Greetings, and welcome to the Mastech Holdings Fourth Quarter 2013 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Jennifer Ford Lacey, Manager of Legal Affairs for Mastech Holdings. Thank you. You may begin.

Thank you, operator, and welcome to Mastech's fourth quarter 2013 conference call. If you have not yet received a copy of our earnings announcement, it can be obtained from our website at www.mastech.com. With me on the call today are Kevin Horner, Mastech'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 our business, cash flows, costs and the markets in which we operate. Without limiting the foregoing, the words believe, 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 risks and uncertainties that could cause actual events to differ materially from these forward-looking statements, including those listed in the Company's 2012 annual report on Form 10-K filed with the Securities and Exchange Commission, and available on their website at www.sec.gov. As a reminder, we will not be providing guidance during this call, nor will we provide guidance in any subsequent one-on-one meetings or calls. I will now turn the call over to Jack for a review of our fourth quarter and full year 2013 results.

Thanks, Jen, and good morning all. First off, I'd like to remind everyone of the sale of our healthcare segment during the third quarter of 2013. Please note that our financial statements have been recast to include the healthcare business as discontinued operations for all periods, including references and comparisons to prior years. Accordingly, all financial results discussed today relate to continuing operations unless specifically noted otherwise. With that clarification out of the way, I’m pleased to report revenues for the fourth quarter of 2013 totaled $28.5 million or approximately 21% higher than fourth quarter 2012 revenues and represented a slight improvement over the third quarter of 2013. This improvement was despite Q4 having one less billable day and a lower utilization factor due to the holiday season. Our IT operations continued to see solid activity levels during the quarter as we grew our consultants on billing for a fourth consecutive quarter. Historically, that consultant growth is negatively impacted in Q4 by high year-end project completions and by activity disruptions due to the holiday season. Despite these negative historical trends, we were able to achieve positive growth in our consultant base during the fourth quarter of 2013 for only the second time in the past eight years. Gross profit for the fourth quarter of 2013 totaled $5.4 million or 19.1% of revenues, compared to $4.5 million or 19.1% of revenues during the same period last year. Our gross profit expansion reflected an increase in billable consultants on assignments in the fourth quarter of 2013, compared to the corresponding 2012 period, as well as a higher average bill rate in the 2013 period. Our gross profit margin percentage was flat compared to the fourth quarter of 2012, as lower direct hire fees in 2013 were offset by slightly higher margins on…

Thank you, Jack, and good morning, all. First, I would like to comment on our fourth quarter performance and then I'll give you my perspective on the full year 2013 and where I see Mastech headed in 2014. With respect to the fourth quarter, I'm pleased to report another quality quarter of Mastech. Top line growth indicators were very positive during the fourth quarter, year-over-year revenue growth of 21%, a sequential quarter-over-quarter increase in revenue in spite of one less billing day and a seasonally impacted utilization rate in Q4, and sequential expansion of our consultants on billing for the fourth consecutive quarter. From an earnings standpoint, we drove the year-over-year net income growth of 29%, we maintained our gross margin percentage year-over-year with significantly less term placement business, and we continued to reduce our SG&A expense as a percentage of total revenue with the fourth quarter at an all-time low of 12.8% after adjusting for the additional bonus and equity compensation expenses that Jack has already mentioned. I'd like to take a minute or two and discuss our operating philosophy which I hope will add color to theses additional costs. At Mastech, we wake up every morning to create and balance satisfaction across four major constituencies, our customers, our shareholders, our employees, and our field consultants. Throughout all of 2013, our customers were partners in profitability with us. Our role in that partnership was to provide capable fairly priced talent to enable our customers to meet the needs of their businesses in their markets. The men in turn trusted us enough with their talent needs to enable us to grow at 2.5 times the rest of the IT staffing market. In the fourth quarter, we took specific actions to create and balance satisfaction for our remaining three constituencies, our…

(Operator Instructions) Our first question comes from the line of Dave Polonitza with AB Value Management. Please proceed with your question.

A very nice quarter and a very good year, so congratulations on that. Just had a few questions here. Was this the first time that Mastech has paid an appreciation bonus to its employees?

I can go back to the point in time when Mastech had been split off as a stand-alone public company, that would be Q4 of 2008, and the answer is, yes.

Well then, a lot of good work was done in the year, so that's definitely a good thing. Jack mentioned that there was slightly higher margin on some of the new contract assignments. What's driving this and are the new contracts on the wholesale side of the business?

I would say there are several things that are driving it. I think the sales philosophy that Scott Aicher has brought to the organization, as you know Scott is new to our team, was new to our team in 2013, and he brought a renewed effort on staying focused on gross margin dollars. That would be number one. Number two, much of those increases have come organically in our existing business. So, I think we've just paid closer attention to detail.

Yes, I totally agree with that. I think we're a little more disciplined on what business we go out there and how we price it. I think we've made some improvements there.

One other question kind of related to that, Mastech grew revenue about 20% year-over-year, especially in these last two quarters. Is it more of a pricing proposition that Mastech is presenting or is it faster fulfilment or customer satisfaction, because it seems like you guys are just winning a little bit more share than some of your competitors?

I'll take a shot at this and then I'll open it up to Jack as well. I think it's a combination of both fulfilment and quicker wins along with the way we've priced, but I'll tell you I think that combination is heavily weighted to quicker wins, speed in the market and growth in consultants on billing. I think, you look at our consultants on billing growth and you can see very clearly why we've had the top line growth rates in Q3 and Q4, right. I think Q2 was a 9% sequential growth in consultants on billing. That's a [indiscernible] to what third quarter looks like as you're going to get in our industry.

And it looks like, I mean just doing the math, your net consultants grew around 10 or 11 for the fourth quarter, do I have that about right?

About right, it's around 10.

That's all the questions I have right now.

Our next question comes from the line of James Kahn with Oppenheimer. Please proceed with your question.

Great quarter, great year, congratulations again. So, you're such a great little company, I almost feel guilty about sort of [indiscernible] questions but it's my job, so there was a Seeking Alpha piece which talked about the possible risk of some legislation regarding H-1B quotas. Would you like to address that?

Sure. So again, I think we've chatted about this a couple of times on these calls, so let me try to in a minute or so address the 800 or so pages of the existing immigration legislation that's passed its way through the Senate, if I'm not mistaken. So, we as a company are about 40% of our field consultants are H-1B visa holders. And just as some basic information about the IT marketplace, I had the specifics of the Seeking Alpha article, the IT industry in the United States grew 200,000 jobs in 2013. So, it grew at about a 3x rate of the rest of U.S. industry in terms of job creation. The U.S. colleges and university system graduated about 50,000 people with IT skills and IT degrees in 2013. So, the piece of the immigration legislation that's critically important to us is highly skilled, highly educated workforce, its focused in that space. And you can see that our colleges and university system are not churning out the number of people that we need in order to support the growth of the industry that we founded, we started and we live here in the U.S., okay. We could go for an hour on some of the rationale behind that and I think you guys know my background, I was the CIO of a Fortune 100 company long before I was doing this. So I understand the IT industry and a whole bunch of the contributions that have happened to it from a job's perspective, it's a little better than most. So first and foremost, you have this demand that's been created in the industry where the industry is growing jobs at a much faster rate than the U.S. education system is filling them. So that's point number one,…

It does. Thanks very much. And if I can ask one more question, I love companies that have high insider ownership and your two founders who also have high insider ownership of iGATE represent that. I think that's a good thing. I mean Berkshire Hathaway and a lot of other companies that you could name succeeded when owners and management and shareholders are aligned. And I know that you and Jack sold some shares over the course of the year, which obviously the stock ran up, so that's understandable, but what's your current, including options, how many shares do you own, Kevin?

That's a good question. If you don't mind, I have to do a little bit of math in my head, and frankly speaking, I haven't personalized the five-for-four split, but I believe it's somewhere around 240,000 and that can be – I love the question, I don't have a bit of a problem being very direct, and in fact, I've had one-on-one conversations with many of our shareholders ahead of the personal actions that I've taken to make sure that people knew what was happening. I have kids in college and my intent was personal cash flow, it was nothing more than that. As you can see it was about 235,000 or 240,000 shares, between options and performance shares, et cetera, et cetera. I still have a significant portion of my net worth tied up in the success of Mastech.

Good, I like that. So last question is just one of the things – you've been doing so great, one of the few things I could think of that might go wrong is another recession because your stock got hit in 2008. So I guess traditionally, Mastech has been correlated to the economy somewhat, and the whole industry had. So is there some way that you can come out of that stronger than ever or what's the strategy if we do hit another recession?

So a couple of thoughts on that. I think, A., number one, let me absolutely positively agree with you, the staffing industry follows GDP, right, and that's not just the IT staffing industry, the staffing industry in total follows GDP. Generally speaking, first business is down at the front end and first one is up, right, because long before people begin to rehire, they begin to bring resources on in a temporary fashion. So, first down, first up. So that part, you're absolutely correct. The second thought, and I want to temper, what you're going to hear now is some of my thinking, not a whole host of detailed planning that the management team and the Board has opted to go do in preparation for the next downturn. So I don't want to confuse anyone that we have done a ton of planning on this, because frankly speaking, we haven't. We're planning for a 2014 that has a 7% growth year in it and that's where our energy is and that's where we're focused on, okay. So, my next set of thoughts are really my own, and I think you can look across every industry and find the companies that in good times and bad have always outperformed, and in some cases that means, have grown. I believe our business, when you get into a marketplace where the abundance of talent exceed the demand for the talent, right, and we are not – which is what a recession is in the staffing industry, right, when there's more talent on the street than there are jobs to fill – I believe our business model works in that situation better than the majority of our publicly traded competitors. Why do I believe that? Number one, our ratio of recruiters, the feet on…

Thanks very much.

Thank you. Our next question comes from the line of Michael Conti with Sidoti & Company. Please proceed with your question. Michael Conti - Sidoti & Company: So on the gross margin, 19.1%, improvement from the third quarter of 2013, can you just talk about I guess more or less the client mixture that you're seeing there, and if any new sizable clients were added, because I mean definitely with the slight improvement, you added more towards the retail side?

I would say that we're still growing more on the wholesale business. So I mean if you're growing more on the wholesale business and your margins are a little bit lower on the wholesale business, you would expect a margin decline, but within each channel, our margins are somewhat strengthening. So, the weight of our – the shift in our revenue mix is basically shaking out as a pretty much push. Does that make sense?

Because we're more disciplined in pricing.

Because we're more disciplined in pricing, yes.

Across both channels.

So, both channels seem to be, from an overall gross margin perspective, trending up a bit as contributors, but negativity being impacted by the shift in the mix of our business.

And the initiative that we talked about, that we'll now begin to report on quarterly 2014 around new client acquisition, is all about acquiring more new direct clients.

Yes, correct.

Which would be, Mike, more retail based clients as opposed to wholesale based clients. Michael Conti - Sidoti & Company: Perfect. And who was your – the top 10 clients by revenue for the fourth quarter?

We have that one. Jack here. We can give you the ones that were over 10% because that's [indiscernible] but Accenture – for Q4, Accenture was our largest client at 12.3% of revenue. All other clients were under 10%. Michael Conti - Sidoti & Company: Okay. And I guess just speaking about with IBM on their earnings call last week with their smart initiative in their business analytics, they are increasing their revenue forecast by 25% for 2015, I mean how will that play to Mastech's advantage?

The talent that IBM will need – as you know, IBM is, and we've reported it now for the last several years, IBM is a large client of ours. They're just not 10% of our revenue at this point in time but they are still a really important, really large client of ours. We play – the space inside of IBM where we play for resourcing help, would include those final resources that are required to help on the analytics front. So yes, I would think that that fits squarely inside of our wheelhouse. Michael Conti - Sidoti & Company: Okay. And I guess lastly, on the last earnings call, you talked more about you were looking at a couple of businesses to acquire. Any update on that front for the fourth quarter?

There was no new news there, Mike. In fact, we are probably going to look to go at this acquisition process in a little different way than the way we approached it in 2013. So we're right now in the process of speaking to a couple of firms that can help us on the buy side, and we'll pick one of those here in the first quarter and approach the buy side a little differently than the way we have so far, because we have not been successful. Michael Conti - Sidoti & Company: Okay, perfect. That's all I had.

Our next question is a follow-up from James Kahn with Oppenheimer. Please proceed with your question.

I'm sorry, I forgot to ask this before. Kevin, on your last conference call, you said something that really fascinated me. You said that, our focus through 2012 and through the first quarter of 2013 has been to train and develop our offshore recruiting model, so we spent a lot of time and energy proving that model out and ensuring that it was capable and scalable, and so what you see us telling everyone in the third quarter is, we are now willing to invest further in that model on the sales side to go bring additional new large consuming clients into our business model. You said that in response to a question about how you were going to diversify. So I just was wondering if you could update us on that effort.

Yes, so where we are, and James, this is an interesting one, we debated this one internally, philosophically around when do you begin to talk about a new client, right. And so, do you talk about a new client at the contractual level or do you talk about a new client when you can claim revenue, okay. My personal view is, I'll take the conservative route there and I don't want to talk about a new client until we actually have consultants on billing and an AR stream, okay. I am willing, in the answer to your question, to say, since that third quarter call which happened in late October, so in the 60 days or actually 90 days now, I believe we have contractual arrangements with five new direct customers, right. I think we have our first consultant on billing with one of them – our first deal for a consultant we did last week, okay. So, James, that's why in my notes this time I said, we will be prepared to talk about that new client acquisition process and report on it in a more sophisticated way throughout 2014, because I personally don't like to talk about contracts.

No, I understand that perfectly. What I was saying was, what I took from that was that, you had been working really hard but there was nothing to show for yet because it was preparatory and that soon all that hard work was going to start to pay off and give almost visible results. It doesn't have to be this quarter or next quarter, I'm just like, is that a correct assumption?

That's a correct assumption and that's our plan, but I think you guys probably know this industry every bit as well as I do, that it is really hard to get a contract with a new customer, and as soon as you do that, then the really hard work starts, right, because the really hard work is about educating your organization, both your sales team and your recruiting team, on how the customer works, on building relationships with customers, and then really understanding their talent needs, so that you could rapidly fill.

And you know, James, I think you're right on it. I think if you look at that initiative and you look at the payback, we have no payback right now. I mean we're negative. But in 2014, we're pretty confident that that's going to be a positive payback.

Thank you.

Thank you. Mr. Horner, there are no further questions at this time. I'd like to turn the floor back to you for any closing comments.

Great. Listen, I appreciate everyone's time and attention. So, I would like to thank everyone for joining the call today. We look forward to sharing our first quarter 2014 results with you in late April, and depending on where you are, here in Pittsburgh I think the temperature is about zero, so for all of you who are in the Northeast, stay warm. Take care.

Thank you. This concludes today's teleconference. We thank you for your participation. You may disconnect your lines and have a wonderful day.