Mastech Digital, Inc.
For the period ended Sep 30, 2025. Filed Nov 13, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2025 · Filed Nov 13, 2025
MHH$6.31-0.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-06-30; filed 2025-08-13.
0001193125-25-179470
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-09-30; filed 2025-11-13.
0001193125-25-279079
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 22 previous paragraphs and 95 current paragraphs.
15 unchanged; 7 reworded; 72 added; 0 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 1 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (72)
Current report
Structural Optimization Costs
Current report
During the third quarter of 2025, the Company recorded $1.1 million of severance charges associated with strategic initiatives undertaken to better align our organizational structure with our long-term growth objectives. These initiatives were designed to streamline leadership responsibilities, enhance operational efficiency, and position the Company for improved scalability across our business segments.
Current report
Results of Operations for the Three Months Ended September 30, 2025 as Compared to the Three Months Ended September 30, 2024:
Current report
Revenues:
Current report
Revenues for the three months ended September 30, 2025 totaled $48.5 million, compared to $51.8 million for the corresponding three-month period in 2024. This 6% year-over-year revenue decrease reflected a 4% revenue decrease in our IT Staffing Services segment and a 16% decline in our Data and Analytics Services segment. For the three months ended September 30, 2025, the Company had three clients that each had revenues in excess of 10% of total revenues (Fidelity 18.1%, Populus = 12.7% and CGI = 10.4%). For the three months ended September 30, 2024, the Company had two clients that each had revenues in excess of 10% of total revenues (CGI = 14.0% and Allegis = 11.7%). The Company’s top ten clients represented approximately 59% and 56% of total revenues for the three months ended September 30, 2025 and 2024, respectively.
Current report
Below is a tabular presentation of revenues by reportable segment for the three months ended September 30, 2025 and 2024, respectively:
Current report
Revenues from our Data and Analytics Services segment totaled $7.9 million in the three months ended September 30, 2025, which is lower compared to $9.4 million in the corresponding period last year. The year-over-year decrease in revenues primarily reflects softer demand and slower client decision making cycles for new projects in 2025. New bookings in the third quarter of 2025 totaled approximately $6.1 million, compared to bookings of $11.1 million in the third quarter of 2024, as we saw clients maintaining a cautious approach to discretionary spending amid macroeconomic uncertainty.
Current report
Revenues from our IT Staffing Services segment totaled $40.6 million in the three months ended September 30, 2025, compared to $42.4 million during the corresponding 2024 period. The year-over-year decline in revenue primarily reflects lower demand for our services in 2025. Billable consultants at September 30, 2025 totaled 947-consultants compared to 1,071-consultants one year earlier. Our average bill rate during the third quarter of 2025 was $86.60 per hour compared to $82.80 per hour in the corresponding 2024 quarter. The increase in average bill rate was due to higher quality of revenues in the new assignments during the third quarter of 2025 and was reflective of the types of skill sets that we deployed to clients. Permanent placement / fee revenues were approximately $0.3 million during both the third quarter of 2025 and the comparable 2024 quarter.
Current report
Gross Margins:
Current report
Gross profits in the third quarter of 2025 totaled $13.5 million, which was $1.3 million lower than the third quarter of 2024 gross profits. Excluding the $0.3 million of severance expense, gross profit as a percentage of revenue was 28.3% for the three-month period ended September 30, 2025, compared to 28.5% during the same period of 2024. This 20-basis point reduction in gross margins reflected higher margins in our IT Staffing Services business segment, offset by lower margins from our Data and Analytics Services segment during the current quarter. Including the $0.3 million of severance expense, gross margin was 27.8% for the three-month period ended September 30, 2025.
Current report
Below is a tabular presentation of gross margin by reporting segment for the three months ended September 30, 2025 and 2024, respectively:
Current report
Gross margins from our Data and Analytics Services segment, excluding severance expense of $0.3 million were 46.0% of revenues during the third quarter of 2025, which represented a decrease of 470-basis points compared to 50.7% of revenues during the third quarter of 2024. The margin reduction was primarily the result of a lower utilization rate in the 2025 quarter compared to the third quarter of 2024. Including the $0.3 million of severance expense, gross margin was 42.8% for the Data and Analytics Services segment for the three-month period ended September 30, 2025.
Current report
Gross margins from our IT Staffing Services segment were 24.8% in the third quarter of 2025 compared to 23.6% during the corresponding quarter of 2024. This 120-basis point increase was due to higher quality placements and better pricing on new assignments in 2025.
Current report
Selling, General and Administrative (“SG&A”) Expenses:
Current report
Below is a tabular presentation of operating expenses by expense category for the three months ended September 30, 2025 and 2024, respectively:
Current report
SG&A expenses for the three months ended September 30, 2025, totaled $12.6 million or 26.1% of total revenues, compared to $12.3 million or 23.8% of total revenues for the three months ended September 30, 2024. Excluding the severance expense and finance and accounting transition expense in the 2025 period and the amortization of acquired intangible assets in both periods, SG&A expense as a percentage of total revenues would have been 20.5% and 22.5%, respectively.
Current report
Fluctuations within SG&A expense components during the third quarter of 2025, compared to the third quarter of 2024, included the following:
Current report
Sales expense was $1.3 million lower in the 2025 period compared to the corresponding 2024 period. Sales expense in our Data and Analytics Services segment decreased by $0.5 million, which decrease was driven primarily by lower payroll and related costs. Sales expense in our IT Staffing Services segment decreased by $0.8 million, resulting from lower payroll and related costs, as well as reduced marketing spend.
Current report
Operations expenses decreased by $0.5 million in the 2025 period compared to the corresponding 2024 period. Operations expense decreased by $0.1 million in our Data and Analytics Services segment and by $0.4 million in our IT Staffing Services segment due to staff reductions.
Current report
General and administrative expenses increased by $0.3 million in the 2025 period compared to the corresponding 2024 period. General and administrative expenses in our Data and Analytics Services segment increased by $0.3 million primarily due to executive leadership hires and higher stock-based compensation expense in the 2025 period. In our IT Staffing Services segment, general and administrative expenses remained flat.
Current report
Amortization of acquired intangible assets was $0.7 million in the 2025 period, compared to $0.6 million in the corresponding 2024 period.
Current report
Severance expense included in SG&A was $0.8 million in the 2025 period, compared to no expense in the third quarter of 2024. The expense related to a strategic initiative undertaken to better align the organizational structure with the Company's long-term growth objectives.
Current report
Finance and accounting transition expense was $0.9 million in the 2025 period, compared to no expense in the third quarter of 2024. The expense relates to the Company’s decision to transition the Company’s finance and accounting functions to India and includes severance and additional costs related to the duplication of resources and travel expenses during the training and knowledge transfer process.
Current report
Other Income / (Expense) Components:
Current report
Other Income / (Expense) for the three months ended September 30, 2025, consisted of interest income of $266,000 and foreign exchange gains of $149,000. For the three months ended September 30, 2024, Other Income / (Expense) consisted of interest income of $163,000 and foreign exchange losses of ($30,000). The higher level of interest income was reflective of higher cash balances in the 2025 period.
Current report
Income Tax Expense:
Current report
Income tax expense for the three months ended September 30, 2025, totaled $294,000, representing an effective tax rate on pre-tax income of 23.8%, compared to $697,000 expense for the three months ended September 30, 2024, which represented an effective tax rate on pre-tax income of 27.1%. The main driver for the lower tax rate in the 2025 period is the shortfall in the expected benefit from stock options, offset by state and foreign tax impacts.
Current report
Results of Operations for the Nine Months Ended September 30, 2025 as Compared to the Nine Months Ended September 30, 2024:
Current report
Revenues:
Current report
Revenues for the nine months ended September 30, 2025, totaled $145.9 million, compared to $148.2 million for the corresponding nine-month period in 2024. This 2% year-over-year revenue decrease reflected a 3% decrease in our Data and Analytics Services segment and a 1% decrease in our IT Staffing Services segment. For the nine months ended September 30, 2025, the Company had three clients that each had revenues in excess of 10% of total revenues (Fidelity = 15.4%, Populus = 12.3% and CGI = 11.1%). For the nine months ended September 30, 2024, the Company had two clients that each had revenues in excess of 10% of total revenues (CGI = 15.4% and Allegis = 10.6%). The Company’s top ten clients represented approximately 58% and 54% of total revenues for the nine months ended September 30, 2025 and 2024, respectively.
Current report
Below is a tabular presentation of revenues by reportable segment for the nine months ended September 30, 2025 and 2024, respectively:
Current report
Revenues from our Data and Analytics Services segment totaled $25.4 million during the nine months ended September 30, 2025, compared to $26.3 million in the corresponding nine-month period last year. The 3% year-over-year decrease was primarily driven by continued softness in client demand and slower decision-making cycles for new projects, compared to the corresponding 2024 period. Order bookings for the first nine months of 2025 totaled approximately $23.5 million, compared to bookings of $30.0 million for the first nine months of 2024.
Current report
Revenues from our IT Staffing Services segment totaled $120.5 million in the nine months ended September 30, 2025, compared to $121.9 million during the corresponding 2024 period. This 1% decrease largely reflected a lower level of billable consultants, partially offset by an increase in average bill rate due to higher quality of placements in the 2025 period. At September 30, 2025 billable consultants totaled 947-consultants compared to 1,071-consultants at September 30, 2024.
Current report
Gross Margins:
Current report
Gross profits in the nine months ended September 30, 2025 totaled $40.2 million compared to $40.9 million in the corresponding period last year. Excluding the $0.3 million of severance expense, gross profit as a percentage of revenue was 27.7% for the nine-month period ended September 30, 2025, compared to 27.6% during the same period of 2024. This 10-basis point increase largely reflected improvements in our IT Staffing Services segment, offset by lower margins in our Data and Analytics Services segment.
Current report
Below is a tabular presentation of gross margin by reporting segment for the nine months ended September 30, 2025 and 2024, respectively:
Current report
Gross margins from our Data and Analytics Services segment, excluding severance expense of $0.3 million were 45.1% of revenues during the nine-month period ended September 30, 2025, compared to 48.9% in the corresponding period of 2024. This gross margin decrease reflected lower utilization rates during the first nine months of 2025. Including the $0.3 million of severance expense, gross margins were 44.1% for the Data and Analytics Services segment for the nine-month period ended September 30, 2025.
Current report
Gross margins from our IT Staffing Services segment were 24.0% in the nine months ended September 30, 2025, compared to 23.0% during the corresponding period of 2024. This 100-basis point increase was due to higher margins and bill rates on new assignments in 2025.
Current report
Selling, General and Administrative (“SG&A”) Expenses:
Current report
Below is a tabular presentation of operating expenses by expense category for the nine months ended September 30, 2025, and 2024, respectively:
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Reworded paragraphs (7)
Previous wording
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, 2024 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 six months ended June 30, 2025.
Current wording
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, 2024 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, 2025.
Previous wording
On January 12, 2024, we entered into a consulting services agreement with Primentor, Inc. (“Primentor”) to provide the Company with strategic advisory and management consulting services, as well as any other business and organizational strategy services as the Board of Directors of the Company may reasonably request from time to time. The initial term of the consulting services agreement is for a three-year period that commenced on January 12, 2024, and the Company may request to renew the term for additional successiveone-year terms, in which case Primentor and the Company will negotiate to agree upon the scope of the additional services and the amount of additional consulting fees. During 2024, the Company incurred consulting expenses of approximately $1.1 million related to these services. In 2025 and 2026, the Company expects to pay Primentor approximately $270,000 and $120,000, respectively, plus reimbursement of any reasonable and documentedout-of-pocket expenses incurred by Primentor in rendering such services.
Current wording
On January 12, 2024, we entered into a consulting services agreement with Primentor, Inc. (“Primentor”) to provide the Company with strategic advisory and management consulting services, as well as any other business and organizational strategy services as the Board of Directors of the Company may reasonably request from time to time. The initial term of the consulting services agreement is for a three-year period that commenced on January 12, 2024, and the Company may request to renew the term for additional successive one-year terms, in which case Primentor and the Company will negotiate to agree upon the scope of the additional services and the amount of additional consulting fees. During 2024, the Company incurred consulting expenses of approximately $1.1 million related to these services. In 2025 and 2026, the Company expects to pay Primentor approximately $270,000 and $120,000, respectively, plus reimbursement of any reasonable and documented out-of-pocket expenses incurred by Primentor in rendering such services.
Previous wording
During the first quarter of 2025, the Company’s Board of Directors made the decision to implement a long-term cost-cutting initiative to transition the Company’s finance and accounting functions to India. During 2025, the Company expects to incur additional costs related to the duplication of resources and travel expenses during the training and knowledge transfer process. As of June 30, 2025, the Company has incurred approximately $200,000 of additional costs and estimates total expenses to range from $500,000 to $750,000 for the transition period.
Current wording
During the first quarter of 2025, the Company’s Board of Directors made the decision to implement a long-term cost-cutting initiative to transition the Company’s finance and accounting functions to India. During 2025, the Company expects to incur additional costs related to the duplication of resources and travel expenses during the training and knowledge transfer process. As of September 30, 2025, the Company has incurred approximately $500,000 of additional costs and estimates total expenses to range from $500,000 to $750,000 for the transition period.
Previous wording
Additionally, the Company expects to pay approximately $1.3 million of severance expense related to this initiative. As of June 30, 2025, the Company has incurred approximately $500,000 in severance. Post-transition cost savings are expected to approximate $1.2 million per annum.
Current wording
Additionally, the Company expects to pay approximately $1.3 million of severance expense related to this initiative. As of September 30, 2025, the Company has incurred approximately $1.1 million in severance. Post-transition cost savings are expected to approximate $1.2 million per annum.
Previous wording
We are a provider of Digital Transformation IT Services to mostly large andmedium-sized organizations.
Current wording
We are a provider of Digital Transformation IT Services to mostly large and medium-sized organizations.
Previous wording
We operate in two reporting segments – Data and Analytics Services and IT Staffing Services. Our data and analytics services are marketed on a global basis under the brand “Mastech InfoTrellis” and are delivered largely on a project basis withon-site andoff-shore resources. These data and analytics capabilities and expertise were acquired through our acquisition of InfoTrellis and enhanced and expanded subsequent to the acquisition. In October 2020, we acquired AmberLeaf Partners, Inc. (“AmberLeaf”), a Chicago-based customer experience consulting firm. This acquisition enhanced our capabilities in customer experience strategy and managed services offerings for a variety of Cloud-based enterprise applications across sales, marketing and customer services organizations. Our IT staffing business combines technical expertise with business process experience to deliver a broad range of staffing services in digital and mainstream technologies, as well as other digital transformation services.
Current wording
We operate in two reporting segments – Data and Analytics Services and IT Staffing Services. Our data and analytics services are marketed on a global basis under the brand “Mastech InfoTrellis” and are delivered largely on a project basis with on-site and off-shore resources. These data and analytics capabilities and expertise were acquired through our acquisition of InfoTrellis and enhanced and expanded subsequent to the acquisition. In October 2020, we acquired AmberLeaf Partners, Inc. (“AmberLeaf”), a Chicago-based customer experience consulting firm. This acquisition enhanced our capabilities in customer experience strategy and managed services offerings for a variety of Cloud-based enterprise applications across sales, marketing and customer services organizations. Our IT staffing business combines technical expertise with business process experience to deliver a broad range of staffing services in digital and mainstream technologies, as well as other digital transformation services.
Previous wording
Generally, our business outlook is highly correlated to general North American economic conditions, particularly with respect to our IT Staffing Services segment. During periods of increasing employment and economic expansion, demand for our services tends to increase. Conversely, during periods of contracting employment and / or a slowing global economy, demand for our services tends to decline. With economic expansion in 2010 through 2019 activity levels improved. However, as economic conditions strengthened, we experienced increased tightness in the supply side (skilled IT professionals) of our businesses. These supply-side challenges pressured resource costs and, to some extent, gross margins. As we entered 2020, we were encouraged by continued growth in the domestic job markets and expanding U.S. and global economies. However, with the COVID-19 pandemic surfacing in the first quarter of 2020, we realized that economic growth would quickly turn into recessionary conditions, which had a material impact on activity levels in both of our business segments. In 2021, we were encouraged by the global rollout of vaccination programs and signs of economic improvement, however, the proliferation of COVID-19 variants had caused some uncertainty and disruption in the global markets. In 2022 and 2023, COVID-19-related concerns seemed to subside; however, increased inflation, challenges in the financial sector related to increasing interest rates, and concerns about a possible recession created much uncertainty and impacted demand for our services in the second half of 2022 and for the entire year of 2023. In 2024, economic conditions in North American improved over the course of the year as job growth and inflationary outlooks showed positive signs of improvement. However, as we move into the second half of 2025, uncertainty and caution continues to persist in the marketplace, driven in part by lingering questions around the direction and implementation of immigration, trade and other policies under the new administration (including the implementation of tariffs and other trade measures). These evolving dynamics have contributed to extended decision-making cycles and conservative spending behavior among clients. Given these and other factors, it remains difficult to reliably forecast how market conditions will develop for the remainder of 2025 or during 2026 and beyond.
Current wording
Generally, our business outlook is highly correlated to general North American economic conditions, particularly with respect to our IT Staffing Services segment. During periods of increasing employment and economic expansion, demand for our services tends to increase. Conversely, during periods of contracting employment and / or a slowing global economy, demand for our services tends to decline. With economic expansion in 2010 through 2019 activity levels improved. However, as economic conditions strengthened, we experienced increased tightness in the supply side (skilled IT professionals) of our businesses. These supply-side challenges pressured resource costs and, to some extent, gross margins. As we entered 2020, we were encouraged by continued growth in the domestic job markets and expanding U.S. and global economies. However, with the COVID-19 pandemic surfacing in the first quarter of 2020, we realized that economic growth would quickly turn into recessionary conditions, which had a material impact on activity levels in both of our business segments. In 2021, we were encouraged by the global rollout of vaccination programs and signs of economic improvement, however, the proliferation of COVID-19 variants had caused some uncertainty and disruption in the global markets. In 2022 and 2023, COVID-19-related concerns seemed to subside; however, increased inflation, challenges in the financial sector related to increasing interest rates, and concerns about a possible recession created much uncertainty and impacted demand for our services in the second half of 2022 and for the entire year of 2023. In 2024, economic conditions in North American improved over the course of the year as job growth and inflationary outlooks showed positive signs of improvement. However, as we move towards the end of 2025, uncertainty and caution continues to persist in the marketplace, driven in part by lingering questions around the direction and implementation of immigration, trade and other policies under the new administration (including the implementation of tariffs and other trade measures). These evolving dynamics have contributed to extended decision-making cycles and conservative spending behavior among clients. Given these and other factors, it remains difficult to reliably forecast how market conditions will develop for the remainder of 2025 or during 2026 and beyond.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
ITEM 2. MANAGEMENT’S DISCU SSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS