Greetings, and welcome to the Mastech Digital Q4 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jenna Lacey, Manager of Legal Affairs for Mastech Digital. Thank you, Ms. Lacey, you may begin.

Thank you, operator, and welcome to Mastech Digital's Fourth Quarter 2024 Conference Call. If you have not yet received a copy of our earnings announcement, it can be obtained from our website at www.mastechdigital.com. With me on the call today are Nirav Patel, Mastech Digital's Chief Executive Officer; and Jack Cronin, our Chief Financial Officer. I would like to remind everyone that statements made during this call that are not historical facts are forward-looking statements. These forward-looking statements include our financial growth and liquidity projections as well as statements about our plans, strategies, intentions and beliefs concerning the business, cash flows, costs and the markets in which we operate. Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to identify certain forward-looking statements. These statements are based on information currently available to us, and we assume no obligation to update these statements as circumstances change. There are statements -- there are risks and uncertainties that could cause actual events to differ materially from these forward-looking statements including those listed in the company's 2023 annual report on Form 10-K filed with the Securities and Exchange Commission and available on its website at www.sec.gov. Additionally, management has elected to provide certain non-GAAP financial measures to supplement our financial results presented on a GAAP basis. Specifically, we will provide non-GAAP net income and non-GAAP diluted earnings per share, which we believe will provide greater transparency with respect to the key metrics used by management in operating the business. Reconciliations of these non-GAAP financial measures to their comparable GAAP measures are included in our earnings announcement, which can be obtained from our website at www.mastechdigital.com. As a reminder, we will not be providing guidance during this call nor will we provide any guidance in any subsequent one-on-one meetings or calls. I will now turn the call over to Nirav for his comments.

Thanks, Jenna, and good morning, everyone. Today is my 45th day with Mastech Digital, and it's a privilege to address you today as Mastech Digital's Chief Executive Officer. Let me start by giving you a bit of my background and experience. I have well over 25 years of experience as a technology executive with a track record of scaling large and midsized organizations. I have held several prominent leadership roles throughout my career. Prior to joining Mastech Digital, I served for over 4 years as President and CEO of Bristlecone, an AI-powered pure-play supply chain transformation company. And before that, I spent over 19 years at Cognizant, playing many executive roles, scaling multibillion-dollar businesses across its key industry segments and serving enterprise clients globally. It's been an incredible and busy first 45 days since stepping into my role at Mastech Digital. I'm about halfway through my first 100 days. And in addition to focusing on the execution of our plans, I have spent a considerable amount of time listening to our customers, partners, employees and investors. It is important for me to hear their perspectives and understand the expectations they have of us for the future. What is clear to me is that we have a strong foundation and culture that is deeply rooted in customer focus. But what's also clear to me is that we are at an inflection point, both in terms of speed of change brought by the AI revolution across our enterprise customers and the changing landscape of technology service providers in this rapidly evolving AI-first world. I believe that winning in the future will require organization like ours to have a sharper execution focus and the founder's mindset for unlocking growth. We cannot ignore the evolving landscape shaping our industry. We are seeing the uncertainties…

Thanks, Nirav, and good morning, everyone. Our fourth quarter 2024 financial results reflected the positive momentum that we experienced over the last 9 months of 2024. Consolidated revenues during the fourth quarter totaled $50.7 million, a year-over-year increase of 10.2% compared to the corresponding quarter of 2023. Our Data and Analytics Services segment reported revenues of $10.3 million in Q4 2024, which were 26.2% higher on a year-over-year basis and 9.4% sequentially higher than our revenue performance in the previous quarter. Order bookings in Q4 2024 totaled $11 million, which was somewhat below our expectations. In the fourth quarter of 2024, our IT Staffing Services segment had revenues of $40.5 million, achieving year-over-year revenue growth of 6.8%. During the quarter, our billable consultant base declined by 63 consultants, which is generally in line with previous years due to seasonal high assignment ends. As expected, this will have some impact on our Q1 2025 revenue results. Consolidated gross profit dollars totaled $14.7 million in Q4, which exceeded the corresponding quarter of 2023 by $3.4 million or a 30% increase, driven by higher revenue volumes as well as increasing gross margin percent. Our Q4 2024 gross margin percent was a company record 29% as both of our business segments had significant margin expansion from the previous year. In our Data and Analytics Services segment, gross margins as a percent of revenue increased by 480 basis points to 49.5% in Q4 2024 compared to 44.7% in the fourth quarter of 2023. This increase reflected higher utilization and better project delivery. In our IT Staffing Services segment, gross margins were up 350 basis points in Q4 compared to Q4 2023 due to an increase in direct hire revenues, a favorable medical claim experience in our self-insured health care program and higher margins on new…

[Operator Instructions] Our first question comes from the line of Lisa Thompson with Zacks Investment Research.

We're all looking forward to an exciting 2025. I know there's a lot of possibilities out there. Could you talk a little bit about what your thinking is of how you're going to approach increasing staffing and D&A? Is there going to be any strategy changes besides the obvious of trying to incorporate AI into your whole service offerings? How is that going to work?

Sure, Lisa. Thank you for the question. Nirav here. I'll take that one. Look, I'm taking a very, very structured approach, Lisa, to defining our long-term strategy. And I sort of -- I've just stepped into my role and my immediate priority is to deeply learn about our business and engage with our teams, customers and partners, and to really have a chance to assess our starting point in terms of our challenges and opportunities. What I can say with confidence that Mastech has a very, very strong foundation. Our focus will be on accelerating growth, driving excellence and enhancing our offerings. But I am going to take a little bit of a structured approach in defining this strategy, and I look forward to be sharing more specific details sometime later half of this year as we refine our plans and execution road map.

Okay. I'm also curious that there's a lot of talk about government efficiency now. Do you see any opportunities in there? If there ever is an entity that needs data modernization, I think that would be the one.

Clearly, government opportunities are something that -- especially in D&A that we look at for sure. So I guess the answer to your question is, yes.

Okay. All right. Could you do happen to have offhand how many employees you ended the year with?

Yes, I do. We ended the year with total employees of both segments 1,816. And just as a point of reference, last year, we had -- we ended the year 2023 with 1,648.

Okay. So that's a pretty big increase.

Yes, not bad.

All right. Yes, yes. And do you have any thoughts about spending this year? Is it going to be pretty much steady? Or is there any investment you need to do?

Spending like on SG&A cost or spending on CapEx?

Well, either, but mostly SG&A.

Okay. SG&A, yes, our objective in SG&A is to continue to maintain our SG&A expense at the same percentage that we had in 2024 for 2025. So that's the objective. And it's going to be a little bit by quarter-to-quarter. I would say that probably in the first half of 2025, we're going to probably not reach that goal because I think we are going to be hiring some of the missing pieces related to a new growth strategy. But by the end of the year, with what we believe would be increases in revenue as well as maybe some cost savings initiatives, we should come in at that objective. And from a CapEx standpoint, we don't have a whole lot of capital expenditures. I mean we're -- maybe it's certainly under $1 million. So that will still hold, clearly under $1 million.

Okay. And you're still thinking 28% tax rate?

Well, the 28% tax rate, it encompasses like a 123R expense true-up based on the gains that our employees enjoy from exercising their shares versus the company expense related to those shares. So in the last year – well, let’s say, the last 1.5 years, our true-up was negative, which negatively impacts the tax rate. That’s why we were 28%. In fourth quarter, our stock price was a little bit higher and a lot of the exercises came in at gains that were greater than the 123R expense, the compensation expense. And actually, our tax rate was actually lower than 25%. So a lot of that depends on some of these unusual true-ups that we have to make from a tax perspective.

Our next question comes from the line of Marc Riddick with Sidoti & Company.

I wanted to touch a little bit on some of the commentary around the bookings during the quarter. And maybe if you could spend maybe a little bit of time sort of giving us a picture on sort of how that progressed, either whether it was -- whether by monthly or were there changes in the demand pre post election? Was -- did the bookings look different based on client verticals? Anything that you could sort of share there as to maybe what you were seeing during the fourth quarter? And then maybe any thoughts as to maybe how the year has begun as far as client activity would be really helpful.

Sure, Marc. I'll take a stab at that. When we looked at our pipeline at the beginning of Q4 and looking at our pipeline, we had a range of where we thought we would land in total bookings and the $11 million came short of that. And we had some project delays because there is a little bit, in particular, in D&A, there's a little bit of uncertainty in the marketplace. I mean we saw a few clients where we thought they were going to give us bookings in Q4, and they delayed those. And so there is -- we clearly see some uncertainty in the marketplace. What's the driver of that uncertainty? I mean, we can guess, is it a tick up in inflation? Is it political concerns, unknowns. But whatever the reason, our clients seem to be less eager to give booking deals immediately. They seem to have a longer cycle -- sales cycle on that before they let a booking transpire.

Okay. And is there -- and I know this is a bit granular, but I was just sort of curious, is there anywhere in particular, whether it's certain types of clients? Or do you think that's sort of more of an across-the-board kind of situation right now?

I would say across the board. I would say across the board. I mean we have some bookings on financial service clients. We've had Q4 bookings on health care clients. It's just that we didn't get the amount that we expected given the robust pipeline that we had.

Okay. And then one of the things I did want to highlight it in your -- in the press release was around the extension of the share repurchase program, which was initially scheduled to end earlier this month and has now been extended to February of '26. Just wondered if you could share any thoughts there. I can understand that, Nirav, you've been there for like 45 days. I can understand that you get to have some time to sort of work through some of the prioritizations. But I was just sort of wondering if you could share any thoughts on that share repurchase extension there.

Yes. I mean the Board made that decision, right? And we had this program for 2 years prior. And during that 2-year period, we experienced a number of extended blackout periods where we weren't able to repurchase our shares. They were like corporate-related transactions and events. we think most of that is behind us, and we have 423,000 shares remaining in the share buyback program, we would like to capitalize on some of those. So I do think that you're going to see less blackout periods and more buyout volume in 2025 compared to last year.

Great. And then the last thing for me as far as potential uses of cash, obviously, a very strong balance sheet to work with at the moment. I was wondering if you could talk about any thoughts on potential acquisitions and maybe what that pipeline may look like now, whether valuations have changed in the last few months or we've seen a few small deals in the space, but maybe sort of comment on maybe what you're seeing out there.

Sure, Marc. This is Nirav here. I'll take that first. So Marc, I think, look, like I said that we are certainly in the phase where we are sort of starting to think through our go-forward strategy, and we are sort of trying to really get a little bit more clarity on that. And I think like I said earlier, right, I just stepped in on my role. And in terms of my go-forward strategy, my immediate priority is really to listen and learn. And I think I am taking a fairly structured approach of thinking through our long-term approach strategy, which kind of will include elements of organic and inorganic plays and so forth. But to me, I think we're getting the direction for the company in terms of where we are headed lays an important emphasis before we would sort of activate or execute on any of those transactions. But please feel free to chime in, Jack, if you want to share your thoughts.

The only thing that I would say, Marc, is M&A is part of our growth strategy for sure. It always has been. It's just that when you're changing leadership, it's hard to decide exactly what you want to purchase. So I think Nirav...

No, that's...

I think once in a year...Go ahead, Marc?

No, I was just going to say we're certainly looking forward to working with you going forward and looking forward to your vision for the company going forward. And that's about it for me today.

Thank you, Marc. I’m equally excited and looking forward to working with you.

[Operator Instructions] There appear to be no further questions at this time. I'd like to turn the floor back over to Mr. Patel for closing remarks.

Thank you, Devin. If there are no additional questions, I thank you for your time, and I look forward to talking with you in early May for our Q1 2025 earnings call.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.