||||||||
Change in valuation allowance |
||||||||||||||||
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$ | % | $ | % | |||||||||||||
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|
Nine Months Ended September 30, 2021 |
Nine Months Ended September 30, 2020 |
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Income taxes computed at the federal statutory rate |
$ | % | $ | % | ||||||||||||
State income taxes, net of federal tax benefit |
||||||||||||||||
Excess tax benefit from stock options/restricted shares |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Difference in income tax rate on foreign earnings |
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Change in valuation allowance |
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$ | % | $ | % | |||||||||||||
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11. |
Derivative Instruments and Hedging Activities |
Derivatives in ASC Topic 815 Cash Flow Hedging Relationships |
Amount of Gain / (Loss) recognized in OCI on Derivatives |
Location of Gain / (Loss) reclassified from Accumulated OCI to Income (Expense) |
Amount of Gain / (Loss) reclassified from Accumulated OCI to Income (Expense) |
Location of Gain / (Loss) reclassified in Income (Expense) on Derivatives |
Amount of Gain / (Loss) recognized in Income (Expense) on Derivatives |
|||||||||||||||
(Effective Portion) |
(Effective Portion) |
(Effective Portion) |
(Ineffective Portion/Amounts excluded from effectiveness testing) |
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For the Three Months Ended September 30, 2021: |
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Interest-Rate Swap Contract |
$ | Interest Expense | $ | Interest Expense | $ | |||||||||||||||
For the Nine Months Ended September 30, 2021: |
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Interest-Rate Swap Contract |
$ | Interest Expense | $ | Interest Expense | $ | |||||||||||||||
For the Three Months Ended September 30, 2020: |
||||||||||||||||||||
Interest-Rate Swap Contract |
$ | Interest Expense | $ | ( |
) | Interest Expense | $ | |||||||||||||
For the Nine Months Ended September 30, 2020: |
||||||||||||||||||||
Interest-Rate Swap Contract |
$ | ( |
) | Interest Expense | $ | ( |
) | Interest Expense | $ |
September 30, 2021 |
December 31, 2020 |
|||||||||||
Derivative Instruments |
Balance Sheet Location |
Fair Value |
Balance Sheet Location |
Fair Value |
||||||||
Interest-Rate Swap Contracts |
Other Current Liabilities |
$ | Other Current Liabilities |
$ |
12. |
Fair Value Measurements |
• | Level 1—Inputs are observable quoted prices (unadjusted) in active markets for identical assets and liabilities. |
• | Level 2—Inputs are observable, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are directly or indirectly observable in the marketplace. |
• | Level 3—Inputs are unobservable that are supported by little or no market activity. |
Fair Value as of September 30, 2021 |
||||||||||||||||
(Amounts in thousands) |
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||
Interest-Rate Swap Contracts |
$ | — | $ | — | $ | — | $ | — | ||||||||
Contingent Consideration Liabilities |
$ | — | $ | — | $ | ( |
) | $ | ( |
) | ||||||
|
|
|
|
|
|
|
|
|||||||||
Fair Value as of December 31, 2020 |
||||||||||||||||
(Amounts in thousands) |
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||
Interest-Rate Swap Contracts |
$ | — | $ | ( |
) | $ | — | $ | ( |
) | ||||||
Contingent Consideration Liabilities |
$ | — | $ | — | $ | ( |
) | $ | ( |
) | ||||||
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2021 |
Twelve Months Ended December 31, 2020 |
|||||||
(Amounts in thousands) |
||||||||
Beginning balance |
$ | $ | ||||||
Contingent consideration liability incurred |
||||||||
Payments made |
||||||||
Revaluations |
( |
) | ||||||
|
|
|
|
|||||
Ending balance |
$ | $ | ||||||
|
|
|
|
13. |
Shareholders’ Equity |
14. |
Earnings Per Share |
15. |
Business Segments and Geographic Information |
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
(Amounts in thousands) |
(Amounts in thousands) |
|||||||||||||||
Revenues: |
||||||||||||||||
Data and analytics services |
$ | $ | $ | $ | ||||||||||||
IT staffing services |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues |
$ | $ | $ | $ | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross Margin %: |
||||||||||||||||
Data and analytics services |
% | % | % | % | ||||||||||||
IT staffing services |
% | % | % | % | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total gross margin % |
% | % | % | % | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Segment operating income: |
||||||||||||||||
Data and analytics services |
$ | $ | $ | $ | ||||||||||||
IT staffing services |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
||||||||||||||||
Amortization of acquired intangible assets |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Revaluation of contingent consideration liability |
— | — | — | |||||||||||||
Interest expenses and other, net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before income taxes |
$ | $ | $ | $ | ||||||||||||
|
|
|
|
|
|
|
|
September 30, 2021 |
December 31, 2020 |
|||||||
(Amounts in thousands) |
||||||||
Total assets: |
||||||||
Data and analytics services |
$ | $ | ||||||
IT staffing services |
||||||||
|
|
|
|
|||||
Total assets |
$ | $ | ||||||
|
|
|
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
(Amounts in thousands) |
(Amounts in thousands) |
|||||||||||||||
United States |
$ | $ | $ | $ | ||||||||||||
Canada |
||||||||||||||||
India and Other |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues |
$ | $ | $ | $ | ||||||||||||
|
|
|
|
|
|
|
|
16. |
Related-Party Transaction |
17. |
Recently Issued Accounting Standards |
ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Revenues (Amounts in millions) |
Three Months Ended September 30, 2021 |
Three Months Ended September 30, 2020 |
||||||
Data and Analytics Services |
$ | 10.5 | $ | 7.2 | ||||
IT Staffing Services |
49.0 | 40.2 | ||||||
|
|
|
|
|||||
Total revenues |
$ | 59.5 | $ | 47.4 | ||||
|
|
|
|
Gross Margin |
Three Months Ended September 30, 2021 |
Three Months Ended September 30, 2020 |
||||||
Data and Analytics Services |
51.6 | % | 55.9 | % | ||||
IT Staffing Services |
22.8 | 22.6 | ||||||
|
|
|
|
|||||
Total gross margin |
27.9 | % | 27.6 | % | ||||
|
|
|
|
S,G&A Expenses (Amounts in millions) |
Three Months Ended September 30, 2021 |
Three Months Ended September 30, 2020 |
||||||
Data and Analytics Services Segment |
||||||||
Sales and Marketing |
$ | 1.5 | $ | 1.2 | ||||
Operations |
0.6 | 0.5 | ||||||
Amortization of Acquired Intangible Assets |
0.6 | 0.5 | ||||||
General & Administrative |
1.5 | 0.7 | ||||||
|
|
|
|
|||||
Subtotal Data and Analytics Services |
$ |
4.2 |
$ |
2.9 |
||||
|
|
|
|
S,G&A Expenses (Amounts in millions) |
||||||||
IT Staffing Services Segment |
||||||||
Sales and Marketing |
$ |
2.0 |
$ |
1.6 |
||||
Operations |
2.4 |
2.0 |
||||||
Amortization of Acquired Intangible Assets |
0.2 |
0.2 |
||||||
General & Administrative |
2.8 |
2.2 |
||||||
|
|
|
|
|||||
Subtotal IT Staffing Services |
$ |
7.4 |
$ |
6.0 |
||||
|
|
|
|
|||||
Total S,G&A Expenses |
$ |
11.6 |
$ |
8.9 |
||||
|
|
|
|
• | Sales expense increased by $0.7 million in the 2021 period compared to the corresponding 2020 period. Approximately $0.1 million reflected AmberLeaf sales expense; $0.2 million was staff expansion in our Data and Analytics Services segment and $0.4 million was due to austerity measures implemented by our IT Staffing Services segment in the 2020 period, which have been unwound in 2021. |
• | Operations expense increased $0.5 million in the 2021 period compared to the corresponding 2020 period. Approximately $0.1 million related to investments made to the delivery organization of our Data and Analytics Services segment. Operations expense in our IT Staffing Services segment increased by $0.4 million and related to increases in recruitment staff and higher variable expenses – both due to supporting higher activity levels in 2021. |
• | Amortization of acquired intangible assets was $0.1 million higher in the 2021 period due to the AmberLeaf acquisition. |
• | General and administrative expense increased by $1.4 million in the 2021 period compared to the corresponding 2020 period. General and administrative expense in our Data and Analytics Services segment increased by $0.8 million due to executive leadership staff increases and higher stock-based compensation expense. In our IT Staffing Services segment, higher stock-based compensation expense and additional administrative staff (as compared to the austerity-impacted levels of 2020) were responsible for a $0.6 million increase from 2020. |
Revenues (Amounts in millions) |
Nine Months Ended September 30, 2021 |
Nine Months Ended September 30, 2020 |
||||||
Data and Analytics Services |
$ | 28.3 | $ | 21.3 | ||||
IT Staffing Services |
134.7 | 124.1 | ||||||
|
|
|
|
|||||
Total revenues |
$ | 163.0 | $ | 145.4 | ||||
|
|
|
|
Gross Margin |
Nine Months Ended September 30, 2021 |
Nine Months Ended September 30, 2020 |
||||||
Data and Analytics Services |
48.2 | % | 51.7 | % | ||||
IT Staffing Services |
22.4 | % | 22.1 | % | ||||
|
|
|
|
|||||
Total gross margin |
26.8 | % | 26.5 | % | ||||
|
|
|
|
S,G&A Expenses (Amounts in millions) |
Nine Months Ended September 30, 2021 |
Nine Months Ended September 30, 2020 |
||||||
Data and Analytics Services Segment |
||||||||
Sales and Marketing |
$ | 4.7 | $ | 3.7 | ||||
Operations |
2.2 | 1.4 | ||||||
Amortization of Acquired Intangible Assets |
1.8 | 1.5 | ||||||
Revaluation of Contingent Consideration |
(2.0 | ) | — | |||||
General & Administrative |
3.8 | 2.2 | ||||||
|
|
|
|
|||||
Subtotal Data and Analytics Services |
$ | 10.5 | $ | 8.8 | ||||
|
|
|
|
S,G&A Expenses (Amounts in millions) |
||||||||
IT Staffing Services Segment |
||||||||
Sales and Marketing |
$ |
5.7 |
$ |
5.3 |
||||
Operations |
6.6 |
6.4 |
||||||
Amortization of Acquired Intangible Assets |
0.6 |
0.6 |
||||||
General & Administrative |
8.2 |
7.1 |
||||||
|
|
|
|
|||||
Subtotal IT Staffing Services |
$ |
21.1 |
$ |
19.4 |
||||
|
|
|
|
|||||
Total S,G&A Expenses |
$ |
31.6 |
$ |
28.2 |
||||
|
|
|
|
• | Sales expense increased by $1.4 million in the 2021 period compared to the corresponding 2020 period. Sales expense of $1.0 million reflected investments in the sales organization of our Data and Analytics Services segment, of which $0.6 million pertained to the AmberLeaf acquisition. Sales expense in our IT Staffing Services segment was higher by $0.4 million due to austerity measures implemented in the 2020 period, which have been unwound in 2021. |
• | Operations expense increased by $1.0 million in the 2021 period compared to the corresponding 2020 period. Approximately $0.8 million reflected investments made to the delivery organization of our Data and Analytics Services segment, including the AmberLeaf acquisition. Operations expense in our IT Staffing Services segment increased by $0.2 million and largely related to increases in recruitment staff and other variable expenses – both due to higher activity levels in 2021. |
• | Amortization of acquired intangible assets was $0.3 million higher in the 2021 period due to the AmberLeaf acquisition. |
• | Revaluation of contingent consideration totaled a credit of $2.0 million in the 2021 period and related to the AmberLeaf acquisition. |
• | General and administrative expense increased by $2.7 million in the 2021 period compared to the corresponding 2020 period. General and administrative expense in our Data and Analytics Services segment increased by $1.6 million due to executive leadership staff increases and higher stock-based compensation expense. In our IT Staffing Services segment, higher stock-based compensation expense and additional administrative staff (from the austerity-impacted levels of 2020) were responsible for a $1.1 million increase from 2020. |
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. |
CONTROLS AND PROCEDURES |
• | hired additional personnel in both the first and second quarters of 2021; |
• | enhanced our management review control processes associated with complex accounting matters beginning in the first quarter and substantially completed in the second quarter of 2021; |
• | started testing for effectiveness our enhance management review control processes associated with complex accounting matters during the third quarter of 2021; and |
• | started the systems implementation process in the second quarter of 2021 to move the Data and Analytics subsidiary responsible for material weakness #2 above, to our Oracle Cloud ERP System. This implementation was completed in October 2021 for the subsidiary in question. |
ITEM 1. |
LEGAL PROCEEDINGS |
ITEM 1A. |
RISK FACTORS |
ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Period |
Total Number of Shares Purchased |
Average Price per Share |
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) |
||||||||||||
July 1, 2021 - July 31, 2021 |
— | — | — | — | ||||||||||||
August 1, 2021 - August 31, 2021 |
— | — | — | — | ||||||||||||
September 1, 2020 - September 30, 2021 |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
— | — | — | — |
(1) | As of September 30, 2021, the Company does not have a publicly announced repurchase program in place. |
ITEM 6. |
EXHIBITS |
MASTECH DIGITAL, INC. | ||||
November 8, 2021 |
/s/ VIVEK GUPTA | |||
Vivek Gupta Chief Executive Officer | ||||
/s/ JOHN J. CRONIN, JR. | ||||
John J. Cronin, Jr. | ||||
Chief Financial Officer | ||||
(Principal Financial Officer) |
Exhibit 31.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer
I, Vivek Gupta, certify that:
1. | I have reviewed this report on Form 10-Q of Mastech Digital, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
MASTECH DIGITAL, INC. | ||||||
Date: November 8, 2021 | /S/ VIVEK GUPTA | |||||
Vivek Gupta | ||||||
Chief Executive Officer |
Exhibit 31.2
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer
I, John J. Cronin, Jr., certify that:
1. | I have reviewed this report on Form 10-Q of Mastech Digital, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
MASTECH DIGITAL, INC. | ||||||
Date: November 8, 2021 | /S/ JOHN J. CRONIN, JR. | |||||
John J. Cronin, Jr. | ||||||
Chief Financial Officer |
Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Mastech Digital, Inc. (the Company) on Form 10-Q for the quarter ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Vivek Gupta, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/S/ VIVEK GUPTA |
Vivek Gupta |
Chief Executive Officer |
Date: November 8, 2021 |
Exhibit 32.2
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Mastech Digital, Inc. (the Company) on Form 10-Q for the quarter ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, John J. Cronin, Jr. Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/S/ JOHN J. CRONIN, JR. |
John J. Cronin, Jr. |
Chief Financial Officer |
Date: November 8, 2021 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Income Statement [Abstract] | ||||
Revenues | $ 59,531 | $ 47,383 | $ 162,964 | $ 145,391 |
Cost of revenues | 42,911 | 34,293 | 119,225 | 106,926 |
Gross profit | 16,620 | 13,090 | 43,739 | 38,465 |
Selling, general and administrative expenses: | ||||
Operating expenses | 11,645 | 8,873 | 33,566 | 28,158 |
Revaluation of contingent consideration liability | (1,982) | |||
Total Selling, general and administrative expenses | 11,645 | 8,873 | 31,584 | 28,158 |
Income from operations | 4,975 | 4,217 | 12,155 | 10,307 |
Interest income (expense), net | (169) | (164) | (523) | (641) |
Other income (expense), net | (66) | (27) | (88) | 67 |
Income before income taxes | 4,740 | 4,026 | 11,544 | 9,733 |
Income tax expense | 1,334 | 1,028 | 3,206 | 1,897 |
Net income | $ 3,406 | $ 2,998 | $ 8,338 | $ 7,836 |
Earnings per share: | ||||
Basic | $ 0.30 | $ 0.26 | $ 0.73 | $ 0.70 |
Diluted | $ 0.28 | $ 0.25 | $ 0.69 | $ 0.66 |
Weighted average common shares outstanding: | ||||
Basic | 11,441 | 11,381 | 11,430 | 11,260 |
Diluted | 12,025 | 12,042 | 12,007 | 11,911 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Net income | $ 3,406 | $ 2,998 | $ 8,338 | $ 7,836 |
Other comprehensive income (loss): | ||||
Net unrealized gain (loss) on interest-rate swap contracts | 39 | 35 | (29) | |
Foreign currency translation adjustment | 31 | 107 | (83) | (198) |
Total pretax net unrealized gain (loss) | 31 | 146 | (48) | (227) |
Income tax expense (benefit) | 10 | 9 | (8) | |
Total other comprehensive gain (loss), net of taxes | 31 | 136 | (57) | (219) |
Total comprehensive income | $ 3,437 | $ 3,134 | $ 8,281 | $ 7,617 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for uncollectible accounts | $ 393 | $ 413 |
Preferred Stock, par value | $ 0 | $ 0 |
Preferred Stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred Stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 250,000,000 | 250,000,000 |
Common stock, shares issued | 13,084,433 | 13,039,893 |
Treasury stock, shares | 1,646,420 | 1,646,420 |
Description of Business and Basis of Presentation |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2021 | |||
Accounting Policies [Abstract] | |||
Description of Business and Basis of Presentation |
Basis of Presentation References in this Quarterly Report on Form 10-Q to “we”, “our”, “Mastech Digital”, “Mastech” or “the Company” refer collectively to Mastech Digital, Inc. and its wholly-owned operating subsidiaries, which are included in these Condensed Consolidated Financial Statements (the “Financial Statements”). Description of Business We are a provider of Digital Transformation IT Services to mostly large and medium-sized organizations. Our portfolio of offerings includes data management and analytics services; digital learning services; and IT staffing services. Reflective of our 2017 acquisition of the services division of Canada-based InfoTrellis, Inc., we have added specialized capabilities in delivering data and analytics services to our customers globally. This business offers project-based consulting services in the areas of data management, data engineering and data science, with such services delivered using on-site and offshore resources. In October 2020, we acquired AmberLeaf Partners, Inc. (“AmberLeaf”), a Chicago-based customer experience consulting firm. This acquisition expanded our capabilities in customer experience strategy and managed services offering for a variety of Cloud-based enterprise applications across sales, marketing and customer services organizations. Our IT staffing business combines technical expertise with business process experience to deliver a broad range of staffing services in digital and mainstream technologies. Our digital technologies include data management, analytics, cloud, mobility, social and artificial intelligence. We work with businesses and institutions with significant IT spending and recurring staffing service needs. We also support smaller organizations with their “project focused” temporary IT staffing requirements. The COVID-19 pandemic had a material impact on activity levels in both of our business segments in 2020. During the first nine months of 2021, we are encouraged by the global roll-out of vaccination programs and signs of economic expansion and improving economic conditions as the impact of the pandemic subsides. There is, however, still uncertainty regarding the virus and the pace, nature and extent of the recovery of global markets. Accounting Principles The accompanying Financial Statements have been prepared by management in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting principally of normal recurring adjustments, considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Financial Statements and the accompanying notes. Actual results could differ from these estimates. These Financial Statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes for the year ended December 31, 2020, included in our Annual Report on Form 10-K filed with the SEC on March 16, 2021. Additionally, our operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that can be expected for the year ending December 31, 2021 or for any other period. Principles of Consolidation The Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. Critical Accounting Policies Please refer to Note 1 “Summary of Significant Accounting Policies” of the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2020 for a more detailed discussion of our significant accounting policies and critical accounting estimates. There were no material changes to these critical accounting policies during the nine months ended September 30, 2021. Segment Reporting The Company has two reportable segments, in accordance with Accounting Standards Committee (“ASC”) Topic 280 “Disclosures About Segments of an Enterprise and Related Information”: Data and Analytics Services and IT Staffing Services. |
Revenue from Contracts with Customers |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contracts with Customers |
The Company recognizes revenue on time-and-material Time-and-material out-of-pocket Out-of-pocket 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. Under the cost-based input method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred. The Company has determined that the cost-based input method provides a faithful depiction of the transfer of goods or services to the customer. Estimated losses are recognized immediately in the period in which current estimates indicate a loss. We record deferred revenues when cash payments are received or due in advance of our performance, including amounts which may be refundable. The Company’s time-and-material 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. We do not sell, lease or otherwise market computer software or hardware, and essentially 100% of our revenue is derived from the sale of data and analytics, IT staffing and digital transformation services. We expense sales commissions in the same period in which revenues are realized. These costs are recorded within sales and marketing expenses. Each contract the Company enters into is assessed to determine the promised services to be performed and includes identification of the performance obligations required by the contract. In substantially all of our contracts, we have identified a single performance obligation for each contract either because the promised services are distinct or the promised services are highly interrelated and interdependent and therefore represent a combined single performance obligation. Our Data and Analytics Services segment provides specialized capabilities in delivering data management and analytics services to customers globally. This business offers project-based consulting services in the areas of Master Data Management, Enterprise Data Integration, Data Engineering and Analytics, which can be delivered using onsite and offshore resources. Our IT Staffing Services segment combines technical expertise with business process experience to deliver a broad range of services in digital and mainstream technologies. Our digital technology stack includes data management and analytics, cloud, mobility, social and automation. Our mainstream technologies include business intelligence / data warehousing; web services; enterprise resource planning & customer resource management; and e-Business solutions. We work with businesses and institutions with significant IT spend and recurring staffing needs. We also support smaller organizations with their “project focused” temporary IT staffing requirements. The following table depicts the disaggregation of our revenues by contract type and operating segment:
For the three months ended September 30, 2021, the Company had two clients that exceeded 10% of total revenue (CGI = 14.6% and Accenture =10.4%). For the nine months ended September 30, 2021, the Company had one client that exceeded 10% of total revenue (CGI = 14.8%). For the three and nine months ended September 30, 2020, the Company had the same one client that exceeded 10% of total revenue in both periods (CGI = 16.6% and 14.8%, respectively). The Company’s top ten clients represented approximately 49% and 51% of total revenues for the three months ended September 30, 2021 and 2020, respectively. For the nine months ended September 30, 2021 and 2020, the Company’s top ten clients represented approximately 48% of total revenues for both periods. The following table presents our revenue from external customers disaggregated by geography, based on the work location of our customers:
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Business Combinations |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations |
On October 1, 2020, Mastech Digital, Inc., through its wholly-owned subsidiary Mastech Digital Data, Inc., acquired all of the outstanding shares of AmberLeaf Partners, Inc. (“AmberLeaf”). Under the terms of the Share Purchase Agreement executed in connection with the AmberLeaf acquisition (the “Purchase Agreement”), the Company paid at the closing of the acquisition approximately $9.7 million in cash. The Purchase Agreement also requires the Company to pay to the former shareholders of AmberLeaf up to $4.5 million in deferred cash payments, which payments are contingent upon the AmberLeaf business achieving specific revenue growth and EBITDA margin targets. The amount of these deferred cash payments, if any, is based upon the revenue growth and EBITDA margins of the AmberLeaf business for the 12-month period beginning on January 1, 2021 and for the 12-month period beginning January 1, 2022, as described more fully in the Purchase Agreement. To fund the acquisition, on October 1, 2020 the Company entered into a Third Amendment (the “Third Amendment”) to its Credit Agreement, as amended and dated April 20, 2018. The Third Amendment amends the Credit Agreement by, among other things, (1) increasing the aggregate commitment amount of the revolving credit facility to $30 million (an increase of $7.5 million); (2) providing for the Term Loan facility in the aggregate amount of $17.5 million (an increase of $10 million); (3) providing for an increase in the total commitment amount to the facility in an aggregate amount not to exceed $15 million, upon the satisfaction of certain conditions; and (4) amending the financial covenant in the Credit Agreement related to the Company’s Fixed Charge Coverage Ratio (as defined in the Credit Agreement) by increasing the minimum permitted Fixed Charge Coverage Ratio for each of the fiscal quarters ending on or after September 30, 2020. The acquisition was accounted for using the acquisition method of accounting. The acquisition method of accounting requires that the assets acquired and liabilities assumed be measured at their fair value as of the closing date. The following table summarizes the fair value of consideration for the acquired business on the October 1, 2020 closing date:
The cash purchase price at closing was paid with funds obtained from the following sources:
The allocation of the purchase price was based on estimates of the fair value of assets acquired and liabilities assumed as of October 1, 2020, as set forth below. The excess purchase price over the fair values of the net tangible assets and identifiable intangible assets was recorded as goodwill, which includes value associated with the assembled workforce. Goodwill is expected to be largely deductible for tax purposes. The valuation of net assets acquired is as follows:
The fair value of identifiable intangible assets has been estimated using the income approach through a discounted cash flow analysis. Specifically, the Company used the income approach through an excess earnings analysis to determine the fair value of client relationships. The value applied to the covenant not-to-compete The Company incurred $650,000 of transaction expenses related to the acquisition in 2020 inclusive of the write-off of $185,000 of deferred finance costs. No transaction costs were incurred for the three and nine month periods ended September 30, 2021 and 2020. Included in the Condensed Statement of Operations for the three and nine month periods ended September 30, 2021 are revenues of $1.9 million and $5.7 million, respectively, and net income of approximately $0.3 million and $0.4 million excluding the impact of the contingent consideration revaluation), respectively, applicable to the AmberLeaf operations acquired on October 1, 2020. The following reflects the Company’s unaudited pro forma results had the results of AmberLeaf been included for all periods presented:
The information above does not reflect all of the operating efficiencies or inefficiencies that may have resulted from the AmberLeaf acquisition in those periods prior to the acquisition. Therefore, the unaudited pro forma information above is not necessarily indicative of results that would have been achieved had the business been combined during all periods presented. |
Goodwill and Other Intangible Assets, net |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets, net |
Goodwill related to our June 15, 2015 acquisition of Hudson Global Resources Management’s U.S. IT staffing business (“Hudson IT”) totaled $8.4 million. Goodwill related to our July 13, 2017 acquisition of the services division of InfoTrellis totaled $27.4 million. During 2018, the Company recorded a goodwill impairment related to the InfoTrellis acquisition of $9.7 million. Goodwill related to our October 1, 2020 acquisition of AmberLeaf totaled $6.4 million. The Company is amortizing the identifiable intangible assets on a straight-line basis over estimated average lives ranging from 3 to 12 years. Identifiable intangible assets were comprised of the following as of September 30, 2021 and December 31, 2020:
Amortization expense for the three and nine month periods ended September 30, 2021 totaled $792,000 and $2.4 million, respectively, and is included in selling, general and administrative expenses in the Consolidated Statement of Operations. For the three and nine month periods ended September 30, 2020, amortization expense was $656,000 and $2.0 million, respectively. The estimated aggregate amortization expense for intangible assets for the years ending December 31, 2021 through 2025 is as follows:
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Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases |
The Company rents certain office facilities and equipment under noncancelable operating leases. As of September 30, 2021, approximately 97,000 square feet of office space is utilized for our sales and recruiting offices, delivery centers, and corporate headquarters. All of our leases are classified as operating leases. The average initial lease term is four years. Several leases have an option to renew, at our sole discretion, for an additional term. Our present lease terms range from less than one year to 5.5 years with an average of 2.8 years. Leases with an initial term of twelve months or less are not recorded on the balance sheet. The following table summarizes the balance sheet classification of the lease assets and related lease liabilities:
Future minimum rental payments for office facilities and equipment under the Company’s noncancelable operating leases are as follows:
The weighted average discount rate used to calculate the present value of future lease payments was 4.2%. We recognize rent expense for these leases on a straight-line basis over the lease term. Rental expense for the three and nine months ended September 30, 2021 totaled $0.4 million and $1.3 million, respectively. Rental expense for the three and nine months ended September 30, 2020 totaled $0.4 million and $1.2 million, respectively. Total cash paid for lease liabilities for the three and nine months ended September 30, 2021 totaled $0.4 million and $1.1 million, respectively. Total cash paid for lease liabilities for the three and nine months ended September 30, 2020 totaled $0.4 million and $1.2 million, respectively. New leases entered into during the three and nine months ended September 30, 2021 totaled $0 and $3.1 million, respectively. New leases entered into during the three and nine months ended September 30, 2020 totaled $0 and $0.2 million, respectively. On April 1, 2021, the Company entered into an operating lease for 35,356 square feet of office space in Chennai, India, which replaces a 19,120 square foot lease. |
Commitments and Contingencies |
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Sep. 30, 2021 | |||
Commitments and Contingencies Disclosure [Abstract] | |||
Commitments and Contingencies |
In the ordinary course of our business, the Company is involved in a number of lawsuits and administrative proceedings. While uncertainties are inherent in the final outcome of these matters, the Company’s management believes, after consultation with legal counsel, that the disposition of these proceedings should not have a material adverse effect on our financial position, results of operations or cash flows. |
Employee Benefit Plan |
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Sep. 30, 2021 | |||
Retirement Benefits [Abstract] | |||
Employee Benefit Plan |
The Company provides an Employee Retirement Savings Plan (the “Retirement Plan”) under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”), that covers substantially all U.S. based salaried and
W-2 hourly employees. Employees may contribute a percentage of eligible compensation to the Retirement Plan, subject to certain limits under the Code. The Company did not provide for any matching contributions for the three and nine month periods ended September 30, 2021 and 2020. |
Stock-Based Compensation |
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Sep. 30, 2021 | |||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||
Stock-Based Compensation |
In 2008, the Company adopted a Stock Incentive Plan (the “Plan”) which, as amended, provides that up to 4,900,000 shares of the Company’s Common Stock shall be allocated for issuance to directors, officers and key personnel. Grants under the Plan can be made in the form of stock options, stock appreciation rights, performance shares or stock awards. During the three months ended September 30, 2021 and September 30, 2020, the Company granted no shares under the Plan. During the nine months ended September 30, 2021, the Company granted restricted share units of 11,955 and 270,000 stock option grants at an average strike price of $17.65. During the nine months ended September 30, 2020, the Company granted restricted share units of 11,475 and 800,000 stock option grants at an average strike price of $15.49. As of September 30, 2021 and December 31, 2020, there were 343,000 shares and 613,000 shares, respectively, available for grants under the Plan. Stock-based compensation expense for the three months ended September 30, 2021 and 2020 was $693,000 and $462,000, respectively, and for the nine months ended September 30, 2021 and 2020 was $2.1 million and $1.5 million. Stock-based compensation expense is included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. During the three and nine months ended September 30, 2021, the Company issued 0 and 30,239 shares, respectively, related to the vesting of restricted shares and the exercising of stock options. During the three and nine months ended September 30, 2020, the Company issued 1,000 and 318,774 shares, respectively, related to the vesting of restricted shares and the exercising of stock options. In October 2018, the Board of Directors of the Company approved the Mastech Digital, Inc. 2019 Employee Stock Purchase Plan (the “Stock Purchase Plan”). The Stock Purchase Plan is intended to meet the requirements of Section 423 of the Code and was required to be approved by the Company’s shareholders to be qualified. On May 15, 2019, the Company’s shareholders approved the Stock Purchase Plan. Under the Stock Purchase Plan, 600,000 shares of Common Stock (subject to adjustment upon certain changes in the Company’s capitalization) are available for purchase by eligible employees who become participants in the Stock Purchase Plan. 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. The Company’s eligible full-time employees are able to contribute up to 15% of their base compensation into the employee stock purchase plan, subject to an annual limit of $25,000 per person. Employees are able to purchase Company common stock at a 15% discount to the lower of the fair market value of the Company’s common stock on the initial or final trading dates of each six-month offering period. Offering periods begin on January 1 and July 1 of each year. The Company uses the Black-Scholes option pricing model to determine the fair value of employee stock purchase planshare-based payments. The fair value of the six-month “look-back” option in the Company’s employee stock purchase plans is estimated by adding the fair value of 15% of one share of stock to 85% of the fair value of an option on one share of stock. The Company utilized U.S. Treasury yields as of the grant date for its risk-free interest rate assumption, matching the Treasury yield terms to the six-month offering period. The Company utilized historical company data to develop its dividend yield and expected volatility assumptions. During the three months ended September 30, 2021 and 2020, there were no shares issued under the Stock Purchase Plan. During the nine months ended September 30, 2021 and 2020, there were 14,301 shares and 11,735 shares issued under the Stock Purchase Plan at a share price of $12.71 and $8.97, respectively. Stock-based compensation expense related to the Stock Purchase Plan for the three months ended September 30, 2021 and 2020 totaled $25,000 and $21,000, respectively. Stock-based compensation expense related to the Stock Purchase Plan for the nine months ended September 30, 2021 and 2020 totaled $106,000 and $58,000, respectively, and is included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. At September 30, 2021, there were 524,740 shares available for grants under the Plan. |
Credit Facility |
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Text Block [Abstract] | |||
Credit Facility |
On July 13, 2017, the Company entered into a Credit Agreement (the “Credit Agreement”) with PNC Bank, as administrative agent, swing loan lender and issuing lender, PNC Capital Markets LLC, as sole lead arranger and sole book-runner, and certain financial institution parties thereto as lenders (the “Lenders”). The Credit Agreement, as amended, provides for a total aggregate commitment of $47.5 million, consisting of (i) a revolving credit facility (the “Revolver”) in an aggregate principal amount not to exceed $30 million (subject to increase by up to an additional $15 million upon satisfaction of certain conditions) and; (ii) a $17.5 million term loan facility (the “Term Loan), as more fully described in Exhibit 10.1 to the Company’s Form 8-Ks filed with the SEC on July 19, 2017 and April 25, 2018, and Exhibit 10.2 to the Form 8-K/A filed with the SEC on October 7, 2020. The Revolver expires in October 2023 and includes swing loan and letter of credit sub-limits in the aggregate amount not to exceed $6.0 million for swing loans and $5.0 million for letters of credit. Borrowings under the Revolver may be denominated in U.S. dollars or Canadian dollars. The maximum borrowings in U.S. dollars may not exceed the sum of 85% of eligible U.S. accounts receivable and 60% of eligible U.S. unbilled receivables, less a reserve amount established by the administrative agent. The maximum borrowings in Canadian dollars may not exceed the lesser of (i) $10.0 million; and (ii) the sum of 85% of eligible Canadian receivables, plus 60% of eligible Canadian unbilled receivables, less a reserve amount established by the administrative agent. Amounts borrowed under the Term Loan are required to be repaid in consecutive quarterly installments through and including the maturity date of October 1, 2023. The principal amount of each quarterly installment payable on the Term Loan equals $1.1 million through and including the maturity date, with the maturity date payment equal to the outstanding amount of the loan on that date. Borrowings under the revolver and the term loan, at the Company’s election, bear interest at either (a) the higher of PNC’s prime rate or the federal funds rate plus 0.50%, plus an applicable margin determined based upon the Company’s senior leverage ratio or (b) an adjusted London Interbank Offered Rate (“LIBOR”), with a floor of 0.50%, plus an applicable margin determined based upon the Company’s senior leverage ratio. The applicable margin on the base rate is between 0.50% and 1.25% on revolver borrowings and between 1.75% and 2.50% on term loans. The applicable margin on the adjusted LIBOR is between 1.50% and 2.25% on revolver borrowings and between 2.75% and 3.50% on term loans. A 20 to 30-basis point per annum commitment fee on the unused portion of the revolver facility is charged and due monthly in arrears. The applicable commitment fee is determined based upon the Company’s senior leverage ratio. The Company pledged substantially all of its assets in support of the Credit Agreement. The Credit Agreement contains standard financial covenants, including, but not limited to, covenants related to the Company’s senior leverage ratio and fixed charge ratio (as defined under the Credit Agreement) and limitations on liens, indebtedness, guarantees, contingent liabilities, loans and investments, distributions, leases, asset sales, stock repurchases and mergers and acquisitions. As of September 30, 2021, the Company was in compliance with all provisions under the facility. In connection with securing the commitments under the Credit Agreement and the April 20, 2018 and October 1, 2020 amendments to the Credit Agreement, the Company paid a commitment fee and incurred deferred financing costs totaling $752,000, which were capitalized and are being amortized as interest expense over the life of the facility. Deferred financing costs of $164,000 and $225,000 (net of amortization) as of September 30, 2021 and December 31, 2020, respectively, are presented as reductions in long-term debt in the Company’s Condensed Consolidated Balance Sheets. As of September 30, 2021 and December 31, 2020, the Company had no outstanding borrowings under the Revolver and unused borrowing capacity available was approximately $30.0 million and $22.0 million, respectively. The Company’s outstanding borrowings under the term loan were $14.2 million and $17.5 million at September 30, 2021 and December 31, 2020, respectively. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes |
The components of income before income taxes, as shown in the accompanying Financial Statements, consisted of the following for the three and nine months ended September 30, 2021 and 2020:
The Company has foreign subsidiaries outside the United States, which generate revenues from non-US based clients. Additionally, these subsidiaries provide services to the Company’s U.S. parents. Accordingly, the Company allocates a portion of its income to these subsidiaries based on a “transfer pricing” model and reports such income as foreign in the above table. The provision for income taxes, as shown in the accompanying Financial Statements, consisted of the following for the three and nine months ended September 30, 2021 and 2020:
The reconciliation of income taxes computed using the statutory U.S. income tax rate and the provision for income taxes for the three and nine months ended September 30, 2021 and 2020 were as follows (amounts in thousands):
We evaluate deferred income taxes quarterly to determine if valuation allowances are required or should be adjusted. GAAP accounting guidance requires us to assess whether valuation allowances should be established against deferred tax assets based on all available evidence, both positive and negative using a “more likely than not” standard. Our assessment considers, among other things, the nature of cumulative losses; forecast of future profitability; the duration of statutory carry-forward periods and tax planning alternatives. At September 30, 2021, our valuation allowance was comprised of balances within locations of Singapore and the United Kingdom. The valuation allowance balances at these locations totaled $268,000 and $179,000 as of September 30, 2021 and December 31, 2020, respectively, and reflect net operating losses which may not be realizable in the future. The IRS’s audit of the Company’s 2018 tax return was completed in third quarter with no adjustment to our original filing. The Company’s Canadian subsidiary for the years 2018 and 2019 are currently under audit. |
Derivative Instruments and Hedging Activities |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities |
Interest Rate Risk Management Concurrent with the Company’s July 13, 2017 borrowings under its new credit facility, the Company entered into a 44–month interest-rate swap to convert the debt’s variable interest rate to a fixed rate of interest. Under the swap contracts, which matured on April 1, 2021, the Company paid interest at a fixed rate of 1.99% and received interest at a variable rate equal to the daily U.S. LIBOR on an initial notional amount of $15.0 million. Notional amounts were $0 and $8.1 million at September 30, 2021 and December 31, 2020, respectively. These swap contracts have been designated as cash flow hedging instruments and qualified as effective hedges at inception under ASC Topic 815, “Derivatives and Hedging”. These contracts are recognized on the balance sheet at fair value. The effective portion of the changes in fair value on these instruments is recorded in other comprehensive income (loss) and is reclassified into the Consolidated Statements of Operations as interest expense in the same period in which the underlying hedge transaction affects earnings. Changes in the fair value of interest-rate swap contracts deemed ineffective are recognized in the Consolidated Statements of Operations as interest expense. The fair value of the interest-rate swap contracts at September 30, 2021 and December 31, 2020 was $0 and a liability of $35,000, respectively, and is reflected in the Consolidated Balance Sheets as other current liabilities. The effect of derivative instruments on the Condensed Consolidated Statements of Operations and Comprehensive Income are as follows (in thousands):
Information on the location and amounts of derivative fair values in the Condensed Consolidated Balance Sheets (in thousands):
The estimated amount of pretax income as of September 30, 2021 that is expected to be reclassified from other comprehensive income into earnings within the next 12 months is $0. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements |
The Company has adopted the provisions of ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), related to certain financial and nonfinancial assets and liabilities. ASC 820 establishes the authoritative definition of fair value; sets out a framework for measuring fair value; and expands the required disclosures about fair value measurements. The valuation techniques required by ASC 820 are based on observable and unobservable inputs using the following three-tier hierarchy:
At September 30, 2021 and December 31, 2020, the Company carried the following financial assets (liabilities) at fair value measured on a recurring basis (in thousands):
The fair value of interest-rate swap contracts are based on quoted prices for similar instruments from a commercial bank, and therefore, the fair value measurement is considered to be within Level 2. The fair value of the contingent consideration liability was estimated by utilizing a probability weighted simulation model to determine the fair value of contingent consideration, and therefore, the fair value measurement is considered to be within Level 3. In 2020, the Company incurred a $2.9 million contingent consideration liability related to the AmberLeaf acquisition. During the nine months ended September 30, 2021, the Company revalued the contingent consideration liability related to the AmberLeaf acquisition after determining that relevant conditions for payment of such liabilities were unlikely to be fully satisfied. The revaluation resulted in a $2.0 million reduction to the contingent consideration liability. The following table provides information regarding changes in the Company’s contingent consideration liability for the periods ended September 30, 2021 and December 31, 2020.
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Shareholders' Equity |
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Sep. 30, 2021 | |||
Equity [Abstract] | |||
Shareholders' Equity |
The Company purchases shares to satisfy employee tax obligations related to its Stock Incentive Plan. The Company did not purchase any shares during the nine months ended September 30, 2021 and 2020. |
Earnings Per Share |
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Sep. 30, 2021 | |||
Earnings Per Share [Abstract] | |||
Earnings Per Share |
The computation of basic earnings per share is based on the Company’s net income divided by the weighted average number of common shares outstanding. Diluted earnings per share reflect the potential dilution that could occur if outstanding stock options were exercised. The dilutive effect of stock options was calculated using the treasury stock method. For the three and nine months ended September 30, 2021, there were 270,000 anti-dilutive stock options excluded from the computation of diluted earnings per share. For the three months and nine months ended September 30, 2020, there were no anti-dilutive stock options excluded from the computation of diluted earnings per share. |
Business Segments and Geographic Information |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segments and Geographic Information |
Our reporting segments are: 1) Data and Analytics Services; and 2) IT Staffing Services. The Data and Analytics Services segment was acquired through the July 13, 2017 acquisition of the services division of Canada-based InfoTrellis, Inc. This segment is a project-based consulting services business with specialized capabilities in data management and analytics. The business is marketed as Mastech InfoTrellis and utilizes a dedicated sales team with deep subject matter expertise. Mastech InfoTrellis has offices in Atlanta, Toronto, London, Dublin and Singapore, and a global delivery center in Chennai, India. Project-based delivery reflects a combination of on-site resources and offshore resources. Assignments are secured on both a time and material and fixed price basis. In October 2020, we acquired AmberLeaf, a Chicago-based customer experience consulting firm. This acquisition expanded our capabilities in customer experience strategy and managed services offering for a variety of Cloud-based enterprise application across sales, marketing and customer service organizations. The IT Staffing Services segment offers staffing services in digital and mainstream technologies and uses digital methods to enhance organizational learning. These services are marketed using a common sales force and delivered via our domestic and global recruitment centers. While the vast majority of our assignments are based on time and materials, we do have the capabilities to deliver our digital transformation services on a fixed price basis.
Below is a reconciliation of segment total assets to consolidated total assets:
Below is geographic information related to our revenues from external customers:
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Related-Party Transaction |
9 Months Ended | ||
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Sep. 30, 2021 | |||
Related Party Transactions [Abstract] | |||
Related-Party Transaction |
During the third quarter of 2021, we purchased cybersecurity software licenses from CrowdStrike, Inc. for $98,000. One of our Board members is a Board member of CrowdStrike Inc. The purchase was completed as an arm’s length transaction. |
Recently Issued Accounting Standards |
9 Months Ended | ||
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Sep. 30, 2021 | |||
Accounting Changes and Error Corrections [Abstract] | |||
Recently Issued Accounting Standards |
Recently Adopted Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740)”. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and by clarifying and amending other areas of Topic 740. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2020. We adopted this ASU on January 1, 2021 with no material impact on our consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)”. The amendments in this ASU provide optional guidance to ease the burden in accounting for contract modifications associated with the cessation of interbank offered rates, particularly LIBOR, as a result of reference rate reform. The amendments in this ASU are effective for annual and interim periods from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020 through December 31, 2022. We adopted this ASU on January 1, 2021 with no material impact on our consolidated financial statements. A variety of proposed or otherwise potential accounting standards are currently under consideration by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, management has not yet determined the effect, if any that the implementation of such proposed standards would have on the Company’s consolidated financial statements. |
Description of Business and Basis of Presentation (Policies) |
9 Months Ended |
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Sep. 30, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation References in this Quarterly Report on Form
10-Q to “we”, “our”, “Mastech Digital”, “Mastech” or “the Company” refer collectively to Mastech Digital, Inc. and its wholly-owned operating subsidiaries, which are included in these Condensed Consolidated Financial Statements (the “Financial Statements”). |
Description of Business | Description of Business We are a provider of Digital Transformation IT Services to mostly large and medium-sized organizations. Our portfolio of offerings includes data management and analytics services; digital learning services; and IT staffing services. Reflective of our 2017 acquisition of the services division of Canada-based InfoTrellis, Inc., we have added specialized capabilities in delivering data and analytics services to our customers globally. This business offers project-based consulting services in the areas of data management, data engineering and data science, with such services delivered using on-site and offshore resources. In October 2020, we acquired AmberLeaf Partners, Inc. (“AmberLeaf”), a Chicago-based customer experience consulting firm. This acquisition expanded our capabilities in customer experience strategy and managed services offering for a variety of Cloud-based enterprise applications across sales, marketing and customer services organizations. Our IT staffing business combines technical expertise with business process experience to deliver a broad range of staffing services in digital and mainstream technologies. Our digital technologies include data management, analytics, cloud, mobility, social and artificial intelligence. We work with businesses and institutions with significant IT spending and recurring staffing service needs. We also support smaller organizations with their “project focused” temporary IT staffing requirements. The
COVID-19 pandemic had a material impact on activity levels in both of our business segments in 2020. During the first nine months of 2021, we are encouraged by the global roll-out of vaccination programs and signs of economic expansion and improving economic conditions as the impact of the pandemic subsides. There is, however, still uncertainty regarding the virus and the pace, nature and extent of the recovery of global markets. |
Accounting Principles | Accounting Principles The accompanying Financial Statements have been prepared by management in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting principally of normal recurring adjustments, considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Financial Statements and the accompanying notes. Actual results could differ from these estimates. These Financial Statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes for the year ended December 31, 2020, included in our Annual Report on Form
10-K filed with the SEC on March 16, 2021. Additionally, our operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that can be expected for the year ending December 31, 2021 or for any other period. |
Principles of Consolidation | Principles of Consolidation The Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. |
Critical Accounting Policies | Critical Accounting Policies Please refer to Note 1 “Summary of Significant Accounting Policies” of the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Critical Accounting Policies and Estimates” in our Annual Report on Form
10-K for the year ended December 31, 2020 for a more detailed discussion of our significant accounting policies and critical accounting estimates. There were no material changes to these critical accounting policies during the nine months ended September 30, 2021. |
Segment Reporting | Segment Reporting The Company has two reportable segments, in accordance with Accounting Standards Committee (“ASC”) Topic 280 “Disclosures About Segments of an Enterprise and Related Information”: Data and Analytics Services and IT Staffing Services. |
Revenue from Contracts with Customers (Tables) |
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Summary of Disaggregation of Our Revenues by Contract Type and Operating Segment | The following table depicts the disaggregation of our revenues by contract type and operating segment:
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Summary of Revenue from External Customers | The following table presents our revenue from external customers disaggregated by geography, based on the work location of our customers:
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Business Combinations (Tables) |
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Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Fair Value of Consideration for Acquired Business | The following table summarizes the fair value of consideration for the acquired business on the October 1, 2020 closing date:
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Schedule of Sources of Funds in Business Acquisition | The cash purchase price at closing was paid with funds obtained from the following sources:
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Schedule of Fair Value of Net Assets Acquired | The valuation of net assets acquired is as follows:
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Summary of Unaudited Pro Forma Results | The following reflects the Company’s unaudited pro forma results had the results of AmberLeaf been included for all periods presented:
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Goodwill and Other Intangible Assets, net (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Identifiable Intangible assets | The Company is amortizing the identifiable intangible assets on a straight-line basis over estimated average lives ranging from 3 to 12 years. Identifiable intangible assets were comprised of the following as of September 30, 2021 and December 31, 2020:
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Schedule of Estimated Amortization Expense | The estimated aggregate amortization expense for intangible assets for the years ending December 31, 2021 through 2025 is as follows:
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Leases (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Balance Sheet classification of lease assets and related lease liabilities | The following table summarizes the balance sheet classification of the lease assets and related lease liabilities:
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Schedule of Minimum Future Rental Payments | Future minimum rental payments for office facilities and equipment under the Company’s noncancelable operating leases are as follows:
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Income Taxes (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Income Before Income Taxes | The components of income before income taxes, as shown in the accompanying Financial Statements, consisted of the following for the three and nine months ended September 30, 2021 and 2020:
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Provision for Income Taxes | The provision for income taxes, as shown in the accompanying Financial Statements, consisted of the following for the three and nine months ended September 30, 2021 and 2020:
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Reconciliation of Income Taxes | The reconciliation of income taxes computed using the statutory U.S. income tax rate and the provision for income taxes for the three and nine months ended September 30, 2021 and 2020 were as follows (amounts in thousands):
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Derivative Instruments and Hedging Activities (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effect of Derivative Instruments on Consolidated Statements of Operations and Comprehensive Income | The effect of derivative instruments on the Condensed Consolidated Statements of Operations and Comprehensive Income are as follows (in thousands):
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Information on Location and Amounts of Derivative Fair Values in Consolidated Balance Sheets | Information on the location and amounts of derivative fair values in the Condensed Consolidated Balance Sheets (in thousands):
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Fair Value Measurements (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Financial Assets and (Liabilities) at Fair Value Measured on Recurring Basis | At September 30, 2021 and December 31, 2020, the Company carried the following financial assets (liabilities) at fair value measured on a recurring basis (in thousands):
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Schedule of Changes in Contingent Consideration Liability | The following table provides information regarding changes in the Company’s contingent consideration liability for the periods ended September 30, 2021 and December 31, 2020.
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Business Segments and Geographic Information (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Operating Segments |
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Summary of Assets, Depreciation and Amortization and Capital Expenditures by Segment | Below is a reconciliation of segment total assets to consolidated total assets:
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Summary of Revenue from External Customers and Long-lived Assets | Below is geographic information related to our revenues from external customers:
|
Revenue from Contracts with Customers - Additional Information (Detail) - Agreement |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Disaggregation of Revenue [Line Items] | ||||
Percentage of billing expense revenues | 2.00% | |||
Sales Revenue Net [Member] | Revenue from Rights Concentration Risk [Member] | CGI [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Percentage of total revenues | 14.60% | 16.60% | 14.80% | 14.80% |
Number of customers | 2 | 1 | 1 | 1 |
Sales Revenue Net [Member] | Revenue from Rights Concentration Risk [Member] | Accenture PLC [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Percentage of total revenues | 10.40% | |||
Number of customers | 2 | |||
Top Ten Customers [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue percentage of total revenue | 49.00% | 51.00% | 48.00% | 48.00% |
Data and Analytics Services [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Percent of revenue from services | 100.00% |
Revenue from Contracts with Customers - Summary of Revenue from External Customers (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Revenue from External Customer [Line Items] | ||||
Total revenues | $ 59,531 | $ 47,383 | $ 162,964 | $ 145,391 |
United States [Member] | ||||
Revenue from External Customer [Line Items] | ||||
Total revenues | 57,682 | 46,445 | 157,156 | 142,572 |
Canada [Member] | ||||
Revenue from External Customer [Line Items] | ||||
Total revenues | 988 | 768 | 3,270 | 2,363 |
India and Other [Member] | ||||
Revenue from External Customer [Line Items] | ||||
Total revenues | $ 861 | $ 170 | $ 2,538 | $ 456 |
Business Combinations - Additional Information (Detail) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Oct. 01, 2020 |
Sep. 30, 2021 |
Jun. 30, 2021 |
Mar. 31, 2021 |
Sep. 30, 2020 |
Jun. 30, 2020 |
Mar. 31, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
|
Business Acquisition [Line Items] | ||||||||||
Increase in Credit Facility | $ 15,000,000 | |||||||||
Revenues | $ 59,531,000 | $ 47,383,000 | $ 162,964,000 | $ 145,391,000 | ||||||
Net income (loss) | 3,406,000 | $ 3,738,000 | $ 1,194,000 | $ 2,998,000 | $ 2,969,000 | $ 1,869,000 | 8,338,000 | $ 7,836,000 | ||
Revolving Line of Credit [Member] | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Credit agreement provides for total aggregate commitment | 30,000,000 | |||||||||
Term Loan Facility [Member] | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Credit agreement provides for total aggregate commitment | 17,500,000 | |||||||||
Maximum [Member] | Revolving Line of Credit [Member] | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Increase in Credit Facility | 7,500,000 | |||||||||
Maximum [Member] | Term Loan Facility [Member] | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Increase in Credit Facility | $ 10,000,000 | |||||||||
Amber Leaf Partners Inc [Member] | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Business acquisition, description | On October 1, 2020, Mastech Digital, Inc., through its wholly-owned subsidiary Mastech Digital Data, Inc., acquired all of the outstanding shares of AmberLeaf Partners, Inc. (“AmberLeaf”). Under the terms of the Share Purchase Agreement executed in connection with the AmberLeaf acquisition (the “Purchase Agreement”) | |||||||||
Cash consideration | $ 9,664,000 | |||||||||
Contingent consideration in deferred cash payments | $ 4,500,000 | |||||||||
Transaction costs related to acquisition | $ 650,000 | |||||||||
Write off of Deferred Finance Costs | $ 185,000 | |||||||||
Revenues | 1,900,000 | 5,700,000 | ||||||||
Net income (loss) | $ 300,000 | $ 400,000 |
Business Combinations - Summary of Fair Value of Consideration for Acquired Business (Detail) - USD ($) $ in Thousands |
Oct. 01, 2020 |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|---|
Business Acquisition [Line Items] | |||
Estimated payout of contingent consideration | $ 0 | $ 2,882 | |
Amber Leaf Partners Inc [Member] | |||
Business Acquisition [Line Items] | |||
Cash purchase price at closing | $ 9,664 | ||
Working capital adjustments | |||
Estimated payout of contingent consideration | 2,882 | ||
Total Fair Value of Consideration | $ 12,546 |
Business Combinations - Summary of Fair Value of Consideration for Acquired Business (Parenthetical) (Detail) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended | |
---|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
Oct. 01, 2020 |
|
Business Acquisition [Line Items] | |||
Fair value of contingent consideration | $ 0 | $ 2,882 | |
Change in contingent consideration liability | (1,982) | $ 0 | |
Amber Leaf Partners Inc [Member] | |||
Business Acquisition [Line Items] | |||
Fair value of contingent consideration | $ 2,882 | ||
Change in contingent consideration liability | $ 2,000 |
Business Combinations - Summary of Source of Funds (Detail) $ in Thousands |
Oct. 01, 2020
USD ($)
|
---|---|
Business Acquisition [Line Items] | |
Increase in term loan debt facility | $ 15,000 |
Amber Leaf Partners Inc [Member] | |
Business Acquisition [Line Items] | |
Cash paid at Closing | 9,664 |
Amber Leaf Partners Inc [Member] | Term Loan Debt Facility [Member] | |
Business Acquisition [Line Items] | |
Increase in term loan debt facility | 10,000 |
Amber Leaf Partners Inc [Member] | Revolving Line of Credit [Member] | |
Business Acquisition [Line Items] | |
Revolving line of credit | $ (336) |
Business Combinations - Schedule of Valuation of Net Assets Acquired (Detail) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
Oct. 01, 2020 |
---|---|---|---|
Identifiable intangible assets: | |||
Goodwill | $ 32,510 | $ 32,510 | |
Amber Leaf Partners Inc [Member] | |||
Business Acquisition [Line Items] | |||
Cash on hand | $ 319 | ||
Working capital assets, net of liabilities | 1,153 | ||
Identifiable intangible assets: | |||
Identifiable intangible assets | 4,670 | ||
Goodwill | 6,404 | ||
Net Assets Acquired | 12,546 | ||
Amber Leaf Partners Inc [Member] | Client Relationships [Member] | |||
Identifiable intangible assets: | |||
Identifiable intangible assets | 2,970 | ||
Amber Leaf Partners Inc [Member] | Covenant Not-to-Compete [Member] | |||
Identifiable intangible assets: | |||
Identifiable intangible assets | 440 | ||
Amber Leaf Partners Inc [Member] | Trade Name [Member] | |||
Identifiable intangible assets: | |||
Identifiable intangible assets | 490 | ||
Amber Leaf Partners Inc [Member] | Technology [Member] | |||
Identifiable intangible assets: | |||
Identifiable intangible assets | $ 770 |
Business Combinations - Summary of Unaudited Pro Forma Results (Detail) - Amber Leaf Partners Inc [Member] - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Business Acquisition [Line Items] | ||||
Revenue | $ 59,531 | $ 50,281 | $ 162,964 | $ 154,132 |
Net income | $ 3,406 | $ 3,460 | $ 8,338 | $ 9,042 |
Earnings per share-diluted | $ 0.28 | $ 0.29 | $ 0.69 | $ 0.76 |
Goodwill and Other Intangible Assets, net - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2018 |
Dec. 31, 2020 |
Oct. 01, 2020 |
Jul. 13, 2017 |
Jun. 15, 2015 |
|
Goodwill and Intangible Assets [Line Items] | |||||||||
Goodwill | $ 32,510 | $ 32,510 | $ 32,510 | ||||||
Amortization expense | $ 792 | $ 656 | $ 2,378 | $ 1,998 | |||||
Hudson IT [Member] | |||||||||
Goodwill and Intangible Assets [Line Items] | |||||||||
Goodwill | $ 8,400 | ||||||||
Info Trellis Inc [Member] | |||||||||
Goodwill and Intangible Assets [Line Items] | |||||||||
Goodwill | $ 27,400 | ||||||||
Goodwill impairment | $ 9,700 | ||||||||
Amber Leaf Partners Inc [Member] | |||||||||
Goodwill and Intangible Assets [Line Items] | |||||||||
Goodwill | $ 6,404 |
Goodwill and Other Intangible Assets, net - Schedule of Estimated Amortization Expense (Detail) $ in Thousands |
Dec. 31, 2021
USD ($)
|
---|---|
Intangible Liability Disclosure [Abstract] | |
Estimated aggregate amortization expense for year ending 2021 | $ 3,168 |
Estimated aggregate amortization expense for year ending 2022 | 2,987 |
Estimated aggregate amortization expense for year ending 2023 | 2,772 |
Estimated aggregate amortization expense for year ending 2024 | 2,693 |
Estimated aggregate amortization expense for year ending 2025 | $ 2,553 |
Leases - Additional Information (Detail) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2021
USD ($)
ft²
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Sep. 30, 2020
USD ($)
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Sep. 30, 2021
USD ($)
ft²
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Sep. 30, 2020
USD ($)
|
Apr. 01, 2021
ft²
|
|
Square feet of office space | ft² | 97,000 | 97,000 | 35,356 | ||
Average initial lease term | 4 years | 4 years | |||
Discount rate | 4.20% | 4.20% | |||
Operating leases, rent expense, net | $ 0.4 | $ 0.4 | $ 1.3 | $ 1.2 | |
Total lease payments | 0.4 | 0.4 | 1.1 | 1.2 | |
Lease obligation incurred | $ 0.0 | $ 0.0 | $ 3.1 | $ 0.2 | |
INDIA | |||||
Replacement of existing Square feet of Office lease | ft² | 19,120 | 19,120 | |||
Minimum [Member] | |||||
Lease term range | 1 year | ||||
Maximum [Member] | |||||
Lease term range | 5 years 6 months | ||||
Weighted Average [Member] | |||||
Lease term range | 2 years 9 months 18 days |
Leases - Summary of Balance Sheet classification of lease asset and related lease liability (Detail) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Assets: | ||
Long-term operating lease right-of-use assets | $ 5,229 | $ 3,286 |
Liabilities: | ||
Short-term operating lease liability | 1,494 | 1,079 |
Long-term operating lease liability | 4,052 | 2,325 |
Total Liabilities | $ 5,546 | $ 3,404 |
Leases - Schedule of Future Minimum Rental Payments for Operating Leases (Detail) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
2021 (For remainder of year) | $ 426 | |
2022 | 1,689 | |
2023 | 1,642 | |
2024 | 901 | |
2025 | 630 | |
Thereafter | 757 | |
Total | 6,045 | |
Less: Imputed interest | (499) | |
Present value of operating lease liabilities | $ 5,546 | $ 3,404 |
Employee Benefit Plan - Additional Information (Detail) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Defined Benefit Plan Disclosure [Line Items] | ||||
Matching contributions | $ 0 | $ 0 | $ 0 | $ 0 |
Income Taxes - Components of Income Before Income Taxes (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Income before income taxes: | ||||
Domestic | $ 4,644 | $ 3,505 | $ 12,091 | $ 8,858 |
Foreign | 96 | 521 | (547) | 875 |
Income before income taxes | $ 4,740 | $ 4,026 | $ 11,544 | $ 9,733 |
Income Taxes - Provision for Income Taxes (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Current provision (benefit): | ||||
Federal | $ 550 | $ 799 | $ 1,809 | $ 1,313 |
State | 133 | 135 | 437 | 321 |
Foreign | 195 | 214 | 179 | 553 |
Total current provision (benefit) | 878 | 1,148 | 2,425 | 2,187 |
Deferred provision (benefit): | ||||
Federal | 372 | (84) | 659 | (177) |
State | 105 | (15) | 173 | (45) |
Foreign | (41) | (181) | (140) | (228) |
Total deferred provision (benefit) | 436 | (280) | 692 | (450) |
Change in valuation allowance | 20 | 160 | 89 | 160 |
Total provision for income taxes | $ 1,334 | $ 1,028 | $ 3,206 | $ 1,897 |
Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Deferred Tax Liabilities Valuation Allowance | $ 268 | $ 179 |
Derivative Instruments and Hedging Activities - Effect of Derivative Instruments on Consolidated Statements of Operations and Comprehensive Income (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Gain / (Loss) recognized in OCI on Derivatives | $ 39 | $ 35 | $ (29) | |
Interest rate swap contracts [Member] | Cash Flow Hedging Relationships [Member] | Interest Expense [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Gain / (Loss) recognized in OCI on Derivatives | $ 0 | 39 | 35 | (29) |
Amount of Gain / (Loss) reclassified from Accumulated OCI to Income | 0 | (40) | 34 | (82) |
Amount of Gain / (Loss) recognized in Income on Derivatives | $ 0 | $ 0 | $ 0 | $ 0 |
Derivative Instruments and Hedging Activities - Information on Location and Amounts of Derivative Fair Values in Consolidated Balance Sheets (Detail) - Interest Rate Swap Contracts [Member] - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Derivatives, Fair Value [Line Items] | ||
Derivative Fair Value Liability | $ 35 | |
Other Current Liabilities [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Fair Value Liability | $ 0 | $ 35 |
Fair Value Measurements - Additional Information (Detail) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
Fair Value Disclosures [Line Items] | ||
Change in contingent consideration liability | $ (1,982) | $ 0 |
Fair value of contingent consideration | 0 | 2,882 |
AmberLeaf [Member] | ||
Fair Value Disclosures [Line Items] | ||
Change in contingent consideration liability | $ (2,000) | |
Fair value of contingent consideration | $ 2,900 |
Fair Value Measurements - Summary of Financial Assets (Liabilities) at Fair Value Measured on Recurring Basis (Detail) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent Consideration Liabilities | $ 0 | $ (2,882) |
Interest Rate Swap Contracts [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of financial liability | (35) | |
Contingent Consideration Liabilities | (900) | (2,882) |
Level 2 [Member] | Interest Rate Swap Contracts [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of financial liability | (35) | |
Level 3 [Member] | Interest Rate Swap Contracts [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent Consideration Liabilities | $ (900) | $ (2,882) |
Fair Value Measurements - Schedule of Changes in Contingent Consideration Liability (Detail) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Beginning balance | $ 2,882 | $ 0 |
Contingent consideration liabilities | 0 | 2,882 |
Payments made | 0 | 0 |
Revaluation | (1,982) | 0 |
Ending balance | $ 900 | $ 2,882 |
Shareholders' Equity - Additional Information (Detail) - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Equity, Class of Treasury Stock [Line Items] | ||
Shares purchased to satisfy employee tax obligation | 0 | 0 |
Earnings per Share - Additional Information (Detail) - shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Earnings Per Share [Abstract] | ||||
Anti-dilutive securities not included in computation of earnings per share | 270,000 | 0 | 270,000 | 0 |
Business Segments and Geographic Information - Summary of Assets by Segment (Detail) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total assets | $ 115,082 | $ 102,046 |
Data and analytics services [Member] | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total assets | 58,356 | 55,792 |
IT Staffing Services [Member] | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total assets | $ 56,726 | $ 46,254 |
Business Segments and Geographic Information - Summary of Revenue from External Customers (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Segment Reporting Information [Line Items] | ||||
Revenues | $ 59,531 | $ 47,383 | $ 162,964 | $ 145,391 |
United States [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 57,682 | 46,445 | 157,156 | 142,572 |
Canada [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 988 | 768 | 3,270 | 2,363 |
India and Other [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | $ 861 | $ 170 | $ 2,538 | $ 456 |
Related-Party Transaction - Additional Information (Detail) |
3 Months Ended |
---|---|
Sep. 30, 2021
USD ($)
| |
CrowdStrike Inc [Member] | |
Related Party Transaction [Line Items] | |
Related party purchases | $ 98,000 |
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