TSS Inc (TSSI) Q3 2024 Earnings Call Highlights: Record Revenue Growth and Strategic Expansion

GuruFocus News
4 min read

In This Article:

  • Total Revenue: $70.1 million, representing a year-over-year growth of 689%.

  • Net Income: $2.6 million, a nearly twelvefold increase from the previous year.

  • Earnings Per Share (EPS): Increased from $0.01 to $0.10.

  • Procurement Revenue: $60.5 million, up from $5.4 million in the previous year.

  • Integration Services Revenue: $7.6 million, a growth of 361% from the previous year.

  • Facilities Management Revenue: $2 million, up 8% year-over-year.

  • Gross Margin: 11.3%, down from 31.9% in Q3 2023.

  • SG&A Expenses: $3.9 million, up from $2 million in the previous year.

  • Adjusted EBITDA: $4.3 million, up from $0.9 million in the previous year.

  • Cash and Cash Equivalents: $46.4 million, with no debt.

  • Cash Flow from Operations: $36.9 million for the first nine months of 2024.

Release Date: November 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • TSS Inc (TSSI) reported a significant year-over-year revenue growth of 689% for the third quarter, reaching $70.1 million.

  • The company achieved a nearly twelvefold increase in net income compared to the same quarter last year, with diluted EPS rising from $0.01 to $0.10.

  • TSS Inc (TSSI) successfully executed a multiyear agreement with a primary customer, enhancing revenue visibility and supporting investment in capacity.

  • The company has expanded its production capacity, reducing cycle times for computer racks from weeks to less than a day.

  • TSS Inc (TSSI) has been awarded the Professional Services Best Deployment Partner Award for 2024 by its largest customer, highlighting its commitment to customer service.

Negative Points

  • The company's overall gross margin decreased to 11.3% from 31.9% due to a higher proportion of lower-margin procurement services.

  • Procurement revenues, while contributing to growth, are subject to quarter-to-quarter fluctuations and seasonality, particularly due to federal government buying cycles.

  • The facilities management segment, while stable, only experienced moderate growth of 8% and faces challenges from increasing compute density and cooling requirements.

  • TSS Inc (TSSI) anticipates potential bottlenecks in growth due to power requirements and availability of NVIDIA chips for its customers.

  • The company expects profitability in the fourth quarter to be slightly below the third quarter level due to timing of incoming projects and a smaller pipeline of procurement deals.

Q & A Highlights

Q: Your business has seen tremendous growth recently, and with a multiyear agreement in place, how do you plan to execute on the potential upside scenario, especially with your competitor facing delisting risks? A: Darryll Dewan, President and CEO, stated that while they can't comment on specific customers, they are prepared for growth spikes and have plans to accommodate increased demand. They are ready to take on more business and are confident in their ability to handle it. Daniel Chism, CFO, added that their new facility is being built to handle two to three times the current volume, preparing for significant growth in AI rack building.

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