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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis should be read in conjunction with our Consolidated Financial Statements and accompanying Notes included in this Annual Report on Form 10-K.

This Management’s Discussion and Analysis contains forward-looking statements that involve risks, uncertainties, and assumptions as described under the heading “Forward-Looking Statements” included in Part I of this Annual Report on Form 10-K. Our actual results could differ materially from those anticipated by these forward-looking statements as a result of many factors, including those discussed under “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K.

Overview:

We are a provider of Digital Transformation IT Services to mostly large and medium-sized organizations.

Our portfolio of offerings includes data management and analytics services, other Digital Transformation services, such as digital learning services, and IT staffing services.

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 offshore resources. These 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 our other Digital Transformation services.

Both business segments provide their services across various industry verticals, including: financial services; government; healthcare; manufacturing; retail; technology; telecommunications; and transportation. In our Data and Analytics Services segment we evaluate our revenues and gross profits largely by service line. In our IT Staffing Services segment, we evaluate our revenues and gross profits largely by sales channel responsibility. This analysis within both our reporting segments is multi-purposed and includes technologies employed, client relationships, and geographic locations.

Beginning in the 2026 fiscal year, the Company plans to revise its segment structure to align with changes in how the Chief Operating Decision Maker (“CODM”) will be evaluating operating performance and allocating resources. These changes are driven by the Company’s operating strategy, which aligns the organization around account-centric management, industry-focused leadership, and an integrated approach to Talent and Services offerings.

Under the revised structure, the Company intends to transition from its current reportable segments of Data and Analytics and IT Staffing Services to the newly formed Talent and Services segments. The revised segment structure is expected to be effective for external reporting beginning in the 2026 fiscal year pending finalization of the Company’s analysis under ASC 280. Any changes to the Company’s segment reporting in future periods will include recasting prior period segment information in accordance with ASC 280.

Economic Trends and Outlook

Our business, particularly within our IT Staffing Services segment, is closely correlated with general North American economic conditions and employment levels. Demand for our services typically increases during periods of economic expansion and strengthening labor markets, and declines during periods of economic contraction or reduced hiring activity. During 2025, hiring activity across certain technology and professional services sectors remained cautious, as clients continued to evaluate discretionary spending and workforce needs in light of broader economic uncertainty and elevated interest rates. These conditions contributed to reduced demand for our staffing and related services, resulting in lower revenue in both of our business segments compared to the prior year. Although overall labor market conditions have eased compared to prior years, compensation levels for certain specialized IT roles remain elevated. In a softer demand environment, competitive pricing conditions also affected our gross margins.

Looking ahead, demand for our services is expected to remain influenced by overall economic growth, corporate hiring trends, and client confidence levels. Continued macroeconomic uncertainty or reduced business investment could further impact project

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activity and staffing demand in future periods.

In addition to general economic conditions in the markets we serve, a significant portion of our revenue is derived from a limited number of clients (see Item 1A, the Risk Factor entitled “Our revenues are highly concentrated, and the loss of a significant client would adversely affect our business and revenues”). As a result, our operating results may be materially influenced by the financial performance, hiring activity, and business priorities of these clients. Changes in spending levels or project activity by one or more significant clients may cause our results to vary from broader economic trends in a given period.

Within our IT Staffing Services segment, a meaningful portion of revenue is generated through strategic relationships with systems integrators. In addition, many large end users utilize managed service providers (“MSPs”) to oversee contractor engagement and pricing. These intermediated delivery models may reduce pricing flexibility and could continue to exert pressure on our gross margins.

Demand for expertise in emerging and advanced technologies, including cloud computing, cybersecurity, artificial intelligence, data analytics, and automation, continues to influence client investment priorities across both of our business segments. While these areas present potential opportunities, demand for these skill sets can be uneven and highly dependent on client budgets and project timing. In addition, the availability of qualified professionals in certain specialized areas remains limited, which can affect fulfillment rates, compensation levels, and margins.

Results of Operations

We operate and report our business in two reporting segments — Data and Analytics Services and IT Staffing Services.

Below is a tabular presentation of revenues and gross profit margins by segment for the periods discussed:

Revenues & Gross Margin by Segment

(Revenues in millions)

Years Ended December 31,

Data and Analytics Services $ 33.3 $ 36.6 $ 34.4

Gross Margin %

Data and Analytics Services 46.2 % 49.1 % 43.5 %

(1) Gross margin differences between the supplemental segment and consolidated results primarily reflect non-allocated severance expense of $0.3 million recorded in cost of goods sold during the third quarter of 2025.

Below is a tabular presentation of operating expenses by sales and marketing, operations, general and administrative, amortization of acquired intangible assets, employment-related claim, net of recoveries, goodwill impairment, severance expense and finance and accounting transition for the periods discussed:

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Selling, General & Administrative (“SG&A”) Expense Details

(Amounts in millions)

Years Ended December 31,

Data and Analytics Services Segment

Sales and Marketing $ 6.8 $ 7.3 $ 6.5

General & Administrative 8.2 6.7 8.9

Subtotal Data and Analytics Services 15.6 14.7 16.7

IT Staffing Services Segment

Sales and Marketing 7.4 9.1 8.3

Amortization of Acquired Intangible Assets $ 2.6 $ 2.7 $ 2.8

Employment-related Claim, net of Recoveries — — 3.1

Goodwill Impairment — — 5.3

Finance and Accounting Transition Expense 1.9 — —

2025 Compared to 2024

Revenues

Revenues for the year ended December 31, 2025 totaled $191.4 million, compared to $198.9 million for the year ended December 31, 2024. This 3.8% decline in total revenues reflected a decrease in revenues of 9.1% in our Data and Analytics Services segment and a 2.6% revenue decrease in our IT Staffing Services segment.

Our Data and Analytics Services segment’s 2025 revenues decreased to $33.3 million from $36.6 million in 2024. This decrease was largely due to a decrease in client spending on existing projects and lower bookings performance in 2025. Bookings in 2025 totaled $34.8 million, compared to $41.0 million reported in 2024.

Our IT Staffing Services segment’s 2025 revenues declined modestly, compared to 2024 revenues due to a lower average level of billable consultants during the the year compared to 2024. We ended 2025 with 840 billable consultants, compared to 1,008 billable consultants at the end of 2024, a decrease of 16.7%. Our average IT staffing bill rate for 2025 totaled $86.10 per hour compared to $82.77 per hour in 2024. This bill rate increase was due to higher rates on new assignments and was reflective of the type of skill sets that we deployed. Permanent placement / fee revenues totaled $0.8 million in 2025, compared to $0.9 million a year ago.

In 2025, we had three clients that exceeded 10% of total revenues (Fidelity = 16.7%, Populus = 12.1% and CGI = 10.8%). In 2024, we had two client that exceeded 10% of total revenues (CGI = 14.5% and Populas = 10.7%). Our top ten clients represented 58% of total revenues in 2025 and 54% of total revenues in 2024. Additionally, our largest industry vertical, financial services, represented approximately 54% of total revenues in 2025, compared to approximately 49% in 2024.

Gross Margin

Gross profit decreased to $53.1 million in 2025, compared to $55.6 million in 2024, a decrease of 4.6% on a year-over-basis. Gross profit as a percentage of revenue totaled 27.7% in both 2025, compared to 27.9% in 2024. Excluding the $0.3 million of severance expense, gross profit as a percentage of revenue was 27.9% for 2025.

Gross margins from our Data and Analytics Services segment in 2025 were 46.2%, which was 290-basis points lower than the 49.1% gross margins that we achieved in 2024. The decrease reflected lower utilization rates through 2025 when compared to 2024, as well as a few key project ends. Including the $0.3 million of severance expense, gross margins were 45.4% for our Data and Analytics Services segment for 2025.

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Gross margins in our IT Staffing Services segment were 24.0% in 2025, compared to 23.2% in 2024. This 80-basis point increase was primarily due to higher bill rates during 2025 when compared to 2024.

Selling, General and Administrative (“SG&A”) Expenses

SG&A expenses in 2025 totaled $53.1 million and represented 27.7% of total revenues, compared to $51.8 million or 26.0% of revenues in 2024. When excluding the amortization of acquired intangible assets, severance expenses and finance and accounting transition expense in 2025, and the amortization of acquired intangible assets and severance expenses in 2024, the adjusted SG&A expenses related to operations as a percentage of revenues was 23.9% in 2025 versus 23.6% in 2024. The increase in SG&A as a percentage of revenues, excluding these items mentioned above, was largely due to higher general and administrative expenses in both business segments, partially offset by lower sales and operations expenses.

Fluctuations within SG&A expense components during 2025 compared to 2024 included the following:

•

Sales expense was $2.2 million lower in 2025 compared to the previous year. In our IT Staffing Services segment, sales expense decreased by $1.7 million due to lower compensation expenses resulting from headcount reductions and lower marketing spend. In the Data and Analytics Services segment, sales expense decreased by $0.5 million due to a decrease in marketing and event expenses and lower compensation expenses resulting from headcount reductions.

•

Operations expense decreased by $1.9 million compared to 2024. In our IT Staffing Services segment operations expense decreased $1.8 million in 2025, due to lower compensation expenses resulting from headcount reduction and lower legal fees. Operations expenses in our Data and Analytics Services segment decreased by $0.1 million in 2025, due to lower recruiting and travel costs.

•

General and administrative expenses increased by $2.9 million in 2025 compared to 2024. The increase was primarily attributable to higher executive compensation, including stock-based compensation, as well as recruiting fees and travel costs associated with leadership changes during the year. In addition, audit and other professional services fees and software licensing costs increased compared to the prior year. The Data and Analytics Services segment accounted for $1.5 million of the increase, while the IT Staffing Services segment accounted for $1.4 million, reflecting similar cost drivers across both segments.

•

Amortization of acquired intangible assets was $2.6 million in 2025 versus $2.7 million in 2024, as a portion of our intangible assets became fully amortized in 2025.

•

Severance expense totaled $2.8 million in 2025 versus $2.1 million in 2024. Severance in both years largely related to executive leadership departures.

•

Finance and accounting transition expenses totaled $1.9 million in 2025, compared to no comparable expense in 2024. These costs were incurred in connection with the Board of Directors’ decision to transition the Company’s finance and accounting functions to India as part of a long-term cost optimization initiative. The expenses primarily consisted of severance, retention bonuses, and travel costs associated with training and knowledge transfer activities. The transition was completed as of December 31, 2025, and the Company does not expect to incur additional finance and accounting transition expenses in future periods.

Other Income / (Expense) Components

In 2025, other income consisted of net interest income of $844,000 and foreign exchange gains of $217,000. In 2024, other income consisted of interest income of $606,000 and foreign exchange gains of $27,000. The increase in interest income was due to a higher balance of cash on hand in 2025 compared to 2024. Net foreign exchange gains in 2025 compared to 2024 reflected exchange rate variations between the Indian rupee and the Canadian dollar compared to the U.S. dollar.

Income Tax Expense

Income tax expense for 2025 was $0.5 million and represented an effective tax rate on pre-tax income of 42.7%, compared to $1.0 million in 2024, which represented an effective tax rate on pre-tax income of 23.1%. The 2025 effective tax rate was largely impacted by disallowed executive compensation and return to provision items, compared to 2024 which was largely impacted by a worthless stock deduction recognized on the dissolution of our Singapore entity in 2024. Both periods were impacted by shortfalls in expected tax benefits from stock options/restricted stock and state income taxes. See additional information in Note 11.

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2024 Compared to 2023

Revenues

Revenues for the year ended December 31, 2024 totaled $198.9 million, compared to $201.1 million for the year ended December 31, 2023. This 1.1% decline in total revenues reflected an increase in revenues of 6.6% in our Data and Analytics Services segment and a 2.6% revenue decrease in our IT Staffing Services segment. Both segments showed revenue run-rate improvements when comparing the fourth quarter of 2024 to the fourth quarter of 2023.

Our Data and Analytics Services segment’s 2024 revenues increased to $36.6 million from $34.4 million in 2023. This increase was largely due to an increase in client spending on existing projects and a strong bookings performance in the fourth quarter of 2023. Bookings in 2024 totaled $41 million, in-line with full year 2023’s bookings performance.

Our IT Staffing Services segment’s 2024 revenues declined modestly, compared to 2023 revenues due to a lower average level of billable consultants during the first half of 2024 compared to the first half of 2023. However, we ended 2024 with 1,008 billable consultants, compared to 946 billable consultants at the end of 2023, an increase of 6.6%. Our average IT staffing bill rate for 2024 totaled $82.77 per hour compared to $78.84 per hour in 2023. This bill rate increase was due to higher rates on new assignments and was reflective of the type of skill sets that we deployed. Permanent placement / fee revenues totaled $0.9 million in 2024, compared to $0.8 million in 2023.

In 2024, we had two clients that exceeded 10% of total revenues (CGI = 14.5% and Populus = 10.7%). In 2023, we had one client that exceeded 10% of total revenues (CGI = 22.5%). Our top ten clients represented 54% of total revenues in 2024 and 53% of total revenues in 2023. Additionally, our largest industry vertical, financial services, represented approximately 49% of total revenues in 2024, compared to approximately 50% in 2023.

Gross Margin

Gross profit increased to $55.6 million in 2024, compared to $51.0 million in 2023, an increase of 8.9% on a year-over-basis. Gross profit as a percentage of revenue totaled 27.9% in 2024, compared to 25.4% in 2023.

Gross margins from our Data and Analytics Services segment in 2024 were 49.1%, which was 560-basis points higher than the 43.5% gross margins that we achieved in 2023. The increase reflected higher utilization and improved delivery efficiencies during 2024 when compared to 2023.

Gross margins in our IT Staffing Services segment were 23.2% in 2024, compared to 21.6% in 2023. This 160-basis point increase was due to higher gross margins on new assignments and favorable medical claim experience related to our self-insured program during 2024 when compared to 2023.

Selling, General and Administrative (“SG&A”) Expenses

SG&A expenses in 2024 totaled $51.8 million and represented 26.0% of total revenues, compared to $60.3 million or 30.0% of revenues in 2023. When excluding the amortization of acquired intangible assets and severance expenses in 2024, and the amortization of acquired intangible assets, severance expenses, an employment-related claim, net of recoveries, and goodwill impairment in 2023, the adjusted SG&A expenses related to operations as a percentage of revenues was 23.6% in 2024 versus 23.2% in 2023. The increase in SG&A as a percentage of revenues, excluding these items mentioned above, was largely due to higher sales expense in both business segments, partially offset by lower general and administrative expenses.

Fluctuations within SG&A expense components during 2024 compared to 2023 included the following:

•

Sales expense was $1.6 million higher in 2024 compared to the previous year. In the Data and Analytics Services segment, sales expense increased by $0.8 million due to an increase in marketing and event expenses and higher compensation expenses. IT staffing sales expense increased by $0.8 million due to higher commissions and bonus expense of $0.5 million and higher variable expense items due to increased activity levels in 2024.

•

Operations expense decreased by $0.4 million compared to 2023. In our Data and Analytics Services segment, operations expense decreased by $0.6 million due to lower staff headcount. Operations expense in our IT Staffing Services segment increased $0.2 million in 2024, due to higher commission expenses largely during the second half of the year.

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•

General & administrative expenses decreased by $0.9 million in 2024 compared to 2023. Our Data and Analytics Services segment was responsible for $2.2 million of this decline due to lower executive leadership staff and professional services expense related to an employment-related claim in 2023. The IT Staffing Services segment had higher general and administrative expenses in 2024 of $1.3 million compared to 2023, largely due to strategic consulting expenses related to our Primentor agreement and higher bonus expenses.

•

Amortization of acquired intangible assets was $2.7 million in 2024 versus $2.8 million in 2023, as a portion of our intangible assets became fully amortized in 2024.

•

Severance expense totaled $2.1 million in 2024 versus $2.4 million in 2023. Severance in both years largely related to executive leadership departures.

•

An employment-related claim expense, net of recoveries, totaled $3.1 million in 2023, compared to no expense in 2024.

•

A goodwill impairment charge totaled $5.3 million in 2023, compared to no impairment charge in 2024. The 2023 charge pertained to our Data and Analytics Services segment.

Other Income / (Expense) Components

In 2024, other income / (expense) consisted of net interest income of $606,000 and foreign exchange gains of $27,000. In 2023, other income / (expense) consisted of interest income of $319,000 and foreign exchange losses of ($75,000). The increase in interest income was due to a higher balance of cash on hand in 2024 compared to 2023, partially offset by interest rate reductions in 2024. Net foreign exchange gains (losses) in 2024 compared to 2023 reflected exchange rate variations between the Indian rupee and the Canadian dollar compared to the U.S. dollar.

Income Tax Expense

Income tax expense (benefit) for 2024 was $1.0 million and represented an effective tax rate on pre-tax income of 23.1%, compared to ($1.9 million) in 2023, which represented an effective tax rate on pre-tax (loss) of (21.0%). The 2024 effective tax rate compared to 2023 reflected a worthless stock deduction recognized on the dissolution of our Singapore entity in 2024.

Liquidity and Capital Resources

Financial Conditions and Liquidity

On December 31, 2025, we had cash balances on hand of $36.5 million, no bank debt outstanding and approximately $19.9 million of borrowing capacity under our existing credit facility.

Historically, we have funded our business needs with cash generation from operating activities. In the data and analytics services and IT staffing services industries, investment in operating working capital levels (defined as current assets excluding cash and cash equivalents minus current liabilities, excluding short-term borrowings) is a significant use of cash. Controlling our operating working capital levels by closely managing our accounts receivable balance is an important element of cash preservation. Our accounts receivable “days sales outstanding” measurement (“DSO”) at year-end 2025 increased slightly to 54-days compared to 52-days at year-end 2024.

Cash provided by operating activities, our cash and cash equivalent balances on hand at December 31, 2025 and current availability under our existing credit facility are expected to be adequate to fund our business needs over the next 12 months, including potential repurchases under the $5.0 million share repurchase authorization approved by our Board of Directors on February 16, 2026, but excluding any significant acquisition-related activities.

Below is a tabular presentation of cash flow activities for the periods discussed:

Years Ended December 31,

(Amounts in millions)

Investing activities (0.5 ) (0.9 ) (0.2 )

Financing activities (1.1 ) 0.7 (1.6 )

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Operating Activities

Cash provided by (used in) operating activities for the years ended December 31, 2025, 2024 and 2023 totaled $11.1 million, $7.2 million, and $16.0 million, respectively. In 2025, cash flows from operating activities included net income of $0.6 million, non-cash charges of $3.2 million and a decrease in operating working capital of $7.4 million. In 2024, cash flows from operating activities included net income of $3.4 million, non-cash charges of $6.1 million and an increase in operating working capital of ($2.3 million). In 2023, cash flows from operating activities included a net (loss) of ($7.1 million), non-cash charges of $10.6 million and decreases in operating working capital of $12.5 million. The 2025 reduction in operating working capital was primarily due to lower accounts receivable, reflecting decreased revenue levels and the timing of billings and collections, as well as decreases in prepaid and other current assets. These favorable working capital changes were partially offset by a $2.0 million payment of deferred compensation during 2025. The 2024 increase in operating working capital reflected higher activities levels as accounts receivable and prepaid expenses increased. The 2023 reduction in operating working capital was due to lower accounts receivable, reflecting significant revenue declines during the year.

Operating working capital levels are generally correlated with revenue trends. If revenue levels increase in future periods, we would expect operating working capital requirements to increase accordingly, which could reduce cash generated from operating activities. Conversely, sustained lower revenue levels may result in reduced working capital requirements.

Days sales outstanding may fluctuate based on revenue mix, as data and analytics services engagements typically experience higher DSO levels than IT staffing engagements. Changes in revenue composition could therefore impact overall working capital requirements in future periods.

Investing Activities

Cash (used in) investing activities for the years ended December 31, 2025, 2024 and 2023 totaled $(0.5) million, $(0.9) million and $(0.2) million, respectively. In 2025, cash (used in) investing activities was primarily comprised of capital expenditures totaling ($0.4) million and payments of ($0.1) million for non-current deposits. In 2024, cash (used in) investing activities consisted entirely of capital expenditures totaling ($0.9) million, largely related to computer equipment and cyber-security investments. In 2023, cash (used in) investing activities consisted of ($0.3) million of capital expenditures and a $0.1 million recovery of non-current office lease deposits.

Financing Activities

In 2025, cash (used in) financing activities totaled ($1.1 million) and included ($2.2 million) for the repurchase of common stock under the Company’s share repurchase program, partially offset by $1 million of proceeds from the exercise of stock options and $0.1 million of proceeds from the issuance of common shares under our employee stock purchase plan. In 2024, cash provided by financing activities totaled $0.7 million and included $0.2 million of proceeds from the issuance of common shares under our employee stock purchase plan and $0.5 million of proceeds from the exercise of stock options, partially offset by the repurchase of common stock under the Company’s share repurchase program. In 2023, cash (used in) financing activities totaled ($1.6 million) and included ($1.1 million) of debt repayments, ($0.6 million) of common stock repurchases, partially offset by proceeds from our issuance of common shares under our employee stock purchase plan.

2024 Primentor, Inc. Consulting Agreement

On January 12, 2024, the Company entered into a consulting agreement with Primentor, Inc. to provide 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. During 2025 and 2024, the Company incurred consulting expenses of approximately $0.5 million and $0.4 million related to these services. For 2026, the Company expects to pay Primentor approximately $0.2 million.

2023 Employment-Related Claims Against the Company

As disclosed in Note 8 “Commitment and Contingencies” to the Notes to the Consolidated Financial Statements, included in Item 8 herein, a former employee who resigned from his employment with the Company in November 2022 asserted various employment-related claims against the Company. During the third quarter of 2023, the Company settled this claim for $3.1 million, net of recoveries, under the terms of a confidential settlement agreement. In addition to the settlement amount, we incurred

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approximately $0.9 million in professional services fees related to this matter during 2023. The settlement amount and the professional fees are included in selling, general and administrative expenses in the Consolidated Statements of Operations.

2025 Finance and Accounting Functions to be Transitioned to India from the U.S.

During the first quarter of 2025, the Board of Directors approved a long-term cost optimization initiative to transition the Company’s finance and accounting functions from the United States to India. The transition was completed as of December 31, 2025. During 2025, the Company incurred approximately $1.9 million of transition-related expenses, consisting primarily of severance, retention bonuses, and travel costs associated with training and knowledge transfer activities. These expenses were included within general and administrative expenses.

The Company does not expect to incur additional transition-related expenses in future periods as the initiative has been fully implemented. The Company expects this initiative to generate annualized cost savings of approximately $1.2 million beginning in 2026.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Inflation

We do not believe that inflation had a significant impact on our results of operations for the periods presented, although economic uncertainty, including the concerns of our clients and other companies with respect to inflationary conditions in North America and elsewhere, has had and may continue to have an adverse impact on the demand for our services. On an ongoing basis, we attempt to minimize any effects of inflation on our operating results by controlling operating costs and, whenever possible, seek to ensure that billing rates reflect increases in costs due to inflation.

In addition, refer to “Item 1A. Risk factors” in this annual report on Form 10-K for a discussion about risks that inflation directly or indirectly may pose to our business.

Seasonality

Our consultants’ billable hours are affected by national holidays and vacation patterns. Accordingly, we typically have lower utilization rates and higher benefit costs during the fourth quarter. Additionally, assignment completions tend to be higher near the end of the calendar year, which largely impacts our revenue and gross profit performance during the subsequent quarter.

Critical Accounting Policies and Estimates

Certain accounting policies are particularly important to the portrayal of our financial position, results of operations and cash flows and require the application of significant judgment by management, and as a result, are subject to an inherent degree of uncertainty. In applying these policies, our management uses judgment to determine the appropriate assumptions to be used in the determination of certain estimates. These estimates are based on our historical experience, terms of existing contracts, observances of industry trends and other available information from outside sources, as appropriate. The following explains our most critical accounting policies. See the Notes to the Consolidated Financial Statements, contained in Item 8, of this Annual Report on Form 10-K for a complete description of our significant accounting policies.

Revenue Recognition

The Company recognizes revenue on time-and-material contracts over time as services are performed and expenses are incurred. Time-and-material contracts typically bill at an agreed-upon hourly rate, plus out-of-pocket expense reimbursement. Out-of-pocket expense reimbursement amounts vary by assignment, but historically on average represent less than 2% of the total contract revenues. Revenue is earned on a per transaction or labor hour basis, as that amount directly corresponds to the value of the Company’s performance. Revenue recognition is negatively impacted by holidays and consultant vacation and sick days.

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depicts, the transfer of control to the client. The Company has determined that the cost-based input method provides a faithful depiction of the transfer of goods or services to the customer. Estimated losses are recognized immediately in the period in which current estimates indicate a loss. We record deferred revenues when cash payments are received or due in advance of our performance, including amounts which may be refundable.

The Company’s time-and-material and fixed price revenue streams are recognized over time as the customer receives and consumes the benefits of the Company’s performance as the work is performed.

In certain situations, related to client direct hire assignments where the Company’s fee is contingent upon the hired resources’ continued employment with the client, revenue is not fully recognized until such employment conditions are satisfied.

Accounts Receivable and Allowance for Credit Losses

The Company extends credit to clients based upon management’s assessment of their creditworthiness. A substantial portion of the Company’s revenue, and the resulting accounts receivable, are from Fortune 1000 companies, major systems integrators and other staffing organizations. The Company does not generally charge interest on delinquent accounts receivable.

Unbilled receivables represent amounts recognized as revenues based on services performed and, in accordance with the terms of the client contract, will be invoiced in a subsequent period.

Accounts receivables are reviewed periodically to determine the probability of loss. The Company records an allowance for credit losses when it is probable that the related receivable balance will not be collected based on historical collection experience, client-specific collection issues, and other matters the Company identifies in its collection monitoring.

Goodwill and Intangible Assets

Identifiable intangible assets are recorded at fair value as of the closing date when acquired in a business combination. Identifiable intangible assets related to acquisitions consisted of client relationships, covenants not-to-compete, trade names and technology, which are being amortized using the straight-line method over their estimated useful lives ranging from three years to twelve years, as more fully described in Note 3 “Goodwill and Other Intangible Assets, net” to the Notes to the Consolidated Financial Statements.

Excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired are recorded as goodwill. Goodwill is not amortized but is tested for impairment at least on an annual basis. If impairment is indicated, a write-down to fair value is recorded based on the excess of the carrying value of the reporting unit over its fair market value.

We review goodwill and intangible assets for impairment annually as of October 1st or more frequently if events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The impairment test is performed at the reporting unit (business segment) level. Determination of recoverability is based on the lowest level of identifiable estimated future discounted cash flows resulting from use of the assets and their eventual disposition. Measurement of any impairment loss is based on the excess carrying value of the reporting unit over their fair market value.

In conducting our annual impairment testing, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (more than 50%) that the estimated fair value of a reporting unit is less than its carrying amount. If not, no further goodwill impairment testing is required. If it is more likely than not that a reporting unit’s fair value is less than its carrying amount, we are then required to perform a quantitative impairment test. We also may elect not to perform the qualitative assessment, and instead, proceed directly to the quantitative impairment test.

In 2025, 2024 and 2023, we performed quantitative impairment tests related to our IT Staffing Services segment, which includes our June 2015 acquisition of Hudson Global Resources Management, Inc.’s U.S. IT staffing business (“Hudson IT”). The results of each of these testing’s indicated no impairment associated with the carrying amount of goodwill.

Additionally in 2025, 2024 and 2023, we performed quantitative impairment tests related to our Data and Analytics Services segment which includes the July 2017 acquisition of InfoTrellis and the October 2020 acquisition of AmberLeaf. The results of the 2025 and 2024 testing’s indicated no impairment associated with the carrying amount of goodwill. On October 1, 2023, our annual impairment testing date, we did not identify an impairment. However, due to a triggering event in the fourth quarter related to declining revenue trends and lower future revenue projections, our December 31, 2023 testing results indicated impairment associated with the carrying amount of goodwill of $5.3 million. Accordingly, this goodwill impairment charge is reflected in selling, general and administrative expenses in the Company’s Consolidated Statements of Operations in Item 8, herein.

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Leases

Operating leases right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Since most of the Company’s leases do not have an implicit borrowing rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our leases may include options allowing us in our sole discretion to extend or terminate the lease, and when it is reasonably certain that we will exercise those options, we will include those periods in our lease term. Variable costs, such as payments for insurance and tax payments, are expensed when the obligation for those payments is incurred.

Business Combinations

The Company accounts for acquisitions in accordance with guidance found in ASC 805, Business Combinations (“ASC 805”). This guidance requires consideration given (including contingent consideration), assets acquired and liabilities assumed to be valued at their fair market values at the acquisition date. The guidance further provides that: (1) in-process research and development will be recorded at fair value as an indefinite-lived intangible asset; (2) acquisition-related transaction costs will generally be expensed as incurred; (3) restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and (4) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense.

ASC 805 requires that any excess purchase price over fair value of assets acquired (including identifiable intangibles) and liabilities assumed be recognized as goodwill. Additionally, any excess fair value of acquired net assets over acquisition consideration results in a bargain purchase gain. Prior to recording a gain, the acquiring entity must reassess whether all acquired assets and assumed liabilities have been identified and must perform re-measurements to verify that the consideration paid, assets acquired and liabilities assumed have all been properly valued.

Stock-Based Compensation

In 2008, the Company adopted a Stock Incentive Plan. This stock incentive plan was amended and restated effective as of May 14, 2024 and further amended on May 14, 2025 (as amended from time to time, the “Plan”). The Plan provides that up to 6,200,000 shares of the Company’s common stock, par value $0.01 per share (“Common Stock”) shall be allocated for issuance to directors, officers, employees and consultants of the Company. Grants under the Plan may be made in the form of stock options, stock appreciation rights, performance share awards, restricted stock awards or stock awards. The Plan is administered by the Compensation Committee of the Board of Directors. Stock options are granted at an exercise price equal to the closing share price of the Company’s common stock at the grant date and generally vest over a three to five-year period.

On December 10, 2024, the Board approved and adopted the 2024 Inducement Stock Incentive Plan and reserved 1,500,000 shares of Common Stock for issuance of awards under the 2024 Inducement Stock Incentive Plan. The 2024 Inducement Stock Incentive Plan was approved and adopted without shareholder approval pursuant to NYSE American Guide Rule 711 and provided for grants of non-qualified stock options, restricted stock awards, stock awards, performance share awards and other stock-based awards (each, an “Inducement Award”). Effective May 14, 2025, the 2024 Inducement Stock Incentive Plan was terminated, which means that no further grants can be made under the 2024 Inducement Stock Incentive Plan but existing outstanding awards granted pursuant to this plan continue to be governed by the plan’s terms. The 2024 Inducement Stock Incentive Plan was established exclusively to grant equity awards to individuals who were not previously employees or directors of the Company, as an inducement to join the Company.

In October 2018, the Board of Directors of the Company approved the Mastech Digital, Inc. 2019 Employee Stock Purchase Plan (the “Stock Purchase Plan”). The Stock Purchase Plan is intended to meet the requirements of Section 423 of the Code and required the approval of the Company’s shareholders to be qualified under Section 423 of the Code. On May 15, 2019, the Company’s shareholders approved the Stock Purchase Plan. Under the Stock Purchase Plan, 600,000 shares of common stock (subject to adjustment upon certain changes in the Company’s capitalization) are available for purchase by eligible employees who become participants in the Stock Purchase Plan. The purchase price per share is 85% of the lesser of (i) the fair market value per share of common stock on the first day of the offering period, or (ii) the fair market value per share of common stock on the last day of the offering period. On February 16, 2026, the Company’s Board of Directors approved the termination of the Stock Purchase Plan. The termination will become effective on July 1, 2026, following completion of the current offering period ending June 30, 2026. Shares issuable under the current offering period will be issued in accordance with the terms of the plan, and no additional offering periods will commence thereafter.

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The Company accounts for stock-based compensation expense in accordance with ASC Topic 718 “Share-based Payments” which requires us to measure all share-based payments based on their estimated fair value and recognize compensation expense over the requisite service period. The fair value of our stock options and shares issued under the Company’s Stock Purchase Plan is determined at the date of grant using the Black-Scholes option pricing model.

Income Taxes

The Company records an estimated liability for income and other taxes based on what management determines will likely be paid in the various tax jurisdictions in which we operate. Management uses its best judgment in the determination of these amounts. However, the liabilities ultimately realized and paid are dependent on various matters, including the resolution of the tax audits in the various affected tax jurisdictions, and may differ from the amounts recorded. An adjustment to the estimated liability would be recorded through income in the period in which it becomes probable that the amount of the actual liability differs from the amount recorded.

Management determines the Company’s income tax provision using the asset and liability method. Under this method, deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. The Company measures deferred tax assets and liabilities using enacted tax rates in effect for the year in which we expect to recover or settle the temporary differences. The effect of a change in tax rates on deferred taxes is recognized in the period that the change is enacted. The Company evaluates its deferred tax assets and records a valuation allowance when, in management’s opinion, it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of December 31, 2025 and 2024, the Company provided a valuation allowance of $435,000 and $452,000, respectively, related to the uncertainty of the realization of foreign net operating losses (“NOL”).

The Tax Cuts and Jobs Act of 2017 created a new requirement that certain income earned by foreign subsidiaries, known as global intangible low-tax income (“GILTI”), must be included in the gross income of their U.S. shareholder. The Financial Accounting Standards Board (the “FASB” allows an accounting policy election of either recognizing deferred taxes for temporary differences expected to reverse as GILTI in future years or recognizing such taxes as a current-period expense when incurred. We have elected to treat the tax effect of GILTI as a current-period expense as incurred.

The Company accounts for uncertain tax positions in accordance with ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes”. The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained under audit. As of December 31, 2025 and 2024, there were no uncertain tax positions for which a reserve or liability is necessary.

Foreign Currency Translation

The reporting currency of the Company and its subsidiaries is the U.S. dollar. The functional currency of the Company’s subsidiary in Canada is the U.S. dollar because the majority of its revenue is denominated in U.S. dollars. The functional currency of the Company’s Indian and European subsidiaries is their local currency. The results of operations of the Company’s Indian and European subsidiaries are translated at the monthly average exchange rates prevailing during the period. The financial position of the Company’s Indian and European subsidiaries is translated at the current exchange rates at the end of the period, and the related translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within Shareholders’ Equity. Gains and losses resulting from foreign currency transactions are included as a component of other income (expense), net in the Consolidated Statements of Operations. Foreign exchange gains / (losses) in 2025 totaled $217,000; 2024 totaled $27,000; in 2023 we incurred losses of ($75,000).

Recently Issued Accounting Standards

Recent accounting pronouncements are described in Note 1 to the Consolidated Financial Statements contained in Item 8, herein.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In addition to the inherent operational risks, the Company is exposed to certain market risks, primarily related to changes in interest rates and currency fluctuations.

Interest Rates

At December 31, 2025, we had no outstanding borrowings under our Credit Agreement with PNC Bank and certain other financial institution lenders (the “Credit Agreement”) — Refer to Note 5 — “Credit Facility” in the Notes to Consolidated Financial Statements, included in Item 8 herein. A hypothetical 10% increase in interest rates would have no impact on our annual interest expense. As of December 31, 2025, the Company has no interest-rate hedge vehicles outstanding.

Currency Fluctuations

The reporting currency of the Company and its subsidiaries is the U.S. dollar. The functional currency of the Company’s subsidiary in Canada is the U.S. dollar because the majority of its revenue is denominated in U.S. dollars. The functional currency of the Company’s Indian and European subsidiaries is their local currency. The results of operations of the Company’s Indian and European subsidiaries are translated at the monthly average exchange rates prevailing during the period. The financial position of the Company’s Indian and European subsidiaries is translated at the current exchange rates at the end of the period, and the related translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within Shareholders’ Equity. Gains and losses resulting from foreign currency transactions are included as a component of other income (expense), net in the Consolidated Statements of Operations. A hypothetical 10% increase or decrease in overall foreign currency rates in 2025 would not have a material impact on our consolidated financial statements. As our international operations grow, we will continue to evaluate and reassess our approach to managing the risks relating to fluctuations in currency rates.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data required by this item are filed as part of this Annual Report on Form 10-K. See Index to Consolidated Financial Statements on page 38 of this Annual Report on Form 10-K.

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MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying Consolidated Financial Statements of Mastech Digital, Inc. and subsidiaries have been prepared by management, which is responsible for their integrity and objectivity. The statements have been prepared in conformity with accounting principles generally accepted in the United States of America and necessarily include amounts based on management’s best estimates and judgments.

The Company’s Consolidated Financial Statements for the year ended December 31, 2025 have been audited by UHY LLP, an Independent Registered Public Accounting Firm. The Audit opinion is on page XX of this Annual Report on Form 10-K.

The Board of Directors pursues its responsibility for the Company’s financial reporting and accounting practices through its Audit Committee, all of the members of which are independent directors. The Audit Committee’s duties include recommending to the Board of Directors the Independent Registered Public Accounting Firm to audit the Company’s financial statements, reviewing the scope and results of the independent accountants’ activities and reporting the results of the committee’s activities to the Board of Directors. The Independent Registered Public Accounting Firm has met with the Audit Committee in the presence of management representatives to discuss the results of their audit work. Additionally, the Independent Registered Public Accounting Firm has direct access to the Audit Committee.

Nirav Patel

President and Chief Executive Officer

Kannan Sugantharaman

Chief Financial Officer

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MASTECH DIGITAL, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm 40

Consolidated Balance Sheets as of December 31, 2025 and 2024 42

Notes to Consolidated Financial Statements 47

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of

Mastech Digital, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Mastech Digital, Inc. and Subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes and Schedule II, Valuation and Qualifying Accounts listed in the index at item 15(2) (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Mastech Digital, Inc. and Subsidiaries at December 31, 2025 and 2024, and the consolidated results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to an account or disclosure that is material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical Audit Matter – Valuation of Goodwill

As discussed in Notes 1 and 4 to the consolidated financial statements, the Company evaluates goodwill for impairment on an annual basis as of October 1 or more frequently if events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. The goodwill balance as of December 31, 2025, was $27.2 million. The Company considers potential impairment by comparing the fair value of a reporting unit to its carrying value. Fair value is estimated by management using a discounted cash flow model.

We identified goodwill impairment as a critical audit matter because of the significant judgments made by management to estimate the fair value of the reporting units. This required a high degree of auditor judgment and an increased extent of effort, including our need to involve valuation specialists, when performing audit procedures to evaluate the reasonableness of inputs into the discounted cash flow model driven by management’s estimates and assumptions. Significant management estimates include forecasts for revenue, gross profit, long-term growth rates, and discount rates.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures performed to evaluate the reasonableness of management’s estimates and assumptions included assessing the methodologies used by the Company and testing the significant assumptions used in the quantitative models. We compared current and prior year forecasts prepared by management to historical revenue and gross profit to evaluate the reasonableness of the assumptions and to evaluate management’s ability to accurately forecast future revenue and gross profit. We evaluated historical trends in assessing the reasonableness of growth rate assumptions and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in these assumptions. We performed procedures to verify the mathematical accuracy of the calculations used by management. We involved our valuation specialists to assist us in identifying the significant assumptions underlying the models, assessing the rationale and supporting documents related to these assumptions, and determining the appropriateness and reasonableness of the methodologies employed. Furthermore, we assessed the appropriateness of the disclosures in the financial statements.

/s/ UHY LLP

We have served as the Company’s auditor since 2008.

Farmington Hills, Michigan

March 18, 2026

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MASTECH DIGITAL, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)

At December 31,

ASSETS

Current assets:

Prepaid and other current assets 5,647 7,020

Equipment, enterprise software, and leasehold improvements, at cost:

Less – accumulated depreciation and amortization (7,183 ) (6,600 )

Net equipment, enterprise software, and leasehold improvements 1,557 1,998

Operating lease right-of-use assets, net 2,534 3,832

Deferred financing costs, net 95 189

Deferred compensation, net 1,000 —

Intangible assets, net of amortization 7,755 10,308

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Current portion of operating lease liability 1,283 1,265

Other accrued liabilities 898 550

Long-term liabilities:

Long-term operating lease liability, less current portion 1,138 2,486

Long-term accrued income taxes — —

Long-term severance liability 330 987

Commitments and contingent liabilities (Note 8)

Shareholders’ equity:

Accumulated other comprehensive income (loss) (2,640 ) (1,910 )

Total liabilities and shareholders’ equity $ 111,840 $ 111,484

The accompanying notes are an integral part of these Consolidated Financial Statements.

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MASTECH DIGITAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

Years Ended December 31,

Selling, general and administrative expenses:

Impairment of goodwill — — 5,300

Employment-related claim, net of recoveries — — 3,100

Income (loss) from operations 1 3,791 (9,275 )

Other income (expense), net 217 27 (75 )

Earnings (Loss) Per Share:

Weighted average common shares outstanding:

The accompanying notes are an integral part of these Consolidated Financial Statements.

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MASTECH DIGITAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in thousands)

Years Ended December 31,

Other comprehensive income (loss):

Foreign currency translation adjustments (730 ) (266 ) (89 )

Total pretax net unrealized (loss) (730 ) (266 ) (89 )

Total other comprehensive (loss), net of taxes (730 ) (266 ) (89 )

Total comprehensive income (loss) $ (121 ) $ 3,136 $ (7,227 )

The accompanying notes are an integral part of these Consolidated Financial Statements.

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MASTECH DIGITAL, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Amounts in thousands)

Net income (loss) — — (7,138 ) — — (7,138 )

Employee common stock purchases — 204 — — — 204

Other comprehensive (loss), net of taxes — — — — (89 ) (89 )

Stock-based compensation expense — 3,082 — — — 3,082

Stock options exercised — — — — — —

Purchase of treasury stock — — — (618 ) (618 )

Employee common stock purchases — 223 — — — 223

Other comprehensive (loss), net of taxes — — — — (266 ) (266 )

Stock-based compensation expense — 2,200 — — — 2,200

Purchase of treasury stock — — — (80 ) — (80 )

Employee common stock purchases — 92 — — — 92

Other comprehensive (loss), net of taxes — — — — (730 ) (730 )

Stock-based compensation expense — 3,118 — — — 3,118

Purchase of treasury stock — — — (2,246 ) — (2,246 )

The accompanying notes are an integral part of these Consolidated Financial Statements.

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MASTECH DIGITAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

Years Ended December 31,

OPERATING ACTIVITIES:

Interest amortization of deferred financing costs 94 95 73

Impairment of goodwill — — 5,300

Operating lease assets and liabilities, net 45 46 75

Loss on disposition of fixed assets 4 24 1

Amortization of deferred compensation 500 987 —

Long-term severance liability (657 ) — —

Payment of deferred compensation (2,000 ) — —

Long-term accrued income taxes — (69 ) (36 )

Working capital items:

Accounts receivable and unbilled receivables 5,013 (1,411 ) 12,537

INVESTING ACTIVITIES:

Recovery of (payments for) non-current deposits (110 ) — 119

Net cash flows (used in) investing activities (486 ) (941 ) (216 )

FINANCING ACTIVITIES:

(Repayments) on term loan facility — — (1,100 )

Proceeds from the issuance of common stock 91 223 204

Purchase of treasury stock (2,246 ) (80 ) (618 )

Payment of deferred financing costs — — (64 )

Proceeds from the exercise of stock options 1,029 511 —

Net cash flows provided by (used in) financing activities (1,126 ) 654 (1,578 )

Effect of exchange rate changes on cash and cash equivalents (732 ) (310 ) (94 )

SUPPLEMENTAL DISCLOSURE:

Cash payments for interest expense $ — $ — $ 43

The accompanying notes are an integral part of these Consolidated Financial Statements.

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MASTECH DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Summary of Significant Accounting Policies:

Basis of Presentation

References in this Annual Report on Form 10-K to “we”, “our”, “Mastech Digital”, “Mastech” or “the Company” refer collectively to Mastech Digital, Inc. and its wholly-owned operating subsidiaries, which are included in these Consolidated Financial Statements (the “Financial Statements”).

Description of Business

We are a provider of Digital Transformation IT Services to mostly large and medium-sized organizations.

Our portfolio of offerings includes data management and analytics services; digital learning services; and IT staffing services.

With our 2017 acquisition of the services division of Canada-based InfoTrellis, Inc., we added specialized capabilities in delivering data and analytics services to our customers, which became our Data and Analytics Services segment. This segment offers project-based consulting services in the areas of data management, data engineering and data science, with such services delivered using on-site and offshore resources. In October 2020, we acquired AmberLeaf Partners, Inc. (“AmberLeaf”), a Chicago-based customer experience consulting firm. This acquisition expanded our Data and Analytics Services segment’s capabilities in customer experience strategy and managed services offering for a variety of Cloud-based enterprise applications across sales, marketing and customer services organizations.

Our IT staffing segment combines technical expertise with business process experience in a broad range of staffing services in digital and mainstream technologies, which can be delivered onshore as well as offshore. Our digital technologies include data management, analytics, cloud, mobility, social and artificial intelligence. We work with businesses and institutions with significant IT spending and recurring staffing service needs. We also support smaller organizations with their “project focused” temporary IT staffing requirements.

Accounting Principles

The Company’s Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates.

Cash and Cash Equivalents

Cash and cash equivalents are defined as cash and highly liquid debt investments with maturities of three months or less when purchased. Cash equivalents are stated at cost, which approximates market value.

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Accounts Receivable and Unbilled Receivables

Unbilled receivables represent amounts recognized as revenues based on services performed and, in accordance with the terms of the client contract, will be invoiced in a subsequent period.

See Note 2 “Revenue from Contracts with Customers” for further details.

Allowance for Credit Losses

Accounts receivable are reviewed periodically to determine the probability of loss. The Company records an allowance for credit losses when it is probable that the related receivable balance will not be collected based on historical collection experience, client-specific collection issues, and other matters the Company identifies in its collection monitoring.

A reconciliation of the beginning and ending amounts of allowance for credit losses for the three years ended December 31, 2025 is as follows:

(Amounts in thousands)

Equipment, Enterprise Software and Leasehold Improvements

Equipment, enterprise software and leasehold improvements are stated at historical cost. The Company provides for depreciation using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of (a) the remaining term of the lease or (b) the estimated useful life of the improvements. Repairs and maintenance, which do not extend the useful life of the respective assets, are charged to expense as incurred. Upon disposal, assets and related accumulated depreciation are removed from the Company’s accounts and the resulting gains or losses are reflected in the Company’s Consolidated Statement of Operations.

The estimated useful lives of depreciable assets are primarily as follows:

Laptop Computers 3-4 years

Equipment 3-5 years

Enterprise Software 3-5 years

The Company capitalizes certain external and internal computer software and software development costs incurred during the application development stage. The application development stage generally includes software design and configuration, coding, testing and installation activities. Capitalized costs include only external direct cost of material and services consumed in developing or obtaining internal-use software, and payroll and payroll-related costs for employees who are directly associated with and devote time to the internal-use software project. Capitalization of such costs ceases no later than the point at which the project is substantially complete and ready for its intended use. Training and maintenance costs are expensed as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality.

Depreciation and amortization expense related to fixed assets totaled $772,000, $806,000 and $1,083,000 for the years ended December 31, 2025, 2024 and 2023, respectively.

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Goodwill and Intangible Assets

We review goodwill and intangible assets for impairment annually as of October 1st or more frequently if events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The impairment test is performed at the reporting unit level. Determination of recoverability is based on the lowest level of identifiable estimated future discounted cash flows resulting from use of the assets and their eventual disposition. Measurement of any impairment loss is based on the excess carrying value of the reporting unit over their fair market value.

In 2025, 2024 and 2023, we performed quantitative impairment tests related to our IT Staffing Services segment, which includes the June 2015 acquisition of Hudson Global Resources Management, Inc.’s U.S. IT staffing business (“Hudson IT”). The results of each of these testing’s indicated no impairment associated with the carrying amount of goodwill.

In 2025, 2024 and 2023, we performed quantitative impairment tests related to our Data and Analytics Services segment which includes the July 2017 acquisition of InfoTrellis and the October 2020 acquisition of AmberLeaf. The results of these 2025 and 2024 testing’s indicated no impairment associated with the carrying amount of goodwill. On October 1, 2023, our annual impairment testing date, we did not identify an impairment. However, due to a triggering event in the fourth quarter related to declining revenue trends and lower future revenue projections, our December 31, 2023 testing results indicated impairment associated with the carrying amount of goodwill of $5.3 million. Accordingly, this goodwill impairment charge is reflected in selling, general and administrative expenses in the Company’s Consolidated Statements of Operations in Item 8, herein.

Business Combinations

Leases

Leases Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Since most of the Company’s leases do not have an implicit borrowing rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our leases may include options allowing us in our sole discretion to extend or

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terminate the lease, and when it is reasonably certain that we will exercise those options, we will include those periods in our lease term. Variable costs, such as payments for insurance and tax payments, are expensed when the obligation for those payments is incurred.

Income Taxes

Management determines the Company’s income tax provision using the asset and liability method. Under this method, deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. The Company measures deferred tax assets and liabilities using enacted tax rates in effect for the year in which we expect to recover or settle the temporary differences. The effect of a change in tax rates on deferred taxes is recognized in the period that the change is enacted. The Company evaluates its deferred tax assets and records a valuation allowance when, in management’s opinion, it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of December 31, 2025, 2024 and 2023, the Company provided a valuation allowance of $435,000, $452,000 and $628,000, respectively, related to the uncertainty of the realization of foreign net operating losses (“NOL”).

The Tax Cuts and Jobs Act of 2017 (“TCJA”) created a new requirement that certain income earned by foreign subsidiaries, known as global intangible low-tax income (“GILTI”), must be included in the gross income of their U.S. shareholder. The FASB allows an accounting policy election of either recognizing deferred taxes for temporary differences expected to reverse as GILTI in future years or recognizing such taxes as a current-period expense when incurred. We have elected to treat the tax effect of GILTI as a current-period expense as incurred.

Deferred Financing Costs

The Company capitalizes expenses directly related to securing and amending its credit facilities. These deferred costs are amortized as interest expense over the term of the underlying credit facilities. Unamortized deferred financing costs are shown as a non-current asset in the Consolidated Balance Sheets.

Segment Reporting

The Company has two reportable segments, in accordance with ASC Topic 280 “Disclosures About Segments of an Enterprise and Related Information”: Data and Analytics and IT Staffing Services.

The Company's President and Chief Executive Officer ("CEO") regularly reviews financial information by reporting segment to make operating decisions. Significant financial metrics that are regularly reviewed for each reportable business segment include revenues, gross margin percent, operating income and segment expenses which are classified as selling & marketing, operations, and general & administrative. Other segment items that are not allocated to a reportable business segment include amortization, interest income/expense, foreign exchange gains/losses, severance, litigation settlements and other infrequent income/expense items.

Monthly revenue amounts by reportable business segment are reviewed by the CEO to evaluate when additional investments are needed. In addition, gross margin percent is used to evaluate operating efficiency which largely determines resource allocations for billable consultant hiring decisions. Finally, segment operating income is used to assess overall performance by each business segment.

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Revenue Recognition

The Company recognizes revenue on time-and-material contracts over time as services are performed and expenses are incurred. Time-and-material contracts typically bill at an agreed upon hourly rate, plus out-of-pocket expense reimbursement. Out-of-pocket expense reimbursement amounts vary by assignment, but on average represent less than 2% of the total contract revenues. Revenue is earned on a per transaction or labor hour basis, as that amount directly corresponds to the value of the Company’s performance. Revenue recognition is negatively impacted by holidays and consultant vacation and sick days.

The Company recognizes revenue on fixed price contracts over time as services are rendered and uses a cost-based input method to measure progress. Determining a measure of progress requires management to make judgments that affect the timing of revenue recognized. Under the cost-based input method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the client. The Company has determined that the cost-based input method provides a faithful depiction of the transfer of goods or services to the customer. Estimated losses are recognized immediately in the period in which current estimates indicate a loss. We record deferred revenues when cash payments are received or due in advance of our performance, including amounts which may be refundable.

The Company’s time-and-material and fixed price revenue streams are recognized over time as the customer receives and consumes the benefits of the Company’s performance as the work is performed.

In certain situations related to client direct hire assignments, where the Company’s fee is contingent upon the hired resources’ continued employment with the client, revenue is not fully recognized until such employment conditions are satisfied.

Stock-Based Compensation

In 2008, the Company adopted a Stock Incentive Plan. This stock incentive plan was amended and restated effective as of May 14, 2024 and further amended on May 14, 2025 (as amended and restated to date, the “Plan”). The Plan provides that up to 6,200,000 shares of the Company's common stock shall be allocated for issuance to directors, officers, employees and consultants of the Company. Grants under the Plan can be made in the form of stock options, stock appreciation rights, performance share awards, restricted stock awards or stock awards. The Plan is administered by the Compensation Committee of the Board of Directors. Stock options are granted at an exercise price equal to the closing share price of the Company’s common stock at the grant date and generally vest over a three to five-year period.

In 2018, the Company adopted the Mastech Digital, Inc. 2019 Employee Stock Purchase Plan (the “Stock Purchase Plan”). The Stock Purchase Plan is intended to meet the requirements of Section 423 of the Code and required the approval of the Company’s shareholders to be qualified under Section 423 of the Code. In 2019, the Company’s shareholders approved the Stock Purchase Plan. Under the Stock Purchase Plan, 600,000 shares of common stock (subject to adjustment upon certain changes in the Company’s capitalization) are available for purchase by eligible employees who become participants in the Stock Purchase Plan. The purchase price per share is 85% of the lesser of (i) the fair market value per share of common stock on the first day of the offering period, or (ii) the fair market value per share of common stock on the last day of the offering period. On February 16, 2026, the Company’s Board of Directors approved the termination of the Stock Purchase Plan. The termination will become effective on July 1, 2026, following completion of the current offering period ending June 30, 2026. Shares issuable under the current offering period will be issued in accordance with the terms of the plan, and no additional offering periods will commence thereafter.

On December 10, 2024, the Board approved and adopted the 2024 Inducement Stock Incentive Plan and reserved 1,500,000 shares of Common Stock for issuance of awards under the 2024 Inducement Stock Incentive Plan. The 2024 Inducement Stock Incentive Plan was approved and adopted without shareholder approval pursuant to NYSE American Company Guide Rule 711 and provided for grants of non-qualified stock options, restricted stock awards, stock awards, performance share awards and other stock-based awards (each, an “Inducement Award”). Effective May 14, 2025, the 2024 Inducement Stock Incentive Plan was terminated, which means that no further grants can be made under the 2024 Inducement Stock Incentive Plan but existing outstanding awards granted pursuant to this plan continue to be governed by the plan’s terms. The 2024 Inducement Stock Incentive Plan was established exclusively to grant equity awards to individuals who were not previously employees or directors of the Company, as an inducement to join the Company.

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Treasury Stock

On February 8, 2023, the Company announced that the Board of Directors authorized a share repurchase program of up to 500,000 shares of the Company’s common stock over a two-year period. On February 19, 2025, the Company announced that the Board of Directors had authorized an extension of its previously announced share repurchase program for an additional year through February 8, 2026. Repurchases under the program could occur from time to time in the open market, through privately negotiated transactions, through block purchases or other purchase techniques, or by any combination of such methods. During 2025, the Company repurchased 299,523 shares of common stock at an average price of $7.49 per share under this program. During 2024, the Company repurchased 9,222 shares of common stock at an average price of $8.70 per share under this program. On February 8, 2026, this share repurchase program expired by its terms.

On February 16, 2026, the Company’s Board of Directors authorized a new share repurchase program pursuant to which the Company may repurchase up to $5.0 million of its common stock. Repurchases under the program may occur from time to time in the open market, through privately negotiated transactions, through block purchases or other purchase techniques, or by any combination of such methods, and the program may be modified, suspended or terminated at any time at the discretion of the Company’s Board of Directors. The authorization became effective on February 16, 2026.

Additionally, the Company makes stock purchases from time to time to satisfy employee tax obligations related to its Stock Incentive Plan. During 2025 and 2024, the Company did not purchase any shares to satisfy such employee tax obligations.

At December 31, 2025, the Company held 2.0 million shares in its treasury at a cost of approximately $7.1 million. At December 31, 2024, the Company held 1.7 million shares in its treasury at a cost of approximately $4.8 million.

Comprehensive Income (Loss)

Comprehensive income (loss) as presented in the Consolidated Statements of Comprehensive Income (Loss) consists of net income (loss) and foreign currency translation adjustments.

Foreign Currency Translation

The reporting currency of the Company and its subsidiaries is the U.S. dollar. The functional currency of the Company’s subsidiary in Canada is the U.S. dollar because the majority of its revenue is denominated in U.S. dollars. The functional currency of the Company’s Indian and European subsidiaries is their local currency. The results of operations of the Company’s Indian and European subsidiaries are translated at the monthly average exchange rates prevailing during the period. The financial position of the Company’s Indian and European subsidiaries is translated at the current exchange rates at the end of the period, and the related translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within Shareholders’ Equity. Gains and losses resulting from foreign currency transactions are included as a component of other income (expense), net in the Consolidated Statements of Operations. Foreign exchange gains and losses were not material in 2025, 2024 and 2023.

Earnings (Loss) Per Share

Basic earnings (loss) per share are computed using the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share are computed using the weighted-average number of common shares outstanding during the period, plus the incremental shares outstanding assuming the exercise of dilutive stock options and the vesting of restricted shares and performance shares, calculated using the treasury stock method. For the year ended December 31, 2025, all stock options and restricted shares were anti-dilutive and excluded from the computation of diluted (loss) per share due to the net loss.

Recently Issued Accounting Standards

Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The amendments in this ASU enhance the transparency and usefulness of income tax disclosures. Additional disclosures include specific rate reconciliation categories; additional disclosure for reconciling items that meet a quantitative threshold; and federal, state and foreign income taxes paid by individual jurisdiction. The amendments in this ASU are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company adopted this ASU on January 1, 2025 which resulted in expanded disclosures as reflected in Note 11.

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Recent Accounting Pronouncements not yet adopted

In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses”. The amendments in this ASU require more detailed disclosures about an entity’s business expenses. Additional interim and annual reporting disclosures in the notes to financial statements include the amounts of inventory purchases, employee compensation, depreciation, amortization of intangible assets and a qualitative description of amounts that are not separately disclosed. The amendments in this ASU are effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company does not expect this ASU to have a material impact on its financial statements.

In July 2025, the FASB issued ASU 2025-05, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets.” The amendments in this ASU introduce a practical expedient for all entities and provide entities other than public business entities with an accounting policy election when applying Topic 326 to current accounts receivable and contract assets arising from transactions under Topic 606, Revenue from Contracts with Customers. The practical expedient is intended to simplify the estimation of expected credit losses for short-term trade receivables and contract assets when such losses are expected to be immaterial. The amendments are effective for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of this ASU but does not expect it to have a material effect on its consolidated financial statements.

A variety of proposed or otherwise potential accounting standards are currently under consideration by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, management has not yet determined the effect, if any that the implementation of such proposed standards would have on the Company’s consolidated financial statements.

Revenue from Contracts with Customers

The Company’s time-and-material and fixed price revenue streams are recognized over time as the customer receives and consumes the benefits of the Company’s performance as the work is performed.

In certain situations related to client direct hire assignments, where the Company’s fee is contingent upon the hired resources continued employment with the client, revenue is not fully recognized until such employment conditions are satisfied.

We do not sell, lease or otherwise market computer software or hardware, and essentially 100% of our revenue is derived from the sale of data and analytics, IT staffing and Digital Transformation services. We expense sales commissions in the same period in which revenues are realized. These costs are recorded within selling, general and administrative expenses.

Each contract the Company enters into is assessed to determine the promised services to be performed and includes identification of the performance obligations required by the contract. In substantially all of our contracts, we have identified a single performance obligation for each contract either because the promised services are distinct, the contract qualifies as a series, or the promised services are highly interrelated and interdependent and therefore represent a combined single performance obligation.

Our Data and Analytics Services segment provides specialized capabilities in delivering data management and analytics services to customers globally. This business offers project-based consulting services in the areas of Master Data Management, Enterprise Data Integration, Big Data, Analytics and Digital Transformation, which can be delivered using on-site and offshore resources.

Our IT staffing segment combines technical expertise with business process experience in a broad range of staffing services in digital and mainstream technologies, which can be delivered onshore as well as offshore. Our digital technology stack includes data management and analytics, cloud, mobility, social and automation. Our mainstream technologies include business intelligence / data warehousing; web services; enterprise resource planning & customer resource management; and e-Business solutions. We work with businesses and institutions with significant IT-spend and recurring staffing needs. We also support smaller organizations with their

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“project focused” temporary IT staffing requirements. In late 2023, we expanded our service offerings to include engineering staffing services. Substantially all of our revenue is recognized over time.

The following table depicts the disaggregation of our revenues by contract type and operating segment:

Years Ended December 31,

(Amounts in thousands)

Data and Analytics Services Segment

IT Staffing Services Segment

Fixed-price Contracts — 136 —

The Company had three clients that individually accounted for more than 10% of total revenues in 2025: Fidelity (16.7%), Populus (12.1%), and CGI (10.8%). In 2024, two clients exceeded 10% of total revenues: CGI (14.5%) and Populus (10.7%). In 2023, one client, CGI, accounted for 22.5% of total revenues. At December 31, 2025 and 2024, CGI accounted for 20.0% and 27.0%, respectively, of the Company’s accounts receivable. Fidelity accounted for 18.0% and 6.0% of accounts receivable at December 31, 2025 and 2024, respectively. Populus accounted for 3.0% and 6.0% of accounts receivable at December 31, 2025 and 2024, respectively.

The Company’s top ten clients represented approximately 58%, 54% and 53% of total revenues in 2025, 2024 and 2023, respectively. The following table presents our revenue from external customers disaggregated by geography, based on the work location of our customers:

Years Ended December 31,

(Amounts in thousands)

Contract assets, shown as unbilled receivables in the Consolidated Balance Sheets, primarily relate to the right to consideration for work completed, but not billed at the reporting date on contracts with customers. The contract assets are transferred to receivables when the rights become unconditional. Contract liabilities, shown as deferred revenue in the Consolidated Balance Sheets, primarily relate to contracts where advance payments or deposits have been received, but performance obligations have not yet been satisfied and revenue has not been recognized.

The following table presents the Company’s net accounts receivable from customers, contract assets and contract liabilities:

December 31,

(Amounts in thousands)

Receivables from contracts, beginning of year $ 23,845 $ 22,556

Receivables from contracts, end of year $ 20,648 $ 23,845

Contract assets, beginning of year $ 7,598 $ 7,259

Contract assets, end of year $ 5,748 $ 7,598

Contract liabilities, beginning of year $ 329 $ 684

Contract liabilities, end of year $ 41 $ 329

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As the majority of our contracts are one year or less when considering cancellation options, we have utilized the optional exemption under ASC 606-10-50-14 to not disclose information about the remaining performance obligations for contracts which have original expected durations of one year or less.

Goodwill and Other Intangible Assets, net

Goodwill of $8.4 million related to our IT Staffing Services segment resulted from the 2015 acquisition of Hudson IT. Goodwill related to our Data and Analytics Services segment includes our 2017 acquisition of the services division of InfoTrellis, which totaled $27.4 million, and our 2020 acquisition of AmberLeaf, which totaled $6.4 million. The Company recorded a $5.3 million goodwill impairment related to the Data and Analytics Services segment in 2023 and a $9.7 million goodwill impairment in 2018. The impairments were primarily attributable to declines in revenue levels and lower future revenue projections.

A reconciliation of the beginning and ending amounts of goodwill by operating segment for the three years ended December 31, 2025 is as follows:

Years Ended December 31,

(Amounts in thousands)

IT Staffing Services:

Goodwill recorded — — —

Impairment — — —

Years Ended December 31,

(Amounts in thousands)

Data and Analytics Services:

Goodwill recorded — — —

Impairment — — (5,300 )

The Company is amortizing the identifiable intangible assets on a straight-line basis over estimated average lives ranging from 3 to 12 years. Identifiable intangible assets were comprised of the following as of December 31, 2025 and 2024:

IT Staffing Services:

Data and Analytics Services:

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IT Staffing Services:

Data and Analytics Services:

Amortization expense for the three years ended December 31, 2025, 2024 and 2023 totaled $2.6 million, $2.7 million and $2.8 million, respectively and is included in selling, general and administrative expenses in the Consolidated Statement of Operations.

The estimated aggregate amortization expense for intangible assets for the years ending December 31, 2026 through 2030 is as follows:

Years Ended December 31,

(Amounts in thousands)

Cash and Cash Equivalents

The Company had cash and cash equivalents consisting of cash balances on hand and money market funds that totaled $36.5 million at December 31, 2025 and $27.7 million at December 31, 2024. There were no restrictions on the Company’s cash balances during the periods presented.

5. Credit Facility

On July 13, 2017, the Company entered into a Credit Agreement (the “Credit Agreement”) with PNC Bank, as administrative agent, swing loan lender and issuing lender, PNC Capital Markets LLC, as sole lead arranger and sole book-runner, and certain financial institution parties thereto as lenders (the “Lenders”). The Credit Agreement, as amended, provides for a total aggregate commitment of $53.1 million, consisting of (i) a revolving credit facility (the “Revolver”) in an aggregate principal amount not to exceed $40 million and (ii) a $13.1 million term loan facility (the “Term Loan), as more fully described in Exhibit 10.1 to the Company’s Form 8-Ks filed with the SEC on July 19, 2017, April 25, 2018, and October 7, 2020, Exhibit 10.2 to the Form 8-K/A filed with the SEC on January 4, 2022 and Exhibit 10.12 to the Company’s Form 10-K filed with the SEC on March 15, 2024. Additionally, the facility includes an accordion feature for additional borrowing of up to $20 million upon satisfaction of certain conditions.

The Revolver expires in December 2026 and includes swing loan and letter of credit sub-limits in the aggregate amount not to exceed $6.0 million for swing loans and $5.0 million for letters of credit. Borrowings under the Revolver may be denominated in U.S. dollars or Canadian dollars. The maximum borrowings in U.S. dollars may not exceed the sum of 85% of eligible U.S. accounts receivable and 60% of eligible U.S. unbilled receivables, less a reserve amount established by the administrative agent. The maximum borrowings in Canadian dollars may not exceed the lesser of (i) $10.0 million; and (ii) the sum of 85% of eligible Canadian receivables, plus 60% of eligible Canadian unbilled receivables, less a reserve amount established by the administrative agent.

Amounts borrowed under the Term Loan were required to be repaid in consecutive quarterly installments of $1.1 million through and including the maturity date of October 1, 2024. In August 2022, the Company prepaid $7.6 million of the outstanding term loan with excess cash balances. The final term loan payment of $1.1 million was made on January 3, 2023, taking the outstanding balance to zero.

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Borrowings under the Revolver and the Term Loan, which may be made at the Company’s election, bear interest at either (a) the higher of PNC’s prime rate or the federal funds rate plus 0.50%, plus an applicable margin determined based upon the Company’s senior leverage ratio or (b) the Secured Overnight Financing Rate (“SOFR”), plus an applicable margin determined based upon the Company’s senior leverage ratio. The applicable margin on the base rate is between 0.50% and 1.25% on Revolver borrowings and between 1.75% and 2.50% on Term Loan borrowings. The applicable margin on the SOFR is between 1.50% and 2.25% on Revolver borrowings and between 2.75% and 3.50% on Term Loan borrowings. A 20 to 30-basis point per annum commitment fee on the unused portion of the Revolver is charged and due monthly in arrears. The applicable commitment fee is determined based upon the Company’s senior leverage ratio.

The Company pledged substantially all of its assets in support of the Credit Agreement. The Credit Agreement contains standard financial covenants, including, but not limited to, covenants related to the Company’s senior leverage ratio and fixed charge ratio (as defined under the Credit Agreement) and limitations on liens, indebtedness, guarantees, contingent liabilities, loans and investments, distributions, leases, asset sales, stock repurchases and mergers and acquisitions. As of December 31, 2025, the Company was in compliance with all applicable provisions of the Credit Agreement.

In connection with securing the commitments under the Credit Agreement and the April 20, 2018, October 1, 2020, December 29, 2021 and December 29, 2023 amendments to the Credit Agreement, the Company paid a commitment fee and incurred deferred financing costs totaling $1,039,000, which were capitalized and are being amortized as interest expense over the life of the Credit Facility. Deferred financing costs of $95,000 and $189,000 (net of amortization) as of December 31, 2025, and December 31, 2024, respectively, are presented as long-term assets in the Company’s Consolidated Balance Sheets.

As of December 31, 2025, and December 31, 2024, the Company’s outstanding borrowings under the Revolver totaled zero dollars; and unused borrowing capacity available was approximately $19.9 million and $22.6 million, respectively. There were no outstanding borrowings under the Term Loan at December 31, 2025, and December 31, 2024. On May 9, 2024, the Company issued two standby Letters of Credit for $162,000 each from PNC Bank to a Vietnam client to secure certain performance and advance payment guarantees made to the client on an existing fixed price Data and Analytics Services assignment. The letters of credit are scheduled to expire on March 21, 2026.

Leases

The Company rents certain office facilities and equipment under noncancelable operating leases. As of December 31, 2025, approximately 94,000 square feet of office space is utilized for our sales and recruiting offices, delivery centers, and corporate headquarters. All of our leases are classified as operating leases. The average initial lease term is 3.9 years. Several leases have an option to renew, at our sole discretion, for an additional term. Our present lease terms range from less than one-year to 3.8 years with a weighted average of 2.3 years. Leases with an initial term of twelve months or less are not recorded on the balance sheet.

The following table summarizes the balance sheet classification of the lease assets and related lease liabilities:

(in thousands)

Assets:

Long-term operating lease right-of-use assets $ 2,534 $ 3,832

Liabilities:

Short-term operating lease liability $ 1,283 $ 1,265

Long-term operating lease liability 1,138 2,486

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Future minimum rental payments for office facilities and equipment under the Company’s noncancelable operating leases are as follows:

Amount as of

(in thousands)

Thereafter -

Less: Imputed interest (176 )

Present value of operating lease liabilities $ 2,421

The weighted average discount rate used to calculate the present value of future lease payments was 5.7%.

We recognize rent expense for these leases on a straight-line basis over the lease term. Rental expense for the years ended December 31, 2025, 2024 and 2023 totaled $1.6 million, $1.5 million and $1.7 million, respectively.

Total cash paid for lease liabilities for the years ended December 31, 2025 totaled $1.4 million, $1.5 million and $1.6 million, respectively.

There were no new leases entered into during the year ended December 31, 2025 or 2024. New leases entered into during the years ended December 31, 2023 totaled $2.7 million . New leases are considered non-cash transactions.

Long-Term Severance Liability

In December 2024, the Company recorded a $1.9 million liability based on the contractual terms of the severance agreement with its former President and Chief Executive Officer. In March 2025, the Company recorded an additional $1.4 million severance liability related to the severance agreement with its former Chief Financial Officer. As of December 31, 2025, $1.6 million is recorded in current liabilities and $0.3 million is recorded as a long-term liability in the Company’s Consolidated Balance Sheets, based on the expected timing of payments.

Commitment and Contingencies

In December 2022, the Company received a demand letter from the attorney of a former employee who resigned from his employment with the Company in November 2022. Among other allegations in the letter, this former employee asserted various employment-related claims against the Company, including a claim of wrongful termination. The Company settled this claim in 2023 and paid a $3.1 million settlement, net of recoveries, and incurred $0.9 million of professional service fees related to this matter. Both the professional services fees and the settlement amount, net of recoveries are included in Selling, General and Administrative expenses in the Consolidated Statement of Operations. There were no professional service fees related to this matter incurred in either 2025, or 2024.

In the ordinary course of our business, the Company is involved in a number of lawsuits and administrative proceedings. While uncertainties are inherent in the final outcome of these matters, the Company’s management believes, after consultation with legal counsel, that the disposition of these proceedings should not have a material adverse effect on our financial position, results of operations or cash flows.

Employee Benefit Plan

The Company provides an Employee Retirement Savings Plan (the “Retirement Plan”) under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”), that covers substantially all U.S.-based salaried and W-2 hourly employees. Employees may contribute a percentage of eligible compensation to the Retirement Plan, subject to certain limits under the Code. The Company did not provide for any matching contributions for the three years ended December 31, 2025.

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10.

Stock-Based Compensation

Effective October 1, 2008, the Company adopted a Stock Incentive Plan. This stock incentive plan was amended and restated effective as of May 14, 2024 and further amended on May 14, 2025, (the “Plan”). The Plan provides that up to 6,200,000 shares of the Company’s common stock shall be allocated for issuance to directors, officers, employees and consultants of the Company. Grants under the Plan can be made in the form of stock options, stock appreciation rights, performance share awards, restricted stock awards or stock awards. As of December 31, 2025, the Company had 5,198,000 outstanding and/or exercised stock options, 24,000 vested performance shares and 365,000 outstanding and/or released restricted stock units that were issued under the Plan. Thus, as of December 31, 2025, the Company has 945,000 shares available for future grants under the Plan.

The Plan is administered by the Compensation Committee of the Board of Directors. All grants awarded under the Plan are recommended by the Committee to the Board of Directors for approval. The exercise price of stock options is set on the grant date and is not to be less than the fair market value per share of our closing stock price on that date. Grants of stock options and restricted stock awards generally vest over a three to five-year period and options expire after ten years from the grant date. Performance shares vest upon the achievement of the performance criteria and approval by the Compensation Committee of the Board of Directors.

Following is a summary of the Company’s stock option activity under the Plan for the three years ended December 31, 2025:

Number ofOptions Weighted AverageExercise Price

Exercised — —

As of December 31, 2025, the Company’s outstanding “in the money” stock options under the Plan, using the year-end share price of $6.95 had an aggregate intrinsic value of $818,000. As of December 31, 2025, the intrinsic value of vested stock options under the Plan totaled $806,000. The total intrinsic value of options exercised under the Plan during 2025, 2024 and 2023 totaled $1,230,000, $281,000 and $0, respectively. The measurement date fair value of stock options vested under the Plan during 2025, 2024 and 2023 totaled $1,740,000, $2,525,000 and $3,317,000, respectively.

The table below summarizes information regarding the Company’s outstanding and exercisable stock options under the Plan as of December 31, 2025:

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Stock options of 1,069,000 units, 525,000 units and 205,000 units were issued under the Plan during the year ended December 31, 2025, 2024, and 2023, respectively, with weighted-average terms of 3.4 years, 3.1 years, and 3.7 years. The Company used the following average assumptions with respect to the Black-Scholes option pricing model for Mastech Digital stock options issued under the Plan during 2025, 2024, and 2023.

Years Ended December 31,

Stock option grants:

Weighted-average risk-free interest rate 4.3 % 4.1 % 4.0 %

Weighted-average dividend yield 0.0 % 0.0 % 0.0 %

Expected term (in years) 3.4 3.1 3.7

Weighted-average fair value $ 6.05 $ 3.08 $ 5.01

Risk-free interest rate — The risk-free rate for stock options granted during the period was determined by using a U.S. Treasury rate for the period that coincided with the expected term of the options.

Expected dividend yield — The Company did not contemplate a recurring dividend program. Accordingly, the dividend yield assumption used was 0.0%.

Expected volatility — Expected volatility was determined based on the historical volatility of Mastech Digital’s common stock.

Expected term — Mastech Digital’s expected term was based on the exercise history of our employees and the vesting term of our stock options.

Following is a summary of Mastech’s restricted stock activity under the Plan for the three years ended December 31, 2025:

Years Ended December 31,

The aggregate intrinsic value of restricted stock units outstanding under the Plan at December 31, 2025 was $116,000. The total intrinsic value of restricted shares released under the Plan during 2025 totaled $243,000.

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which means that no further grants can be made under the 2024 Inducement Stock Incentive Plan but existing outstanding awards granted pursuant to this plan continue to be governed by the plan’s terms. The 2024 Inducement Stock Incentive Plan was established exclusively to grant equity awards to individuals who were not previously employees or directors of the Company, as an inducement to join the Company.

In October 2018, the Board of Directors of the Company approved the Mastech Digital, Inc. 2019 Employee Stock Purchase Plan (the “Stock Purchase Plan”). The Stock Purchase Plan is intended to meet the requirements of Section 423 of the Code and had to be approved by the Company’s shareholders to be qualified. On May 15, 2019, the Company’s shareholders approved the Stock Purchase Plan. Under the Stock Purchase Plan, 600,000 shares of common stock (subject to adjustment upon certain changes in the Company’s capitalization) are available for purchase by eligible employees who become participants in the Stock Purchase Plan. The purchase price per share is 85% of the lesser of (i) the fair market value per share of common stock on the first day of the offering period, or (ii) the fair market value per share of common stock on the last day of the offering period. On February 16, 2026, the Company’s Board of Directors approved the termination of the Stock Purchase Plan. The termination will become effective on July 1, 2026, following completion of the current offering period ending June 30, 2026. Shares issuable under the current offering period will be issued in accordance with the terms of the plan, and no additional offering periods will commence thereafter.

During the year ended December 31, 2025 and December 31, 2024, the Company issued 15,114 and 34,860 shares under the Stock Purchase Plan at an average share of $6.06 and $6.40, respectively. At December 31, 2025, there were 416,945 shares available for purchases under the Plan.

The Company’s eligible full-time employees are able to contribute up to 15% of their base compensation into the employee stock purchase plan, subject to an annual limit of $25,000 per person. Employees are able to purchase Company common stock at a 15% discount to the lower of the fair market value of the Company’s common stock on the initial or final trading dates of each six-month offering period. Offering periods begin on January 1 and July 1 of each year. The Company uses the Black-Scholes option pricing model to determine the fair value of employee stock purchase plan share-based payments. The fair value of the six-month “look-back” option in the Company’s employee stock purchase plans is estimated by adding the fair value of 15% of one share of stock to the fair value of 85% of an option on one share of stock. The Company utilized U.S. Treasury yields as of the grant date for its risk-free interest rate assumption, matching the Treasury yield terms to the six-month offering period. The Company utilized historical company data to develop its dividend yield and expected volatility assumptions.

Stock-based compensation expense of $3.1 million, $2.2 million and $3.1 million was recognized in the Consolidated Statements of Operations for the years ended December 31, 2025, 2024, and 2023, respectively. The Company has recognized related tax benefits associated with its stock-based compensation arrangements for the years ended December 31, 2025, 2024, and 2023 of $780,000, $528,000 and $721,000, respectively. As of December 31, 2025, the total remaining unrecognized compensation expense related to non-vested stock options totaled $5.6 million which will be amortized over the weighted-average remaining requisite service period of 1.9 years. The total remaining unrecognized compensation expense related to restricted stock units amounted to $18,000 which will be amortized over the weighted-average remaining requisite service period of 0.1 years.

11.

Income Taxes

The components of income before income taxes as shown in the accompanying Consolidated Statement of Operations, consisted of the following for the years ended December 31, 2025, 2024 and 2023:

Years Ended December 31,

(Amounts in thousands)

Income (loss) before income taxes:

Mastech Digital, Inc. MHH US Equity

MHH · 10-K · period ended 2025-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Mastech Digital, Inc. MHH US Equity☆

MHH · 10-K · period ended 2025-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Mastech Digital, Inc. MHH US Equity