MHH: Mastech Digital Acquires AmberLeaf Partners for $14 Million

By Lisa Thompson



Today, Mastech Digital (NYSE:MHH) announced the acquisition of AmberLeaf Partners, Inc. for $14.0 million. Of that, $9.5 million was paid in cash at closing, and up to $4.5 million in deferred payments could be paid over the next two years. The company has approximately $11 million in sales, is profitable, and cash flow positive. The deferred payments are contingent upon the acquired business achieving specific financial targets during the two years following the closing of the acquisition.

AmberLeaf is a consulting company based in Chicago with approximately 40 employees and 40 to 50 clients. It provides managed services for companies for cloud-based applications including sales, marketing, and customer service. AmberLeaf’s client base in general is comprised of companies smaller than Mastech’s current data and analytics business usually services. AmberLeaf provides services that are typically sold to a marketing manager who wants actionable recommendations from its data and may not have the resources to do this analysis in house. This complements Mastech’s D&A business, which sells to IT managers implementing data analysis systems. Like Mastech, AmberLeaf also sells on a contract basis: either time and materials or monthly recurring flat fee. While the company has not been growing Mastech believes with its resources and sales and marketing infrastructure, it can grow revenues at AmberLeaf and even cross sell to its current clients.

As a result of this acquisition that closes today, we are increasing our revenue and earnings estimates for Q4 2020 and beyond. We are now estimating Q4 revenues of $54.9 million in Q4 and a non-GAAP EPS of $0.30. Our 2021 estimate is raised to $247 million, up 23% year over year, with a non-GAAP EPS of $1.32. Business at Mastech continues to recover, although slowly on the staffing side. We believe Q2 was the low point for billable consultants and expect the number to continue to increase.

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