Mastech Digital : ROTH Capital Conference March 2020

MASTECH DIGITAL: A COMPELLING VALUE PROPOSITION

Roth Conference | March 17, 2020

© Copyright 2019 Mastech Digital. All rights reserved

SPEAKERS

VIVEK GUPTA

PRESIDENT, CEO, AND MEMBER OF THE BOARD

• Joined as the President and Chief Executive Officer in March 2016
• Has over three decades of experience in the technology industry
• Chief Executive of Global Infrastructure Management Services at Zensar Technologies
• Played a major role in global growth of Zensar
• Advanced Management Program from Wharton Business School, University of Pennsylvania
• Bachelors in Technology from the Indian Institute of Technology, Delhi, India

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JACK CRONIN

CHIEF FINANCIAL OFFICER

• As the CFO, Jack oversees all finance functions as well as M&A-related activities
• Played a leadership role in Mastech Digital's acquisition of InfoTrellis and Hudson's IT staffing business, as well as the sale of past Mastech Digital subsidiaries
• 21 years at Mastech Digital
• Chief Financial Officer at Industrial Ceramics
• Assistant Corporate Controller at Dravo Corporation
• MBA from Katz Business School, University of Pittsburgh
• Certified CPA and CMA

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SAFE HARBOR DISCLOSURE

Certain statements contained in this presentation are forward-looking statements based on management's expectations, estimates, projections and assumptions. Words such as "expects," "anticipates," "plans," "believes," "scheduled," "estimates" and variations of these words and similar expressions are intended to identify forward-looking statements, which include but are not limited to projections of revenues, earnings, and cash flow. These statements are based on information currently available to the Company and it assumes no obligation to update the forward-looking statements as circumstances change. These statements are not guarantee of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results and trends may differ materially from what is forecast in forward-looking statements due to a variety of factors, including, without limitation, the level of market demand for its services, the highly competitive market for the types of

services offered by the company, the impact of competitive factors on profit margins, market conditions that could cause the Company's customers to reduce their spending for its services, and the company's ability to create, acquire and build new lines of business, to attract and retain qualified personnel, reduce costs and conserve cash, and other risks that are described in more detail in the company's filings with the Securities and Exchange Commission including its Form 10-K for the year ended December 31, 2018.

© Copyright 2019 Mastech Digital. All rights reserved

AGENDA

DATA AND ANALYTICS SERVICES

Industry Highlights | Key Business Attributes |	02
Financial Model | Financial Highlights

COMPELLING VALUE ATTRIBUTES		04
Favorable Outlook | Unlocked Value

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01			COMPANY OVERVIEW
		Introduction | Key Business Events | Consolidated Highlights
			|Financial Position
03			IT STAFFING SERVICES
		Industry Highlights | Key Business Attributes |
			Financial Model | Financial Highlights

© Copyright 2019 Mastech Digital. All rights reserved

COMPANY OVERVIEW

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WHO WE ARE

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 A Digital Transformation IT services company with deep capabilities in Data and Analytics Services and IT Staffing Services

 Former operating subsidiary of IGATE Corporation

 NYSE-listed (MHH); Pittsburgh, PA-headquartered

 Presence across North America, India, Europe, ASEAN, and the Middle East

 Run-rate revenue of $200 million

 1,700+ associates and growing

INDUSTRY RECOGNITION

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OUR BOARD OF DIRECTORS

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	ASHOK TRIVEDI		SUNIL WADHWANI		BRENDA GALILEE
Co-founder and Co-chairman	Co-founder and Co-chairman	Ex-Chairman and CEO, InTouch Corporation

	JOHN AUSURA	GERHARD WATZINGER		VIVEK GUPTA
Founder, Capital Resolution, LLC	Chairman, CrowdStrike	President and CEO, Mastech Digital

© Copyright 2019 Mastech Digital. All rights reserved

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KEY BUSINESS EVENTS

	Appointed Vivek Gupta as
Mastech Spun-off from	President and CEO to lead	Acquired InfoTrellis, Inc.,	Formulated strategic	Delivered record
IGATE Corporation as a	Company's transformation	a Data and Analytics	blueprint for the D&A
revenues in Q4
Public Company (MHH)	beyond Staffing	Services Company	segment
OCTOBER 1, 2008	MARCH 1, 2016	JULY 13, 2017	NOVEMBER 1, 2018	DECEMBER 31, 2019

JULY 15, 2015	SEPTEMBER 1, 2016	JULY 24, 2018	JANUARY 1, 2019
Acquired Hudson Global	Rebranded as Mastech Digital	Board of Directors declares	Empowered new
Resources Management,	to support our digital	a two-for-one stock split	Leadership team to
an IT Staffing Company	transformation journey		execute the strategic plan
			for the D&A business

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PROGRESS MADE IN THE LAST FOUR YEARS

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PARAMETER	MARCH 01, 2016	JANUARY 01, 2018	JANUARY 01, 2019	JANUARY 01, 2020	IN FOUR YEARS
	Mastech 1.0	Mastech 2.0	Mastech 2.0	Mastech 2.0
BRANDING
POSITIONING	IT Staffing Company	Digital Transformation IT	Digital Transformation IT	Digital Transformation IT
Services Company	Services Company	Services Company
REVENUE	$123.5 Mn	$147.9 Mn	$177.2 Mn	$193.6 Mn	+57%
HEADCOUNT	1,117	1,517	1,651	1,745	+56%
% DIGITAL REVENUE	18%	38%	40%	46%	+255%
SHARE PRICE	$3.61	$5.03	$6.44	$11.07	+307%
MARKET CAP	$31.6 Mn	$54.9 Mn	$70.8 Mn	$121.7 Mn	+385%
GEOGRAPHIES (CUSTOMERS)	USA	USA, Canada	USA, Canada	USA, Canada, EMEA,
ASEAN
OFFSHORE DELIVERY CENTERS	NOIDA, Bangalore	NOIDA, Chennai	Larger NOIDA, Larger	Larger NOIDA, Larger
Chennai	Chennai

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CONSOLIDATED 2019 FINANCIAL HIGHLIGHTS

Q-4 2019

• YOY revenue growth of 13%
• YOY gross margin expansion of 140-basis points to 25.3%
• Non-GAAPDiluted EPS of $0.26 - up from $0.16 last year
• Substantial investments have muted earnings in the short- term

FULL YEAR 2019

• YOY revenue growth of 9%
• YOY gross margin expansion of 80-basis points to 24.8%
• Non-GAAPDiluted EPS of $0.82 - up from $0.74 last year
• Substantial investments have muted earnings in the short- term

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FINANCIAL POSITION, AT DECEMBER 31, 2019

MANAGEABLE DEBT LOAD / ADEQUATE LIQUIDITY

• Balance Sheet Bank Debt, net of cash balances: Total: $22.5 million

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 Return on Equity: 27%

• Short Term: $4.6 million

 Capitalization Ratio: 37%

• Effective Annual Interest Rate on Debt: 3.5%

 Debt to EBITDA: 1.75x

• Existing Borrowing Capacity under Revolver: $13 million

© Copyright 2019 Mastech Digital. All rights reserved

DATA AND ANALYTICS SERVICES

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INDUSTRY HIGHLIGHTS

• By 2023, Data and Analytics revenue forecasted to be $275 billion, with a CAGR of 12%
• By 2027, Big Data revenue forecasted to be $103 billion, with a CAGR of 11%
• By 2022, more than half of major new business systems will incorporate continuous intelligence that uses real-time context data to improve decisions.
• Over 60% of Business Executives believe that a well-planned AI Strategy can create more data-driven business opportunities. 72% of business leaders consider AI as a major business advantage
• India holds world's largest STEM talent pool, The Advanced Analytics talent pool in India will expand from 65,000 in 2018 to more than 200,000 by 2020.

Source: MarketWatch, NASSCOM, Forrester, Zinnov, Gartner

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KEY BUSINESS ATTRIBUTES

• Enhanced services portfolio covering the full stack of Data and Analytics including Data Management, Data Engineering and Data Science
• Continue to be a recognized leader in Master Data Management
• Renewed sales focus including relationships with the C-suite, consultative selling, strategic engagements, and focus on annuity-based revenues
• Locations expanded to include North America, India, Europe, ASEAN, and the Middle East

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DATA & ANALYTICS FINANCIAL MODEL

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PROJECT GROSS	EBITDA	OPERATING
MARGINS: 50%	MARGIN: 25%-30%	MARGINS: 17%-22%

Largely the

Driven by strong

Highly leverageable

amortization of

industry growth and

costs structure;

acquired intangible

our exciting new

Project Margins;

investment mode in

assets

service offerings

2019/2020

Highly leverageable

Investment mode

adjusted for Bench									impacted 2019
Costs of 2%-4%					costs structure;
				investment mode in
					2019/2020

REVENUES	OPERATING	DEPRECIATION AND
	EXPENSE: 18-20%	AMORTIZATION: 8%

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FOURTH QUARTER 2019 FINANCIAL HIGHLIGHTS

• YOY revenue growth of 34%
• YOY gross margin expansion of 400-basis points to 49.1%
• Third consecutive quarter of strengthening activity levels and pipeline expansion
• Non-GAAPEBITDA increased by 38% over the last year to $1.7 million
• Record bookings of over $23 million secured in Q4
• Substantial investments have muted earnings in the short-term

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IT STAFFING SERVICES

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INDUSTRY HIGHLIGHTS

• 2020 US IT Staffing Industry projections: $33 billion market size; and growth @ 3%
• Jobs in Information and Computer Technology is projected to reach a scale of 5 million between 2018 and 2028, up 12.2% over the previous ten-year period
• 9% IT decision makers in the US plan more hiring in the first half of 2020
• Contingent worker usage to increase by 179% over the next ten years
• Integration of AI-basedautomation into the enterprise will unlock a world of opportunities, enabling better hiring decisions

Source: SIA Reports

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KEY BUSINESS ATTRIBUTES

• Recognized as a quality provider of IT staffing services with over 30 years in the industry
• Service offerings span across both Digital and Mainstream technologies
• Special focus on Digital Staffing over the last three years has helped drive superior revenue growth
• Advantaged recruitment model with over 200 recruiters in India; Recruiter to Sales ratio of 5:1
• Low-costoperating structure compared to many of the industry peers
• Recognized as a certified minority-owned business

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IT STAFFING FINANCIAL MODEL

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GROSS	EBITDA	OPERATING
MARGINS: 20-21%	MARGIN: 5%-7%	MARGINS: 4-6%

			Low-cost model
			compared to most
Driven by high			peers; highly
demands for digital			adjustable to

Largely the

amortization of

acquired intangible

skill-sets	20%-22%; advanced	economic conditions

technologies can modestly expand margins

Realistic view of industry; MHH does have a reliably cash- conversion model

assets

4%-5% - with reliablecash-conversion and low Capex requirements

REVENUES	OPERATING	DEPRECIATION AND
	EXPENSE: 14-16%	AMORTIZATION: 1%

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FOURTH QUARTER 2019 FINANCIAL HIGHLIGHTS

• YOY revenue growth of 10% (the industry growth rate is 3%)
• Average bill rate improved by 3%, reflective of digital technologies focus
• YOY gross margin expansion of 40-basis points to 21.4%
• NON-GAAPEBITDA increased by 41% over the last year to $2.7 million

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COMPELLING VALUE

ATTRIBUTES

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INVESTOR VALUE PROPOSITION

• Low valuation of MHH at present given the potential of the Data & Analytics segment
• Data & Analytics business delivered record revenues in Q4-2019; $23 million of new bookings in Q-4 2019
• Our IT Staffing business consistently outperformed industry growth rate (of 3%)

2019 = 9%; 2018 = 11%; 2017 = 5%; 2016 = 7%; 2015 = 9%

• High gross margin Data & Analytics business continues to expand, uplifting MHH's overall gross margin profile
• Data & Analytics is a high-growth industry in which customer spend is non-discretionary
• IT staffing industry is growing steadily with increasing demand for Digital technologies (MHH's focus area)
• MHH today is wired for scale. We have already made significant investments to support expected growth.

THE BEST IS YET TO COME!

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THANK YOU

1305 CHERRINGTON PARKWAY

BUILDING 210, SUITE 400

MOON TOWNSHIP, PA - 15108

WWW.MASTECHDIGITAL.COM

[e-mail]

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