TSS, Inc. (TSSI) research, news, and more from GeoInvesting

Company description

Mon, 25 Mar 2024 14:21:48 GMT

TSS, Inc. is a holding company. The Company provides various services for the planning, design, development and maintenance of mission-critical facilities and information infrastructure, as well as integration services. The Company operates through two segments: facilities and systems integration. Its facilities segment is involved in the design, project management and maintenance of data center and mission-critical business operations. Its systems integration unit integrates information technology (IT) equipment for original equipment manufacturer (OEM) vendors and customers to be used inside data center environments, including modular data centers. The Company's services include technology consulting, design and engineering, project management, systems integration, system installations and facilities management. Its subsidiaries include VTC, LLC doing business as Total Site Solutions and Innovative Power Systems, Inc.

Research

Wed, 11 Mar 2026 15:47:32 GMT

Tss, Inc. (NASDAQ:TSSI) ($11.05; $319.1M market cap) announced Q4 and full-year 2025 results:

Q4 sales of $60.9 million vs. $50.0 million in the prior year, above analyst estimates of $38.9 million
Q4 2025 EPS: $0.41 vs. $0.08 in the prior year, above analyst estimates of $0.01
Q4 non-GAAP EPS $0.15 vs $0.08
FY 2025 sales of $245.7 million vs. $148.1 million in the prior year, above analyst estimates of $223.7 million
FY 2025 EPS: $0.56 vs. $0.24 in the prior year, above analyst estimates of $0.12
FY 2025 non-GAAP EPS of $0.31 vs $0.24 in the prior year
TSS amended its AI rack integration agreement with DELL in December 2025 and extended the term by two years and included price amendments to deal with an increasing cost environment.
Management expects to double rack integration volumes in 2026, subject to component availability.

Management Commentary:

"We are pleased to have surpassed the upper end of our outlook for 2025," said Darryll Dewan, CEO of TSS, Inc. "Systems integration rack volumes at our new Georgetown facility came online mid-year and ramped in the fourth quarter, positioning the company for solid growth in 2026. Our business, providing high-performance computing solutions to global leaders in the AI and cloud infrastructure ecosystem, is scaling profitably. As customer requirements evolve, we continue to invest in our systems, processes, and people to improve efficiency.

"The market for AI infrastructure continues to accelerate, as reflected in publicly disclosed forecasts of industry analysts and corporate reports. Importantly, as AI chip functionality improves, the additional size, complexity and cooling requirements of racks play to our strengths, capabilities and capacities. Supply chains continue to be volatile, as noted in the highly publicized memory price increases and volume shortages. We have taken a conservative approach to forecasting 2026 rack integration volumes, and we are already seeing customer activity beyond our initial forecasts."

"Our integration experience and strategic operational investments uniquely position us to achieve record growth in our Systems Integration business in 2026. Our largest partner anticipates doubling its AI infrastructure business in 2026 compared to last year, and we expect to capture our fair share of this growth, doubling our rack integration volumes and driving strong revenue growth in this segment. Combined with a more conservative outlook for our Procurement and Facilities Management businesses, we expect to achieve Adjusted EBITDA in the range of $20 million to $22 million for 2026. Our ability to deliver completed racks depends on supply of components and our forecast takes a conservative view on component availability. Total integration demand exceeds the volume imputed into our forecast.”

Our Quick Take:

Strong results even when adjusting for a large tax gain. See InfoArb from the conference call, which we tweeted earlier this morning. (The associated clip can also be found here).

One of the most important things we wanted to see from the Q4 report was whether the company would be able to renegotiate its contract with DELL to accommodate the increased costs TSSI has been experiencing, some of which stem from the DELL relationship itself. What we learned from the earnings call is that not only was the contract amended to account for these cost increases, but DELL also extended the contract by two years. However, DELL did not make any adjustments to the minimum rack integration volume terms.

The conference call also mentioned that TSSI is already evaluating capacity expansion plans to meet demand signals not included in its “just OK” 2026 guidance. We found this interesting for two reasons. Could this mean the company may receive order flow beyond the minimum requirements DELL has agreed to? If that is the case, we know from the call that revenue above the minimum order commitment would be highly accretive to earnings. Alternatively, could it mean the company is exploring customer relationships outside of DELL?

The quarter was also favorably impacted by some lumpy revenue from the facilities management side of the business.

There are still questions we need to explore regarding the business’s diversification potential and gaining a clearer understanding of the margin profile. We also need to take a deeper look at the company’s valuation.

Regardless, one thing we can take away from this report, beyond the strengthening Dell relationship and the indication that the relationship may not be as fragile as some might think, is that we caught a glimpse of how profitable TSSI’s business can be if it ever begins operating and humming at a steady, consistent pace.

For now, we need to sharpen our pencils and revisit our model, while keeping in mind that TSSI’s business still carries an element of unpredictability.

TSS, Inc. provides IT infrastructure services, including system planning, deployment, configuration, maintenance, and hardware procurement for enterprise, OEM, and government clients.

Research

Fri, 14 Nov 2025 16:10:02 GMT

Tss, Inc. (NASDAQ:TSSI) ($15.25, $439.4 market cap; shares are off 40% pre market) reported Q3 2025 numbers after hours yesterday:

Q3 2025 sales of $41.8 million vs $70.1 million in the prior year
Q32025 loss per share of $0.06 vs EPS of $0.10 in the prior year

During the last Open Forum, Maj said that going into TSSI’s earnings, the goal was to stay flexible and trade around potential volatility using a put-call spread instead of taking a hard stance on direction. Well, the direction is decidedly bearish as evidenced by the sharply lower price move off today’s earnings report.

Strategy notes from the Open Forum:

Maj stated that there were no current shares in his portfolio after selling off remaining shares during the prior run-up to $30 per share.
Watching for signs of when the next growth leg might begin after the initial speculation-driven move.
Focused on the rack integration revenue, which carries higher margins than the reseller side.
The key variable is the Dell agreement, wanting clarity on how the minimum revenue support plays out and whether it shows up in Q3.
Considering a put-call spread (buying both puts and calls) if weekly options are reasonably priced.
Expecting a large move either way, partly depending on whether results show meaningful traction beyond Dell.
Broader market caution, especially in AI names, keeps the setup defensive.
Also keeping an eye on potential new customers outside Dell, hinted by job postings tied to the old facility.

View the clip here.

Now, the next step is to determine if the stock’s 40% decline in reaction to the report is an opportunity moving forward. Based on the company’s guidance, the Q4 2025 adjusted EBITDA should come in around $4.5 million to $7 million and $15.2 million to $17.7 million for the year. Using the company's interest expense and depreciation expense guidance from the call would translate into an earnings-per-share range of $0.10 to $0.18 for Q4 2025.

In the fourth quarter 2024 TSSI did $3.4 million in adjusted EBITDA and EPS of $0.08.

Moving on to 2026, the company is forecasting EBITDA guidance of 40% to 60% growth. If the company's interest expense and depreciation expense guidance remain intact for 2026, that would translate into an earnings-per-share target of $0.60 at the midpoint of the EBITDA guidance.

One note of caution that you must take into consideration with our calculations is that interest expense moves higher if the company’s EBITDA is driven more by procurement revenue vs. rack integration revenue because the procurement revenue comes with higher interest expense. For example, in the first quarter of 2025 when the company did nearly $100 million, procurement revenue interest expense was $1.4 million.

Will be working on a model that will incorporate a tighter analysis, including a sensitivity analysis to take into account different procurement revenue levels.

Depending on this analysis, it’s quite possible that the stock could offer upside from current levels, potentially making it an interesting buy on pull back model portfolio (BOP) candidate at the right price.

TSS, Inc. provides IT infrastructure services, including system planning, deployment, configuration, maintenance, and hardware procurement for enterprise, OEM, and government clients

Research

Thu, 07 Aug 2025 15:10:41 GMT

TSS, Inc. (NASDAQ:TSSI) ($28.75; $719.3M market cap) announced Q2 2025 results:

Q2 2025 sales of $44.0 million vs. $12.2 million in the prior year
Q2 2025 EPS: $0.06 vs. $0.06 in the prior year
Georgetown facility now fully operational
2025 Adjusted EBITDA guidance raised from 50%+ to 75%+ year-over-year growth
Procurement revenue up 572% YoY; Systems Integration up 91% YoY
Facilities Management revenue declined 35% YoY,, but up sequentially from Q1 2025

"In the second quarter, we delivered substantial year-over-year growth across key financial metrics, including a 262% increase in revenue, a 103% increase in Adjusted EBITDA and strong positive operating cash flow," commented Darryll Dewan, CEO of TSS, Inc. "Total revenue for the first half of 2025 exceeded total revenue in the second half of 2024. These results reflect strong operational execution and the growing leverage in our business model. Our Georgetown facility is now fully operational across all capabilities, enabling us to integrate more racks featuring the latest advanced AI technologies, shorten delivery timelines and serve a large share of the market.

"The outlook for our industry remains exceptionally strong, and demand across our core markets—particularly in data center infrastructure and AI rack integration—continues to accelerate, reinforcing our belief that we are in a significant and sustained growth cycle. With the strategic groundwork in place, we are positioned to scale capacity and address complexity to capitalize on opportunities before us and meet the growing demand for advanced, AI-driven systems."

"Given the strength of our first-half performance and increasing visibility into the second half of the year, we are raising our full-year 2025 Adjusted EBITDA outlook from at least 50% growth to at least 75% growth compared to 2024," Dewan continued. "The foundational pieces of our business are in place, and we believe a full wave of demand is still ahead. We will continue to position ourselves to grow our business organically, while exploring potential strategic opportunities."

Our Quick Take:

The quarterly results came in as expected based on the company’s guidance. See our open forum clip from early July on why we exited our position.

The key factor we want to pay attention to is the growth in the facilities management business, which will include recurring maintenance revenue. Facility revenue is tied to the company's modular data business modular data center deployments. Interestingly, during our skull session event with TGEN last week, the CEO gave us some optimistic insights into the modular data center market. That could give us some hints that this opportunity could actually start translating into a new leg of growth for TSSI, although it’s too early to tell

TSS, Inc. provides IT infrastructure services, including system planning, deployment, configuration, maintenance, and hardware procurement for enterprise, OEM, and government clients

Research

Fri, 16 May 2025 14:36:29 GMT

Tss Inc (OOTC:TSSI) ($8.87, $221.9M market cap), announced Q1 2025 results:

Q1 sales of $98.9 million vs $15.9 million in the prior year
Q1 reseller revenue of $90.1 million vs $11.6 million in the prior year
Q1 system (rack) integration and facility management revenue of $8.7 million vs $4.2 million (higher margin).
Q1 EPS of $0.12 vs a EPS of $0.00 in the prior year
Stay tuned for a pod clip, where we’ll be discussing the quarterly results

“We are highly optimistic about our growth prospects for 2025 and beyond. Just last week, we began initial production at our new facility. We expect production volumes will grow in the second quarter and continue to ramp throughout the remainder of 2025 and into 2026. Based on our current visibility, and within the ever-changing geopolitical environment, we continue to expect total revenue in the first half of 2025 to exceed total revenue in the second half of 2024. For the full year 2025, we continue to expect Adjusted EBITDA to be at least 50% higher than 2024.

Main conference call takeaway:

“The rapid pace of evolution of data center technologies from chip to power to cooling continues to impact buying patterns. As an example, the transparency of NVIDIA's product road map and the magnitude of processing advancement causes customers to debate the timing of purchases. Couple this with the political and macroeconomic environment, it's a recipe for uncertainty. That said, the order pipeline of our OEM customers remains extremely robust, and we're seeing orders closing kicking off lead times.

In summary, this historic investment in AI capacity continues. Our success the last 2 years has been due to our ability to look ahead and to be in the best position to support our partners need for capacity with the expertise and infrastructure to support growing levels of complexity. That focus has us exceptionally well-positioned for the future no matter what the trade and tariff world looks like.

So looking ahead, we expect continued strong performance for the year in 2025. Specifically, we anticipate total revenue in the first half of this year will exceed revenue in the second half of last year, reflecting sustained customer demand and ongoing execution across our business lines.”

TSS, Inc. provides various services for the planning, design, development and maintenance of mission-critical facilities and information infrastructure, as well as integration services.

Research

Fri, 28 Mar 2025 15:25:12 GMT

Tss Inc (OOTC:TSSI) ($8.51, $212.9M market cap), announced Q4 and full year 2024 results:

Q4 sales of $50.0 million vs $24.4 million in the prior year
Q4 reseller revenue of $40.5 million vs $20.7 million in the prior year
Q4 system integration and facility management revenue of $7.9 million vs $2.2 million (higher margin)
Q4 EPS of $0.08 vs a EPS of $0.02 in the prior year
It should be noted that there were some one-time costs in the 2024?fourth quarter that the company did not break out. Unfortunately, we cannot calculate an adjusted EPS number to account for those costs, but management did stay on the call that those costs were six-figures.
Full year $117.5 million vs $38.5 million in the prior year
Full year EPS of $0.24 vs $0.00

“2024 was a transformative year by all accounts, driven by strong operational execution and our commitment to customer service as we capture the soaring demand for AI rack integration and capitalize on opportunistic procurement services... We signed a multi-year agreement with our largest customer, solidifying our position as a key partner for executing its technology roadmap, particularly AI rack integration. We exited the year with strong momentum, securing debt financing for the buildout of our new state-of-the-art facility, which is progressing according to plan, and achieving impressive fourth quarter revenue and diluted EPS growth of 105% and 300%, respectively...

...The outlook for our industry is robust with significant capital investment flowing into AI-enabling technologies. With a strong operational foundation established and capacity expansion underway, we are confident in our ability to capitalize on these trends and deliver profitable growth, generate positive cash from operations and further enhance value for our shareholders.”

2025 Outlook:

“We are highly optimistic about our growth prospects in 2025 and beyond given the outsized opportunities in our sector, our strong customer relationships and expanded capacity. Our profitability will continue to be influenced by our revenue mix. Procurement Services represents nearly 80% of revenues in 2024 and is characterized by wider quarter-to-quarter revenue variability and margins that are typically below our corporate average. In our higher-margin Systems Integration and Facilities Management businesses, we expect growth at a significantly higher rate than our overall business.”

“We have made significant progress in the readiness of our new facility and expect to be fully operational by June. Looking ahead to 2025, we expect an overall high level of EBITDA growth for the year compared to 2024. The second quarter will mark initial contributions from our new facility, with that segment ramping as rack volumes grow through the year and in 2026.”

The conference call offered more specific guidance than the press release. Here is the outlook for Q1 and some comments on the full year from the call:

“Based on our current visibility, we expect revenue for the first quarter of 2025 to be higher than the fourth quarter of 2024, largely due to another quarter of very robust procurement services revenue.

We also expect our SI business, our integration business in Q1 to exceed Q4. Looking past Q1, we expect the total revenue in the first half of 2025 to exceed our total revenues in the second half of 2024 and we expect 2025 adjusted EBITDA to be at least 50% higher than in 2024.”

The Q4 report offered no surprises and was in line with the CFO’s guidance provided on the Q3 conference call, where he said that Q4 EPS would be slightly lower than Q3 EPS of $0.10. We do appreciate that management was able to provide full year adjusted EBITDA guidance of at least 50%, which could indicate that visibility is improving.

There also seems to be upside to the guidance if the company can close some contracts in its higher margin modular data center business which leads to more recurring revenue maintenance business (facilities management). On the call, Maj posed the question on this maj:

“We do believe there is opportunity for the MDC business. We are working with a variety of opportunities that we think will turn into business for us in the larger container. The reason for some of the -- the length in the sales cycle is largely because of technology changes going from air to direct liquid and requiring a different design point for the actual container. But we're pretty excited that we're going to see some business growth there.

You'd be surprised what a couple of million dollars does to the overall model and that's what we're pushing for. And frankly, that's how we're compensating our people based on that stretch. And that stretch is not that significant, but it's meaningful to us overall.”

One area that we would like to get some clarification on is how the company’s guidance could translate into EPS, although we understand why they did not focus on EPS. There are going to be some temporary costs associated with their move into their new facility and higher interest expense from debt to fund capital expenditures related to that move.

Furthermore, the company is still incurring lease costs on the old facility as it searches for a subleasing opportunity, or potentially to use to meet more demand that can’t be satisfied in its new facility.

With that being said, our back of the envelope math of implied EPS from the EBITDA guidance for 2025 would be around $0.31, which includes an aggressive assumption on shareholder comp. (This implies 30% EPS growth and does not bake in any upside surprise which we think is highly likely).

Research

Tue, 07 Jan 2025 21:06:54 GMT

Tss Inc (OOTC:TSSI) ($13.56, $304.7M market cap) announced a new $20 million credit facility and a $150 million shelf registration that management claims is a housekeeping measure.

"We are pleased to expand our relationship with Susser Bank, and we appreciate their support. Our ability to expand our physical capacity with bank financing is a testament to the credibility of our growth plan. This credit facility supports the development of our operational footprint required by the projected demand from our customer and enables us to pursue new opportunities in the rapidly evolving AI space. Build out of the new space has begun, and we continue to expect to be operational at this location in early 2025."

"The company also filed a shelf registration statement with the Securities and Exchange Commission (the "SEC"). The company believes that filing the shelf registration statement is a prudent corporate housekeeping measure that will provide greater financial flexibility in the coming years. If the company decides to raise capital in a future offering using the shelf registration statement, it will describe the specific details of that future offering in a prospectus supplement that is filed with the SEC."

We don't generally agree with management teams that use the corporate governance excuse to file a shelf. This is usually a cover for succumbing to Wall Street investment bank pressure whose goals do not align with Main Street investors. We strongly believe that TSSI could gradually raise equity capital from institutional investors (with long-term horizons vs. secondary offerings placed in weak hands) at the drop of a dime without the need for a shelf.

Regardless, it was good to see that the company was able to complete its credit facility agreement in a quick manner so it can move into the new manufacturing facility, which is expected to happen in Q1.

To their credit, management could have filed a shelf a long time ago to prepare for the company's facility upgrade. Overall, we are extremely impressed with management's prudence to have preserved the company’s capital structure during the stock's 4000% ascent in 2024. This gives us a degree of confidence that they will execute on the shelf for accretive uses of capital, like an acquisition or to pay down its credit facility as it taps it for the new facility.

We are preparing a small article on how we feel about quality companies that yield to bankers, when filing BS “housekeeping shelfs.”

TSS, Inc. provides various services for the planning, design, development and maintenance of mission-critical facilities and information infrastructure, as well as integration services.

Research

Fri, 06 Dec 2024 16:48:49 GMT

Tss Inc (OOTC:TSSI) ($9.96, $223.8M market cap) announced it has signed a long term lease to support accelerating demand for AI-Enabled technologies.

"Continuing our rapid growth trajectory was centered around two key drivers: signing a long-term agreement with our primary customer, which we successfully completed and announced in October, and building capacity to deliver the demand driven by AI infrastructure needs in the market. Our new facility more than doubles our square footage and positions TSS to continue our rapid growth. We are beginning the required fit out immediately and expect to be operational in the new building in the first quarter of 2025."

TSS, Inc. provides various services for the planning, design, development and maintenance of mission-critical facilities and information infrastructure, as well as integration services.

PodClips

Mon, 18 Nov 2024 14:29:13 GMT

In his latest PodClip, Maj Soueidan shared his thoughts and takeaways on $TSSI Q3 2024 earnings.

Research

Fri, 15 Nov 2024 17:30:55 GMT

Tss Inc (OOTC:TSSI) ($11.98, $283.8M market cap; marked down 30%), announced Q3 2024 results:

Sales of $70.1 million vs $8.8 million in the prior year
Reseller revenue of $60.5 million vs $5.4 million in the prior year
System integration and facility management revenue of $9.5 million vs $3.4 million (higher margin)
EPS of $0.10 vs a EPS of $0.01 in the prior year

"We are pleased to report a dramatic increase in earnings in the third quarter, both sequentially and year-over-year," said Darryll Dewan, CEO of TSS. "This is the first quarter that includes a full period of revenue for AI-enabled server rack integrations at meaningful volumes. Even more encouraging is the recent signing of an agreement with one of our largest customers to build similar volumes of AI-enabled racks for the next several years. To address both the anticipated volume and the ever-increasing power demands expected from the next several generations of AI racks, we plan to relocate from our current integration facility to a new, larger facility in the area in early 2025."

Outlook:

"We are bullish on the outlook for our business with revenue and profit trajectories that are promising over the long-term. Keeping in mind the timing of orders and the mix of services we provide can fluctuate quarter-to-quarter, the multi-year agreement we secured with one of our largest customers will reduce variability and provide greater certainty in our earnings stream. Based on our current visibility, we expect results through the first half of 2025 to be similar to our second and third quarters of 2024."

From conference call:

“While we are not providing specific financial guidance at this time, based on our current visibility, we expect profitability in the fourth quarter to be slightly below the third quarter level due to the timing of incoming projects and a smaller pipeline of procurement deals in Q4 compared to Q3.”

After an historic run up, we are not surprised by the strong pullback on the EPS results, given the range of expectations (including ours), but that the story is still intact.

Over the last few days, TSSI had easily exceeded our price target range of $5.20 to $10.40 based on our low end EPS expectations. This prompted us to issue an urgent message yesterday on TSSI’s standing in our Legacy Top 5 Favorites Model Portfolio, inspiring us to revisit the entire portfolio.

Important takeaways from TSSI Q3 results and yesterday’s research update:

This is a case study on why we like being conservative when setting near-term price targets by using low end financial estimates.
As we said in our Q3 expectations update, sizing positions appropriately is a key part of investing. This is why we provided our clarity on our near-term price expectations in that update.
The stock is probably trading right where it should be, given management's current guidance. If we assume the current EPS run-rate is around 32 cents, the range of near-term price targets would be $4.80 to $8.00 (P/E 15x to 25x). However, we are getting more comfortable with the stock being able to trade at a P/E multiple of 20x to 25x, and maybe higher as the business plan evolves. Furthermore, management was willing to provide three quarters worth of EPS visibility into the future, something they’ve never done. In our opinion, this could set up the company to beat those numbers if parts of their business plan starts coming together. It’s going to be an interesting 9 months.
We could see institutions using TSSI’s pullback as an opportunity to get some exposure.
Models are just models. Though this might be controversial, I use models with a grain of salt. They can make us feel too comfortable or confident with the stocks we own. We will never have perfect information—not even insiders do.
That being said, if we plug in TSSI Q3 revenue numbers from their different divisions into our model, we arrive at $0.11 earnings per share, pretty darn close to what they reported.
The most important takeaway from TSSI over the last couple quarters depends on the perspective of when you started following the company. We’ve been following the company since June, 2017 at $0.19 when we added the stock to our Tier One OTC Screen. Since then, they never really made money or grew rack integration, were probably close to bankruptcy at one point, did not have a strong relationship with their biggest customer and couldn’t scale. If you look at rack integration revenue growth over the last three quarters, it’s gone from $4.3M to $7.2M to $9.5M. With that backdrop the last 2 quarters were amazing, especially considering that now their biggest customer is supporting their $25 million facility expansion. If the stock was trading around five dollars ahead of the third-quarter report, and if there are no expectations on the street, the stock would probably be up three or four dollars today. Over the weekend, we’ll be reviewing the company's third-quarter earnings call transcript to determine if we need to make any refinements in our model.

Call to Action

Thu, 14 Nov 2024 05:00:00 GMT

Portfolio Action: Removing TSSI from Top 5 Favorite Model Portfolio

Tss Inc. (TSSI) was closed from the Top Five Favorites Model Portfolio at $11.66 with a final return of 1918% and high return of 2,147% (hit today).

TSSI is currently trading outside the range of our short term price target range based on our low-end Q3 earnings per share run rate assumptions. On the heels of uplist news this week, shares of TSSI continued to power forward to hit new highs. You can our Q3 expectations research update here.

Research

Wed, 13 Nov 2024 20:58:48 GMT

Tss Inc (OOTC:TSSI) ($9.27, $219.6M market cap) announced its shares have been approved to uplist to the Nasdaq Capital Market. Shares will begin trading on the Nasdaq at the open tomorrow morning.

Darryll Dewan, CEO of TSS Inc., commented, "Uplisting to the Nasdaq marks a significant milestone in our journey as a publicly traded company, and as a technology company, trading on this market is a logical next step. There is a strong positive outlook for our services, particularly AI-enabled rack integration, given the growing interest in AI technologies. Listing on the Nasdaq will improve liquidity for our investors, increase our visibility and help attract new investors as we continue to execute our growth strategy."

Investors should note the company is also announcing Q3 2024 results after hours, tomorrow. TSSI has by far been one of the best performing stocks in our coverage universe, with shares up 3,656% since being added to the select coverage universe in September 2017.

TSS, Inc. provides various services for the planning, design, development and maintenance of mission-critical facilities and information infrastructure, as well as integration services.

Research

Thu, 24 Oct 2024 04:00:00 GMT

Tss Inc (OOTC:TSSI) ($6.00, $142.1M market cap) announced the relocating and expanding factory to address accelerating demand for AI-Enabled technologies.

TSS, Inc. is relocating and expanding its headquarters to a larger facility to meet growing demand for AI-enabled technologies. The new facility, operational by early 2025, will increase production capacity by over 60% and triple testing capabilities for advanced liquid-cooled racks. The $25-30 million investment will also enhance power infrastructure, supporting AI racks with 3-5 times current power levels. This expansion is backed by a multiyear customer agreement and aims to position TSS for long-term growth in the AI sector.

Some key takeaways from the release:

Visibility - “Our outlook for at least the next five years is for volumes to be at a similar or greater level to what we began to experience under our first, large AI-related program.”
Availability - “We expect the new facility will be fully operational in early 2025, enabling us to meet the production requirements that we anticipate under a new multiyear customer agreement.”
Non-dilutive Funding - “We plan to finance the investment with bank debt and cash on hand.”
Partner assistance - While TSSI does not say Dell Technologies Inc. (NYSE:DELL) in the following quote, the related news below should give an indication that is who they are talking about in this quote - “One of our largest customers has demonstrated a true sense of partnership in structuring an agreement supporting this capacity expansion. This is a substantial next step in positioning ourselves for continued rapid growth.”

Related News

TSSI received the 2024 Dell Technologies professional services best deployment partner award.

Via Linkedin, TSSI announced it has won the award:

CEO, Darryll Dewan, expressed our gratitude: “This recognition from Dell Technologies comes at an exciting time in our industry and reflects our team’s dedication to meeting evolving customer needs. Our commitment to Dell has helped us streamline our operations, obtain ISO certification, and expand our capacity while always seeking creative ways to collaboratively solve our clients’ challenges.”

This all but confirms all the X chatter about the DELL/TSSI relationship as well as the excellence in delivering services which many believe is why TSSI may have been involved in the the initial build-out of Elon Musk's xAI supercomputer, utilizing 100,000 Nvidia liquid-cooled H100 GPUs.

Research

Thu, 15 Aug 2024 16:09:19 GMT

Tss Inc (OOTC:TSSI) ($2.75, $60.5M market cap), announced Q2 2024 results:

Sales of $12.2 million vs $14.5 million in the prior year
Reseller revenue of $4.9 million vs $10.6 million in the prior year
System integration and facility management revenue of $7.2 million vs $3.3 million (higher margin)
EPS of $0.06 vs a EPS of $0.01 in the prior year

During Q2, we made a significant investment in our production capacity, which came online at the beginning of June,” said Darryll Dewan, CEO of TSS. “This expansion, compounded with process improvements, has significantly increased our volume capacity for rack integration and decreased the cycle time to complete each rack within our existing facility. The expansion was driven primarily by the surge in demand for server rack builds related to generative AI, as the AI market expands as a whole.”

“To be clear, the volume ramp we've been anticipating is now underway. Our OEM customers have robust pipelines and we are seeing their deals beginning to close including one significant program the was started in the second quarter and will more dramatically impact the third quarter. We believe our Q2 performance was a harbinger of results to come. Our strategic inclusion in key customer programs signals a bright future as OEM pipelines materialize.”

We highly encourage you to read the conference call transcript to hear how positive the management team sounds and the encouraging outlook they provide.

Here is a small excerpt:

“The pipeline deals of our OEM partners are large and we anticipate some variabilities as the market adapts to rapid technological changes. But make no mistake, we're witnessing the dawn of a transformative era in our industry and TSS is at the forefront. This is not just exciting, it's validating. It confirms our strategy, our investments, and more importantly, the tireless efforts of our exceptional team. I'm proud of this team and as we navigate this dynamic landscape, we're just not riding the wave of AI revolution, we're helping to propel it forward.”

—--

More TSSI highlights and breakdown:

Here is what you need to know: after years of stagnant growth in systems integration revenue, the company finally delivered strong revenue growth in this higher-margin business segment, which has primarily built and delivered racks for traditional (enterprise) data centers in a building. This revenue was up 113% to $5 million and carried gross margins of 43% for the quarter.

The company reported earnings per share of 6 cents versus Q2 2023 EPS of 1 cent . These numbers were clear quarterly records for the company’s systems integration business. Overall gross margins were 36% versus 22% last year.

The growth in the systems integration business was fueled by the company’s backlog of AI integration work beginning to materialize in June.

Overall Q2 sales came in at $12.2 million versus $14.5 million . Investors who are not familiar with TSSI will not understand that the headline number doesn’t tell the whole story.

Remember, the reseller/procurement business can be lumpy. This is basically revenue generated from its OEM customer (Dell), asking TSSI to procure hardware/software that Dell does not sell, but its customers want. It’s a low gross margin business (we estimate around 1 0% ), but strengthens TSSI relationship with OEMs. It also opens the door for TSSI to develop closer relationships with customers, so that it can possibly perform higher margin system integration services for them. One thing to keep in mind is that even though this business is a low gross margin business, it’s a high revenue business and a good deal of the gross margin flows right to the bottom line. This quarter, the segment produced income of $600,000 .

Investors who have been following TSSI understand that the near to midterm growth story and the impetus for valuation multiple expansion to occur revolves around its ability to grow its systems integration business. This is pure data center work. Up until Q2, there has been no dramatic growth in rack integration. All we had was a very lumpy revenue stream in the reseller business here and there. It’s tough to value a business on that type of revenue stream.

Now, recall that in the last few earnings calls, management has said that they have positioned the company to be able to grow the rack integration business by 10x . We are finally getting a glimpse of the type of profitability the company can experience as it grows the system integration business. In fact, on the earnings call, I asked the CEO if efficiencies will improve as the company scales. He very confidently said yes.

It’s going to be interesting to see how earnings per share will play out as the company gets closer to the 10x capacity goal. Prior to this quarter, I had estimated that EPS could reach at least $0.20 per at full capacit y. Now, I think that’s potentially conservative. Regardless, it looks like it won't be long until the company is approaching an annual EPS run-rate of $1.00 per share.

I’ll let you decide what P/E to throw on that.

There was another very important takeaway from the earnings call. Management already indicated that they’re going to need more capacity heading into 2025. So, that’s giving us a clue that our $0.20+ EPS assumption could be right around the corner and that 2025 should be a banner year for the company. To accommodate for this growth, management said that it’s eyeing up moving into a new facility to meet demand. Why is this important?

It’s been pretty much assumed that the company's current facility is “dedicated” to its “large OEM customer”, partly because the OEM has actually invested money into the facility. So, we think moving into another facility will allow TSSI to more aggressively expand outside its large OEM relationship and reduce that very large customer concentration risk.

I should add that we think that the company now meets the minimum shareholder equity requirement for an up-listing from the OTC.

Longer-term, two other sources of revenue could help add to and diversify TSSI’s growth.

Modular Data Centers

Modular data centers are built at a facility and delivered to the customer’s location, typically outside. This option is easier for a company to plan/expand than with an enclosed data center. Traditional data centers that are enclosed require more pre-planning in terms of deciding how big of a building to build to accommodate imprecise expansion needs over time. Modular centers are lighter, customizable, smaller, quicker to deploy, require less equipment, can be more energy efficient, and can be located closer to the processing “edge.”

The company spent some time on the Q2 2024 call talking about how this opportunity is starting to shape up as well they can go after

“In our modular data center business, while we've seen year-over-year improvement, we're now engaged in promising discussions with prospective customers. Our focus is on building a solid backlog to fuel revenue growth in 2025 and beyond.

We're observing increased refresh activities in existing installations, though new builds are taking longer, particularly for AI solutions due to high GPU demand and anticipated technology releases. In the long term, we see potential synergy between AI and modular form factors, especially for use cases like autonomous vehicles and other time-sensitive applications in underserved areas.”

Facilities Management

This segment provides maintenance services and hasn’t been a consistently big driver of revenue, although it has grown this year, including 44% in Q2 to $2.3 million. This is an area of the business I need to dig into because it carries gross margins of over 70% . I’m not quite sure how the revenue moves with the rest of the business, but it currently appears to be only tied to modular business which is why the company wants to step up plans to grow the modular business. So, my original assumption that this revenue would automatically go up with the system integration business was incorrect, although I would not rule out management seeking out ways to expand that business to its system integration business.

What we now know is that getting the modular business growing could be extremely additive to our quarterly EPS run-rate of $0.20+.

Here’s a breakout of the revenue in all of the companies segments outlined in the Q2 filing :

The gross margin breakout is provided in the management, discussion and analysis section of the Q2 filing.

Caveats:

Revenue, especially the reseller business will be lumpy. For example, on the Q2 call, management indicated that Q3 will come in at $50 million.
How will the company pay for purchasing /building/leasing another facility to expand in 2025?

PodClips

Wed, 24 Jul 2024 04:00:00 GMT

Mark Gomes provided an update on TSSI during a Twitter Spaces Event held by @WOLF_Financial , referencing a significant development involving Elon Musk's xAI supercomputer.

Key Points :

xAI Supercomputer Build-Out : TSSI was confirmed to have been involved in the initial build-out of Elon Musk's xAI supercomputer, utilizing 100,000 Nvidia liquid-cooled H100 GPUs.
Future Expansion : TSSI did an exceptional job, leading to Dell accelerating their utilization for future projects. Elon Musk prioritized xAI over Tesla for the next set of GPUs.
Increase in GPUs : The project is expanding from 100,000 to 450,000 GPUs in the coming months.
Earnings Projection : Gomes projects TSSI's EPS to reach $0.20 as early as Q4 of this year and expects this to persist and grow through 2025.
Management Insights : Gomes spoke to TSSI’s CEO and new CFO, who confirmed that the initial build-out is only phase one, with plans for additional facilities due to high demand.
Stock Valuation : With a projected EPS of $0.20 per quarter ($0.80 per year), Gomes suggests a significant potential increase in TSSI’s stock price, which is currently around $2.71.
Market Performance : The stock has shown a pattern of growth with occasional pullbacks, presenting potential buying opportunities.
Future Plans : While there are no current plans for TSSI to uplist to a better exchange, Gomes mentioned Kraken (KRKNF) is making moves to uplist to NASDAQ.

Mark emphasized the importance of monitoring the next earnings call for further insights and confirmations.

TSSI Pitch Update by Mark Gomes (@PipelineDataLLC)

Research

Tue, 21 May 2024 18:14:26 GMT

Tss Inc (OOTC:TSSI) ($1.48, $32.6M market cap) - Interesting Reuters article yesterday regarding Dell’s latest line of servers which are compatible with Nvidia’s new chips.

“Arthur Lewis, president of the company's infrastructure solutions group, told Reuters in an interview that Dell's Nvidia-based servers were the fastest ramping product in its history.”

As we mentioned several times, DELL is TSSI’s largest customer. This development only seems to strengthen the bullish comments from the recent conference calls that talk about the company finally being in a position to scale with its “largest OEM” in the AI data center space.

In related news, TSSI’s CFO is resigning. We assume this move was made in order to potentially find a replacement that is more suited to handle scaling the business now that the company is preparing for a new chapter in its growth story.

Research

Wed, 15 May 2024 17:52:20 GMT

Tss Inc (OOTC:TSSI) ($1.40, $32.5M market cap), announced Q1 2024 results:

Sales of $15.9 million vs $6.6 million in the prior year
Reseller revenue of $11.6 million vs $1.7 million in the prior year
EPS of $0.00 vs a loss of $0.04 in the prior year

“TSS is prepared to benefit from the growth in data center infrastructure spending that we are witnessing. New service offerings have been created that are extensions of our core capabilities. As a result of our operational improvements and investments in growth and given the state of this vibrant technology environment, we will continue to drive improved financial results in 2024 and beyond.”

It’s certainly unclear what to expect today with TSSI’s price movement after the stock shot up 50% in the last 10 minutes of trading yesterday. Regardless, on the revenue side, this is another strong quarter for the company.

A potential key takeaway is that the reseller/procurement revenue seems to be stabilizing at higher levels, as opposed to sporadic in certain quarters.

Obviously, we would like to see the company put up bigger EPS numbers. However, the TSSI has been setting expectations that the second half of 2024 is when business should start to pick up in subdued growth in higher margin segments.

Furthermore, the conference call was very bullish. Quotes from the call convey the company’s optimism:

“We are seeing increased demand for our rack integration services, driven by the seemingly limitless demand for generative AI computing solutions. Customer engagement, along with our OEM partner is at a scale we have not previously experienced.”

“We will continue to make improvements to the skilled labor force that is required to support our growth. These investments will provide benefits in the second-half of '24 and carry us into 2025.”

“...we've got a plan, a multi-year plan to continue to execute, to do more with our existing customer and to grow outside of our existing customer. Both can happen in concert. I'd say we only have just begun”

TSSI is a data center facilities and technology services company.

Research

Fri, 19 Apr 2024 13:50:18 GMT

New verbiage provides fresh insights into company's goals

Tss Inc (OOTC:TSSI) ($0.76, $16.5M market cap) shares were hitting new 52 week highs yesterday. We wanted to highlight some takeaways from our read-through of the associated 10-K filing. Most importantly, areas that contained new verbiage not found in prior year 10-Ks.

First on strategy, this year’s 10- had a whole new section:

“...

Our goal is to profitably grow our existing businesses and to identify expanded service offerings to further our value add to our customers as we become a recognized leader in the life-cycle management of complex IT solutions. At a high level, the strategy we intend to use to accomplish this goal include:

Expand our ability to drive demand with direct and selling resources and to co-sell with our customers and partners. We believe we can expand our services portfolio penetration within these new, as well as existing customers.

Maintain intense customer focus: We intend to strengthen and deepen our customer relationships. We believe that continued focus on cost-effective systems integration, deployment, and ongoing life-cycle management is important, and will help to increase our net sales, operating performance, and market share. To accomplish this, we intend to continue our close collaboration with our OEM partner to assist them in identifying demand for our services and design new services that allow them to meet new customer requirements and leverage innovations and technical developments. Additionally, we will continue to expand our sales force and field service technicians and add additional technical expertise.

Continue to deliver operational excellence and cost competitiveness and enhance our manufacturing capability. A key element of our success is our ability to leverage and optimize our systems integration facility. We will continue to invest in our integration processes and technology to achieve additional cost efficiencies and enhance our existing capabilities. We are expanding to a hybrid integration model which allows us to generate revenues from within our facility and externally at customer locations. This allows more flexibility to support our customers’ requirements while continuing to enhance our cost-effectiveness.

Pursue selective strategic partnerships and acquisitions: As part of our strategy to expand our service offerings and to maximize our market opportunities, we may partner with or acquire technologies, services, or product lines to accelerate our growth and to enhance our portfolio.

…”

And then even more notably, management provided its outlook on profitability moving forward, stating the following:

“Management believes that we will be able to generate sufficient cash flows and liquidity as described above, as we have been able to grow our revenues and order backlog and seen an improvement in supply chain constraints. We believe that we will continue to be profitable on a quarterly and annual basis in 2024 and beyond.”

Last years 10-K only provided profitability on an annual basis:

“Management believes that we will be able to generate sufficient cash flows and liquidity as described above, as we still have a significant backlog of projects which have been impacted due to COVID-19 and the related supply chain constraints. We have invested in supporting new IT technologies and received new orders that should drive an increase in our integration business going forward and have also seen new MDC customers emerge during 2022 These factors among others allow us to believe that we will be profitable in 2023.”

Inconsistency in profitability has been a big issue over the years, standing in the way of valuation multiples being able to expand. Now, the company has to meet its stated goal.

Research

Mon, 01 Apr 2024 16:49:57 GMT

Tss Inc (OOTC:TSSI) ($0.63, $14.4M market cap) announced Q4 2023 results:

Q4 sales of $24.4 million vs $10.9 million in the prior year
Reseller revenue of $20.8 million vs $7.6 million in the prior year
EPS of $0.02 vs a loss of $0.05 in the prior year
Full year sales of $54.4 million vs $30.6 million in the prior year
Full year EPS of $0.00 vs $0.00 in the prior year

“2023 was a transformational year for TSS. We continued to produce strong financial results during the fourth quarter and for fiscal year 2023. We grew revenues 78% in 2023 and increased our operating income by 91% compared to 2022, while making operational and go-to-market investments in the business. Operationally, we have reorganized our integration business, investing in both the team and technology to be able to credibly demonstrate to our largest OEM partners that we can scale to serve growing demand. We selectively optimized the personnel in our integration facility, we added a Chief People Officer and direct sales personnel, and we kicked off a relationship with a PR firm to improve our branding, messaging, and web experience. New service offerings have been identified that are extensions of our core capabilities. As a result of our operational improvements and investments in growth and this vibrant technology environment, we will continue to drive improved financial results in 2024 and beyond.”

“As generative AI, cybersecurity and other advanced computing technologies drive data center demand, TSS is uniquely positioned to capitalize on these trends with our leading-edge system integration and deployment capabilities.” Dewan continued, “The data center market is evolving. Central data centers continue to struggle to meet demand, and new models are emerging, such as edge computing. The flexibility and speed of our integration business, paired with deployment capabilities of our modular business, make for a unique “one stop shop” for our OEM partners who want to offer customized solutions and white glove service. TSS is in a great position to benefit from this next phase of data center expansion.”

We also encourage you to read the conference call transcript which was extremely bullish and included several questions from our cofounder, Maj Soueidan, to help understand more about the datacenter industry and the company’s role in it.

We did want to highlight one excerpt from the call here:

“We have modeled plans to scale our data center rack integration business up to 10x over our 2023 rack integration results, and we are positioned to implement them in 60 days. We expect to benefit from this growth beginning in the second half of this year, 2024.”

This is extremely important because the company's past problem, under previous management, had been its inability to scale its core integration business. This is part of the business where the company builds datacenter racks at its manufacturing facility in Round Rock, Texas before shipping out the racks to its customers.

The inability to scale is likely the reason its main OEM customer, who we think is Dell Technologies Inc. (NYSE:DELL), was unwilling to give TSSI more business in the past.

Now that new management has positioned the business to be able to scale, we think the integration business has a really good chance of growing rapidly and gaining more trust from its biggest customer.

In the end, the growth in the integration business, new lines of integration business and customer diversification will allow the stock to command higher valuation multiples. We think the company is on its way to meeting all three of these requirements.

It was also great to see the CEO not shy away from talking about TSSI’s role in Ai.

As far as valuation goes, it’s still hard to put a definitive answer to that until we see some momentum on the things we’ve outlined. However, we think the stock can be worth multiples of its current price as management starts checking off these boxes.

To see all of our research updates that we’ve been writing about on TSSI you can go here, and you can reference several recent pod clips here, to help you understand the growth and risk of risk associated with the story.

TSSI is a datacenter services company that integrates high-performance computing infrastructure and software.

Research

Wed, 27 Mar 2024 17:04:08 GMT

A lot has changed since we published our fiirst Octover 2017 article on TSSI, so we thought it would be a good idea to give you an update on some of the reasons we are bullish on the opportunities that lie ahead for the company:

THe new CEO has used 2023 as a restructuring point. This mainly consisted of a few items.

Revamping the manufacturing facility to scale and handle larger workloads.
Reducing the time it takes for the company to complete a rack integration.
Putting together a direct sales strategy, as opposed to just relying on its OEM partners to connect TSSI to end customers.
Make sure TSSI is viewed as an expert in the industry by writing white papers on data centers related to AI.
Clearing out all inventory that was stacking up because of past management’s inability to scale and deploy racks in a timely manner.
Making personnel changes at the managerial level.
Prices for some of the services are increasing (prices have not been raised in years).

While prior management did not do a great job of pushing the modular data center business, which has higher margins, the new CEO seems hyper-focused on growing that piece of the business. He’s partly doing this by educating OEM customer sales reps, who engage with companies that need to build or expand their data centers, that modular is a faster and more efficient option to expand data centers.

It appears that DELL is aggressively starting to push modular data solutions. This is great for TSSI since DELL is likely their biggest customer, which is a bit of info that most investors are probably not aware of.

TSSI was awarded Dell Technologies' First Choice Partner Award for 2023.

The CEO's background involves working at DELL, so that should help solidify TSSI’s relationship with them.

While the data center market is expected to grow at about 10% over the next few years, the The modular data center market is expected to reach US$ 135 billion by 2034, exhibiting a CAGR of 18.3%.

Ok, here we unfortunately go… AI is transforming the data center industry, as companies are scrambling to expand their data center needs. We feel that TSSI’s modular solution is an excellent option to capitalize on this trend if it can quickly deploy racks. Keep in mind that NVDA and DELL are working closely together to develop data center solutions.

So far, TSSI has been largely ignored as a potential beneficiary of bullish AI data center trends. But we expect investors to start making the connection soon. TSSI Is sending subtle hints to the market that it understands how AI is impacting the demand for types of data centers and related services that cater to AI and the unique challenges that AI poses for data centers. For example, on March 12, 2024, the company issued a comprehensive paper on this subject and press released it. Furthermore, the TSSI description in the last two press releases is clearly different from prior releases and clearly highlights that it is targeting the AI opportunity.

TSSI hits one of our favorite multi-bagger markers: Gaining more revenue for new customers. From the Q3 conference call: We will soon announce a new set of service capabilities, extensions of what we do today that our existing customers can utilize, and that it also opened up new markets for our current customer base.

On this subject, we are really curious to learn more about the new service TSSI just press released about helping companies that are relocating their data centers. This seems to be a service that will be offered outside the DELL relationship and could help the company diversify its revenue. We see a big opportunity for the TSSI to offer services to companies using colocation facilities for their data center needs that could use TSSI for equipment, integration, and maintenance services.

The third-quarter conference call included some information arbitrage. The company mentioned that revenue growth could be as high as 60% for 2023 the full year, which implies that 2023 revenue will come in at $49 million compared to $30.6 million in 2022 and that fourth quarter 2023 revenue will be $19.9 million vs.$10.9 million in 2022.

Caveats:

Beware, there are serious ones that exist. That is why the company sells at such a low P/S of 0.26x. However, given the data center and AI theme, we think it would be criminal not add TSSI to an equally weighted index, where underperformance won’t kill the performance.
The heavy customer concentration with DELL is definitely an issue and could materially constrain valuation. However, TSSI is servicing DELL’s customers, so in reality, one could assume the revenue is diversified and stable.
We believe TSSI’s facility heavily caters to whatever DELL wants (and their scaling needs). This could make it harder for the company to deal with DELL competitors or other types of OEMs in the data center space.
TSSI Still has to prove it can materially expand profits.
TSSI has not fulfilled customer diversification promises.
Our biggest concern is the large volatility in quarterly revenue, margins, and EPS over the years. Although we like the new CEO, it remains to be seen if he can fix these issues, especially with DELL representing the majority of revenue. Regardless, we still like the bet where the upside could be huge.

Research Tasks

What are the company’s options to grow beyond DELL?
Has the company gained trust in DELL so that DELL will send them more business?
What are other areas of the data center business that the company could enter?
Why not just sell the company to DELL or another integration company? The DELL relationship seems like a very interesting bargaining chip to market.
Why doesn't TSSI engage with IT resellers or channel partners to help you sell services?
What can the company do to materially increase the recurring service and maintenance revenue?
Learn more about the direct selling strategy that the new CEO has put in place.
Conduct a site visit.
Any plans to build out another facility to service non-DELL customers?

You can see our original article on TSSI from 2017 here.

PodClips

Mon, 25 Mar 2024 04:00:00 GMT

PodClip On TSSI Data Center Application Update

As a data center facilities and technology services company Tss Inc (OOTC:TSSI) continued to catch some bids to go on and hit a new 52-wk high last week, Maj wanted to convey some deeper thoughts on the company’s involvement in data centers, especially now that it seems the cat is out of the bag on how they are positioning themselves to be viewed going forward.

GeoTeam · 3/25/2024 TSS Inc. (TSSI) Update

To offer a review on TSSI's capabilites, it is a company specializing in services for building data centers, particularly through partnerships with OEMs like Dell, which constitutes 70-90% of their business. TSSI's role involves integrating equipment into racks for data centers, which can be traditional, enterprise-owned, colocation (retail or wholesale), or hyperscale data centers for large companies like Google and Netflix. The company also ventures into modular data centers, offering more energy-efficient and easier-to-plan solutions. Besides, TSSI provides maintenance, service contracts, and acts as a reseller for OEMs, offering additional services and equipment that OEMs like Dell may not provide. This reseller segment has become a complicated but significant part of their revenue stream, highlighting TSSI's ability to capture more revenue for its OEM partners through extra integration services.

TSS Inc's (TSSI) revenue flow on the reseller side of the business, focusing on their partnership with Dell. When Dell receives a special request from a customer for services or equipment it cannot provide, it turns to TSSI for fulfillment. TSSI then invoices Dell for the cost of the equipment and services plus a small margin. Due to the delay in payment from Dell, often up to 90 days, TSSI uses a factoring company to sell the receivables at a discount, allowing TSSI to receive cash immediately to purchase equipment and perform services. This process results in an interest expense on the income statement, which is actually a financing fee for the factoring arrangement, not traditional debt interest. This clarification highlights the use of factoring agreements in TSSI's financial operations to maintain cash flow and service delivery.

Research

Tue, 12 Mar 2024 14:34:01 GMT

Tss Inc (OOTC:TSSI) ($0.44, $9.7M market cap) - A few weeks ago we highlighted that Dell Technologies Inc. (NYSE:DELL) was up strongly on the heels of excellent Q4 results which were fueled by demand in its AI servers.

As we have mentioned in prior notes, although the company has not disclosed this information, we believe DELL is TSSI’s biggest customer, possibly representing up to 90% of its revenue.

Today, TSSI issued a release sharing the trends for data center demand which is driven by the transformative explosion in AI and machine learning capacity and data compliance.

“As the need for compute power and infrastructure continues to grow exponentially, particularly driven by AI and ML, the data center market and related technologies are having a significant impact on how people store, use, and protect data across virtually every industry,” said Darryll Dewan, CEO of TSS. “While these trends and the industry have the potential to change rapidly, understanding what is happening now will better prepare people for the future and pave the way for advancements that will drive and support the infrastructure needs of society.”

Our modern digital world is creating a level of demand for data center technology, infrastructure, and talent that has never been seen before — putting immense pressure on suppliers, vendors, and developers to deliver the components and capacity more and more rapidly,” added Dewan. “Companies in the sector that can deliver more rapid time-to-value and the expertise to simplify complexity will be the winners in 2024.”

While this release has little relevance in terms of what TSSI’s involvement might be in the growth in AI data centers, it's nice to see that the company is commenting on related trends. This could be a hint that they are aggressively exploring ways to participate in these growth trends.

The press release also came with reference to the PDF report, which at the bottom, describes the company’s ‘Total Site Solutions’,

Essentially, the report can be construed as indicating that the company is positioning itself as a one-stop solution for the deployment and maintenance of high-performance computing infrastructure. This infrastructure is crucial for companies involved in data-intensive fields like artificial intelligence, big data analytics, and cloud computing.

TSS Inc.'s industry report not only primes stakeholders for future developments in their data center services but also acts as a strategic “advertisement” to attract a wider range of business clients. This can be particularly good for the company, since it lacks customer diversification.

Research

Fri, 01 Mar 2024 15:20:19 GMT

Tss Inc (OOTC:TSSI) ($0.44, $9.7M market cap) - We feel it is worth noting that DELL is up strong on the heels of excellent Q4 2023 results which were fueled by demand in its AI servers.

As we have mentioned in prior notes, although the company has not disclosed this information, we believe Dell Technologies Inc. (NYSE:DELL) is its biggest customer, possibly representing up to 90% of its revenue.

From the DELL release:

“Our strong AI-optimized server momentum continues, with orders increasing nearly 40% sequentially and backlog nearly doubling, exiting our fiscal year at $2.9 billion," said Jeff Clarke, vice chairman and chief operating officer, Dell Technologies. "We've just started to touch the AI opportunities ahead of us, and we believe Dell is uniquely positioned with our broad portfolio to help customers build GenAI solutions that meet performance, cost and security requirements."

At some point DELL’s growth in AI servers/initiatives could spill over to TSSI if it can prove that it can build and deploy modular data centers quickly. To be clear, we still need more information on how much of Dell server demand is related to modular data centers.

PodClips

Mon, 26 Feb 2024 17:08:45 GMT

With AI's growing popularity, Maj explores how data centers, including those offered by TSSI, could benefit from the AI boom. He notes TSSI's main customer is likely Dell and emphasizes the company's strength in quickly deploying modular data centers. While TSSI doesn't produce AI-specific hardware, its rapid deployment capability is crucial for supporting AI-driven data center growth. Maj plans to consult industry experts for deeper insights and believes TSSI could gain recognition in the AI data center space.

Research

Tue, 14 Nov 2023 16:34:33 GMT

Tss Inc (OOTC:TSSI) ($0.36, $87.8M market cap), a data center facilities and technology services company announced Q3 2023 results:

Sales of $8.9 million vs $8.1 million in the prior year
Reseller revenue of $5.4 million vs $3.1 million in the prior year
EPS of $0.01 vs EPS of $0.03 in the prior year

“We have balanced achieving positive results with funding strategic investments in our sales and operations staff that will benefit us and drive growth in future periods,” added Dewan. “Looking forward, we are in the process of expanding our direct selling capabilities and improving communication to the market and our customers so that we can capture more of the transformation and growth in the IT market that is being driven by AI, cyber-security, data analytics, and other emerging technologies. We are also looking at expanding the range of services we provide to the IT market and believe both initiatives will drive continued revenue growth in 2023 and into next year. We anticipate finishing the year strongly as we build a pipeline for additional growth next year.”

Q4 Guidance InfoArb on Conference Call:

“We expect to close this year with strong growth in revenue, net profit and EBITDA compared to 2022. Our Q4 revenue opportunities could result in revenue growth as high as 60% for 2023, the full year.”

The guidance implies that Q4 revenues will be around $18 to $19 million vs $10.9 in the prior year. The 10-Q states the quarter will be profitable. The conference call also states momentum will carry over into Q1 2024, and plans to increase investor relation efforts.

Research

Wed, 30 Aug 2023 04:00:00 GMT

Good morning, I just wanted to let you know that we are still going down the path of exploring Tss Inc (OOTC:TSSI)'s possible role as hyperscale AI data centers begin to dominate the capital spend for new versus traditional data centers. We do think that the possibility for TSSI to participate in some capacity exists. A key question becomes, “to what scale?”

Here are some of the dots connecting TSSI to AI data center participation:

TSSI’s Primary business is servicing and building modular data centers.
Although the company has not disclosed this information, we believe Dell Technologies Inc. (NYSE:Dell) is its biggest customer, making up 90% of revenue.
Dell makes servers and other equipment that go into data centers.
AI servers/computers require certain chips (stronger processing requirements) that Nvidia Corporation (NASDAQ:NVDA) makes.
As explained in an August 25, 2023 PodClip on this topic, Dell and Nvidia entered into “a joint initiative to make it easier for businesses to build and use generative AI models on premises to quickly and securely deliver better customer service, market intelligence, enterprise search, and a range of other capabilities.”

“Dell PowerEdge servers, such as the PowerEdge XE9680 and PowerEdge R760xa, are optimized to deliver performance for generative AI training and AI inferencing. The combination of Dell servers with NVIDIA® H100 Tensor Core GPUs and NVIDIA Networkingform the infrastructure backbone for these workloads. Customers can pair this infrastructure with resilient and scalable unstructured data storage, including Dell PowerScale and Dell ECS Enterprise Object Storage.

Dell and TSSI are both located in Round Rock, Texas.

Please be aware that there are certain caveats we’re exploring that I’ll share with you once we’ve gone down the due diligence path a little more, which includes polishing up my conversations with some experts and investors familiar with the AI space, such as a GeoInvesting Subscriber and tech expert Mark Gomes, and software expert, Ed Gilmore. I suggest that you follow them on Twitter: @MoneyMarkGomes, and @elg, respectively.

My hope is to host a Skull Session Expert Insight live event with Mark and Ed, along with other experts.

One caveat we should be aware of is that even though TSSI mentioned that it is working with its OEM “partner” (Dell) on AI initiatives in its second quarter press release and related conference call, there was some verbiage in the transcript talking about how the OEM may have had some concerns about TSSI’s ability to scale. However, it does appear that the company has addressed these issues. But it is something to be aware of.

Another perspective shared with us covers a potential bigger issue in that Nvidia Corporation (NASDAQ:NVDA) “AI Chips” are in high demand and tight supply. So there’s only so much to go around. How is Nvidia going to allocate that supply?

PodClips

Fri, 25 Aug 2023 15:13:18 GMT

I just wanted to quickly convey a PodClip to you that posits TSSI’s potential roles in AI through its data center solutions, in light of an industry wide increased focus on the role of AI and data centers from companies like $NVDA and $DELL. Maj

Research

Tue, 15 Aug 2023 18:48:41 GMT

Tss Inc (OOTC:TSSI) ($0.39, $8.4M market cap), a data center facilities and technology services company announced Q2 2023 results:

Sales of $14.5 million vs $6.4 million in the prior year
Reseller revenue of $10.6 million vs $0.8 million in the prior year
EPS of $0.01 vs EPS of $0.04 in the prior year

“We had a very successful second quarter with strong financial results benefitting from progress made aligning our cost structure, strengthening our management team, and positioning TSS for future growth. Several large procurement transactions that slipped from our first quarter closed during the second quarter and helped fuel revenue and profits from our procurement and reseller business,” said Darryll E. Dewan, President and CEO of TSS. “Looking forward,” continued Dewan, “we plan to capitalize on the growing compute and storage requirements as a result of the accelerating digital transformation driven by AI, cyber-security, data analytics, and other emerging technologies. We expect this market activity will fuel long-term demand for the integration services we provide. We are actively building new demand-generation plans to take advantage of projected market growth, including aligning ourselves with OEM customers earlier in the sales process to ensure we benefit from new opportunities in emerging technologies and markets. In the near-term we are optimistic about our business prospects and outlook for the latter half of 2023.”

Conference call highlights: (quotes from transcript)

"We announced in our last earnings call that we would focus in three key areas, and we're glad to report solid progress in each: number one, improve our systems integration processes and business model; number two, pursue and place talent to prepare for and accelerate our growth; and number three, to develop a strategy capitalized on emerging markets.

We anticipate that our third-quarter results will reflect the continued increase in revenues compared to 2022, and that we will maintain our profitability.

There is a growing expectation for a macro economic slowdown, and our main customers' voicing their expectation for a temporary slowdown in demand. We have already taken action and addressed this in Q3.

We anticipate that our level of system integration services, particularly rack integration, will slow in the third and the fourth quarter of this year before rebounding next year based on forecasts from our customers. As a result, in August, we've adjusted our staffing levels and integration business to reflect this decreased demand, but to ensure we effectively manage our labor costs, which is our largest operating cost, the integration unit.

I commented earlier that we anticipate some decrease in demand for our integration business over the next few quarters. And we still expect our revenues will grow in 2023 versus 2022, and we project being profitable with strong EBITDA comparable to 2022. Our investments and actions are helping us in 2023 and paving the way for growth."

Research

Tue, 16 May 2023 14:43:04 GMT

Tss Inc (OOTC:TSSI) ($0.29, $6.4M market cap), a data center facilities and technology services company announced Q1 2023 results:

Sales of $6.6 million vs $5.2 million in the prior year
Reseller revenue of $1.7 million vs $1.7 million in the prior year
Net loss of $0.04 vs a net loss of $0.02 in the prior year
Adjusted net loss for the quarter, taking into account severance costs, was $0.03.

“We made tremendous progress during the first quarter on tactical and strategic priorities to align our cost structure and operations, strengthen our management team and position TSS for future growth. Our first quarter financial results were heavily impacted by two large reseller transactions we expected to close in the first quarter and now expect to close in the second quarter,” said Darryll E. Dewan, President and CEO of TSS. “Operationally, during the quarter we raised prices and took action to remediate high labor costs in our systems integration business, positioning it for significantly improved second quarter profitability. Our leadership team has been strengthened with key additions in both operations and business development. We expect to return to bottom line profitability in the second quarter and remain optimistic our 2023 results will show growth in revenue and adjusted EBITDA compared to 2022. Our balance sheet remains strong with sufficient working capital liquidity.”

The company has taken steps to be able to better monitor customer demand, which enables the company to operate more cost effectively. Quote from conference call:

“Let’s begin with operational efficiency in our systems integration business. We are balancing our labor force, and that’s a really important thing to do because between the direct intent to lower our overall labor costs, we have improved the process flow in our assembly lines to gain velocity and provide for scale. Our confidence to do this was based on the strength of our customer relationships and the visibility that we are getting into upcoming product projects. We now get a better demand signal from our key customer, which helps us a lot.”

Furthermore, the company has cut expenses:

“During Q1, we made significant progress to lower the run rate of our labor costs and to improve overall efficiency in our systems integration business, in particular. We’ve reduced our total headcount, including contract labor in this business by 25% since December 31, ‘22.”

Research

Tue, 04 Apr 2023 19:07:42 GMT

Tss Inc (OOTC:TSSI) ($0.50, $11.0M market cap), a data center facilities and technology services company announced Q4 2022 results which we highlighted yesterday via the 10-K. The company issued its press release and held the related conference call.

Our takeaways:

The company invested in technology to increase efficiency. However the conference call did not get into all the specifics regarding the new technologies and what part of the business they will impact.
Processes have been put in place to get better indication of order flow from its customers so that it can manage inventory more efficiently.
Appears they have enacted price increases to their customers to offset increased labor and material costs.
First quarter will continue to feel the impact of the increased costs associated with these actions and likely not experience the full positive impact from price increases.
Benefits of these actions should be fully felt in Q2 2023 and beyond.
New CEO is highly focused on reducing customer concentration and has a goal of 10% of revenues coming from new sources in 2023.
New CEO is putting a large emphasis on profitable growth.

Q4 Conference Call Commentary:

“I will have more to say on this later, but suffice it to say, now we're working out these issues. We expect this inflated level of cost to continue into Q1 of 2023. The labor markets remain very tight, cutting costs now we put our execution at risk, which is not the prudent thing to do. We are experiencing higher costs but we are taking steps to remediate them and to not persist materially past Q1. We do expect to continue to be adjusted EBITDA positive going forward. There were many positive trends in 2022 that point to a strong base of business for the future. Our modular data center or MDC deployments increased by $3.9 million or 262% during 2022 versus prior year”

“One of our top 5 company goals is to obtain 10% of our revenue in 2023 from new logos to the company. These hires will help us reach our goals. We have begun the strategic planning process to identify ways to add additional value to our business. This translates to doing things that relate to the reasons why I remain very excited about the company.”

Caveat on investor sentiment:

Comments from the press release and conference call are a bit unclear on if management’s anticipation of profitable growth is based on only EBITDA or also net income. However, as we mentioned in yesterday’s morning email, we want to emphasize that the 10-K specifically mentions 2023 will be profitable.

Research

Mon, 03 Apr 2023 14:36:29 GMT

Tss Inc (OOTC:TSSI) ($0.52, $11.0M market cap), a data center facilities and technology services company, announced Q4 2022 results: (via 10-k only)

Sales of $10.9 million vs $14.6 million in the prior year
Non-GAAP loss of $0.03 vs loss of $0.01
Full year sales of $30.6 million vs $27.4 million in the prior year
Non-GAAP EPS of $0.02 vs loss of $0.07 in the prior year

Our takeaways:

Q4 Sales exceeded guidance set in Q2
EPS came in below guidance partly due to what appears to be a $600,000 Severance payment to the ex-CEO. New investments have also been made into new IT technologies since the appointment of a new CEO in Q3. So, we want to see if that played any role in the EPS guidance miss, and if these costs will be one-time in nature.
We are awaiting the press release and conference call to find out if management will expand on the following comments buried in the 10-K:

“TSSI:Management believes that we will be able to generate sufficient cash flows and liquidity as described above, as we still have a significant backlog of projects which have been impacted due to

COVID-19 and the related supply chain constraints. We have invested in supporting new IT technologies and received new orders that should drive an increase in our integration business going forward and have also seen new MDC customers emerge during 2022 These factors among others allow us to believe that we will be profitable in 2023.

We anticipate generating further cash flows from operations and, having repaid all of the Company’s long-term debt during 2022 from existing sources, we now have no long-term debt outstanding apart from lease obligations.”

It is unclear how investors will view the “profitable in 2023” without specific guidance

Research

Wed, 16 Nov 2022 05:00:00 GMT

Tss Inc (OOTC:TSSI) ($0.58, $11.3M market cap), a data center facilities and technology services company. Yesterday, the company reported its Q3 2022 results which we highlighted here. Unlike many past conference calls, including the one for Q2 2022, the Q3 2022 conference call did not offer any InfoArb or guidance. However, while reading through the 10-Q, we noticed a bit of InfoArb on the company’s outlook:

“Management believes that we will be able to generate sufficient cash flows and liquidity as described above, as we have a significant backlog of projects which have been delayed due to COVID-19 and the related supply chain constraints. During the second and third quarters of 2022 we have been able to achieve operating and net profits as we saw improvements in delivery of products and components that allowed us to fulfill a large portion of our existing backlog. We anticipate that this will continue into the next quarter based on anticipated delivery of products and components as indicated by suppliers and vendors and that we will again be profitable in the fourth quarter and for the year ending December 31, 2022 and that we will be profitable in 2023.”

While they did not offer specific guidance as they did in Q2 where management stated they expect to do $0.08 to $0.10 for fiscal 2022, it is nice to see that they expect to remain profitable in Q4 2022 and in 2023. It should be noted that the omission of specific guidance could be related to the CEO change and time may be required for him to get up to speed with the business.

Research

Tue, 15 Nov 2022 19:09:10 GMT

Tss Inc (OOTC:TSSI) ($0.65, $12.7M market cap), a data center facilities and technology services company announced Q3 2022 results:

Sales of $8.1 million vs $4.6 million in the prior year
EPS of $0.03 vs EPS of $0.01

“TSS announced the appointment of Darryll Dewan as President and CEO. Dewan commented, “I am looking forward to furthering my understanding of our business. It is clear the third quarter results reflect growth across all of our business units and strong net income and adjusted EBITDA. We expect to see strong demand continue into the fourth quarter. I will communicate further with our investors as I gain greater insight into our long-term strategy and investments we may consider in our business to maintain and expand our leadership in the data center infrastructure and IT services sectors.”

The leadership change came as a surprise to us. We will reach out to the new CEO to see why the transition occurred and what his vision for growth is moving forward. We anticipate that the sudden change in leadership will be met with some pessimism by the market.

The valuation is a little tricky because of the customer concentration with Dell. This is compounded by the fact that TSSI hasn’t been able to reduce this concentration over the last several years. So, we’re guessing that they wanted to bring in new leadership to get more aggressive on that front. However, it could be argued that Darryll’s history with Dell could strengthen that relationship and make it less risky. Shares are currently selling at a trailing P/E 15.

Maj recently conducted his third site visit to the facility in Austin Texas. The sense he got was that Dell is getting even more intertwined/sticky.

Research

Tue, 16 Aug 2022 04:00:00 GMT

Tss Inc (OOTC:TSSI) ($0.42, $10.1M market cap), a data center facilities and technology services company announced Q2 2022 results:

Sales of $6.4 million vs $$3.1 million in the prior year
EPS of $0.04 vs a net loss of $0.03

“We saw very good growth across all of our business units in our second quarter and therefore delivered positive net income and adjusted EBITDA.” said Anthony Angelini, President and Chief Executive Officer of TSS. “As the supply chain situation continued to improve, we were able to deliver against some of our backlog. It is important to note our backlog remains strong and new orders continue to flow. We anticipate this trend continuing throughout our third quarter and the balance of the year. Therefore, we expect improved financial results for the remainder of 2022 as demand for our services remains very strong.”

The conference call was very bullish, below are some excerpts from the call which includes EPS guidance:

On Q3 outlook:

“And based on the backlog, we expect our third quarter facilities revenue to be strong again, which will help drive strong third quarter 2022 operating results.”

Balance sheet improvements:

“In July, we repaid in full all of the outstanding balances of our notes payable to MHW Capital using our existing funds on hand to repay this debt. We now have no long-term debt, excluding our operating lease liabilities outstanding, and we have a clean balance sheet.”

New orders and backlog:

“The good news is that the uptick we expected began late in the second quarter and has very good momentum into our current third quarter. While we were able to deliver on some of our backlog in the second quarter, our expectations is that our backlog, which is slightly lower, will remain strong at high levels throughout the year. We continue to receive new orders while we deliver on existing orders. Fundamentally, we are seeing higher demand overall and believe our momentum in our core business will continue to improve, while potential deal flow in our reseller business is ticking up as well. We anticipate that we will deliver our highest EPS and adjusted EBITDA for a full year in over a decade. This is net of any one-time event.”

Full year outlook:

“On our May call, we said that our outlook for the year was revenue in the mid- to high $20 million range and adjusted EBITDA north of $2 million. As we stand today, we believe the revenue to be in the higher level of that guidance, if not potentially above that level, depending on the type of reseller deals at close, albeit gross or net deals, and we believe we can achieve adjusted EBITDA of near $3 million or higher with EPS closing closer to $0.08 to $0.10 for the year.”

Research

Tue, 16 Nov 2021 18:02:43 GMT

Tss Inc (OOTC:TSSI) ($0.99, $7.9M market cap), a data center facilities and technology services company announced Q3 2021 results:

Sales of $4.6 million vs $20.8 million in the prior year
Reseller revenues of $0.7 million vs $15.8 million in the prior year
EPS of $0.01 vs a EPS of $0.05

“We are pleased with our results in the third quarter despite supply chain challenges that have affected the timing of delivery for a number of projects.” said Anthony Angelini, President and Chief Executive Officer of TSS. “While some of our projects were delayed, we have a large backlog and expect that through the fourth quarter and into 2022, our results will continue to improve sequentially.”

Conference call highlights:

“So the change in reseller revenues drove the majority of the decrease in our revenue compared to the third quarter of 2020. Our fourth quarter will show an increase in reseller revenues compared to Q3 and could top $10 million during the fourth quarter based on orders received and our pipeline of potential transactions.

We expect to be adjusted EBITDA positive in the fourth quarter. Our backlog of projects continues to grow due to these supply chain issues, and we expect the first half of 2022 to show stronger financial results as we are able to complete many of these projects. To put some perspective around this, we have deferred over 5 million of modular data center deployments into 2022 as we await delivery of critical components. This will affect us in 2021, but they will occur in 2022.”

Guidance:

“We still believe we will end the year with revenue in the mid- to high $20 million range. Our mix will make it difficult to hit the $1 million of adjusted EBITDA for the year as some of the higher-margin projects have shifted into early 2022 due to the supply chain issues we previously mentioned.”

The company gave similar guidance in Q2, but it seems the mix will be of lower margin reseller revenues, so they will likely miss EBITDA guidance. However, a positive takeaway would be if they hadn't deferred the nearly $5 million in high margin data center revenue into 2022, they would have beat their initial guidance for 2021. It seems the demand is there, but supply chain issues continue to impact the company. We believe shares could remain weak until the company resolves supply chain issues.

Research

Tue, 17 Aug 2021 16:08:11 GMT

Tss Inc (OOTC:TSSI) ($0.41, $7.9M market cap), a data center facilities and technology services company announced Q2 2021 results:

Sales of $3.1 million vs $6.5 million in the prior year
Reseller revenues of $0.1 million vs $3.0 million in the prior year
Net loss of $0.03 vs a net loss of $0.06

“Our first half of the year was impacted by a lower level of reseller business and supply chain shortages that have occurred throughout the industry. We are seeing a significant improvement in pipeline and orders across all of our business streams for the back half of the year and anticipate a significant improvement in our operating results as we deliver a large degree of upside in the third and fourth quarters.” said Anthony Angelini, President and Chief Executive Officer of TSS. “Our current projections show us returning to profitability in the second half of the year. The momentum of our business is strong, and we believe that our positioning for growth over the next several quarters will catapult us significantly as we roll into 2022.”

Some key Information Arbitrage takeaways from the conference call: (all quotes from cc)

There are a number of trends that we believe will begin to improve our revenue opportunities, primarily 5G and the related business with the telecom industry.
And as we work through these changes,we anticipate that our level of integration services will increase during the third quarter.
We anticipate higher quarterly revenues from the facility business in the remainder of 2021 and as our customers begin to replace older deployed modular units and continue to refresh and upgrade their MDC base.
We are seeing improvement toward the end of the year and rolling into 2022.
I also said we expect and are seeing significant turnaround in Q3 and especially Q4.
We expect to end the year with revenue in the mid- to high $20 million range and adjusted EBITDA at $1 million and probably a bit higher. This represents a second half of at least $1.6 million of adjusted EBITDA.

It’s been a tough few months for TSSI. Shares have fallen from a high of 1.65 on 01/02/2020 to a low of 0.392 on 03/31/2021 as the on-set of COVID-19 disrupted order patterns from its customers and created supply chain issues.

Now, it seems like the business has bottomed with guidance implying that second half sales will clearly outpace the $8 million in revenue the company achieved for the first half of 2021. Since the specific guidance information was only provided on the conference call, it might take a bit for investors to find it. We are considering adding to our position in TSSI.

Research

Tue, 18 May 2021 17:19:24 GMT

Tss Inc (OOTC:TSSI) ($0.56, $11.0M market cap), a data center facilities and technology services company announced Q1 2021 results:

Sales of $5.2 million vs $10.6 million in the prior year; Reseller revenues were $2.2 million vs $6.8 million in the prior year
Net loss of $0.04 vs net loss of $0.02 in the prior year

“We continue to see fluctuations in our revenue and profitability quarter to quarter. These fluctuations are primarily due to the timing of delivery of new projects. We anticipate these quarterly fluctuations to continue throughout the year,” said Anthony Angelini, President and Chief Executive Officer of TSS. “We are seeing a significant number of large opportunities within all of our business units. Our expectation is the delivery of these opportunities will result in significant positive results in the second half of the year and into next year.”

Research

Tue, 30 Mar 2021 15:00:58 GMT

Removing TSSI From Top 5 Favorite List

Tss Inc (OOTC:TSSI) ($0.80, $15.1M market cap), a data center facilities and technology services company announced Q4 2020 results:

$7.2 million vs $20.4 million in the prior year
Loss per share of $0.01 vs EPS of $0.02

“As we have previously stated, our reseller revenue can fluctuate quarter to quarter, and we saw that in Q4 versus Q3. We continue to believe that this value-added offering helps us strategically. We believe our well positioned service offerings continue to resonate with our customer,” said Anthony Angelini, President and Chief Executive Officer of TSS. “Overall, our revenues grew 37% in 2020 and we were able to improve our Non-GAAP Adjusted EBITDA compared to 2019. While we were impacted negatively by the pandemic in 2020, we did benefit from the receipt of and forgiveness of our PPP loan. While we are still cautious of the impacts of the pandemic and supply chain constraints, we are optimistic for 2021 overall.”

The positive angle is that revenue without reseller revenue would have been up year over year at $4.1 million vs $3.4 million, however down sequentially from $5.0 million in Q3 as the company continues to battle covid pandemic impacts. Regardless, TSSI’s sub par performance in 2020 (Covid-19 set aside), shows us why customer concentration risk is an issue when investing in TSSI. The companyI’s largest customer represents 97% concentration, so it's imperative that TSSI finds a way to diversify its customer base.

Some highlights from the conference call:

“While it was more difficult to diversify our customer base in 2020 due to the challenges of the pandemic, we and the related personal interactions, we do see an uptrend of potential new relationships as we all adjust to the macro environment.

We feel we're on track to produce similar results to 2020 without the pain of the COVID transition issues and excluding the benefit of the PPP forgiveness. We will do this while investigating and building our business for future growth and acceleration of profitability during the decade. While I say that, we also have some major potential opportunities that can significantly change our base case to the upside.”

The company comments regarding similar results to 2020 are a bit confusing, as it's unclear if they are referring to the core business or if they are including the reseller segment as well. Due to some uncertainty on the near term growth prospects of TSSI and our growing pipeline of high conviction stocks we are researching, we think it’s prudent to remove TSSI from the top 5 list as we look for a candidate to replace its position.

Research

Tue, 17 Nov 2020 19:17:23 GMT

Tss Inc (OOTC:TSSI) ($0.65, $11.6M market cap), a data center facilities and technology services company announced Q3 2020 results:

Sales of $20.8 million vs $4.2 million in the prior year
EPS of $0.05 vs loss of $0.01

“While there are still challenges relating to safety protocols and travel restrictions, we have been able to adapt while delivering and deploying our services for our customers. We expect that revenues will begin to normalize on a quarterly basis, allowing us to deliver more consistent results while continuing to grow year over year.”

The conference call offered a bit more color on what a normalized quarterly basis could be as we head into 2021.

“But -- so from quarter-to-quarter, we're still evaluating how these fluctuations occur. So I would suspect that us being in the $8 million to $12 million range per quarter, on average

So I would expect that our goals are to be in that 8% to 12% for -- going into 2021 per quarter. And so kind of putting us at $35 million to $45 million revenue range and then it all comes down in the mix. But we haven't given guidance for 2021.”

Then on profitability on that level of revenue:

“Unknown Analyst [12]

So -- well, good. So if our revenues are $8 million as some change, you fully expect to be profitable, whether it's $0.02, $0.03 or $0.04 for the quarter. It probably wouldn't be the nickel that we made in the third quarter, but it could, I mean on the low end, maybe $0.02, maybe on the high end, $0.04.

Anthony Angelini, TSS, Inc. - CEO, President & Director [13]

Yes. John, help me there.

John K. Penver, TSS, Inc. - Chief Financial Officer [14]

Yes. Yes. I mean, I think that's a reasonable assertion.”

Q4 2020 guidance:

The company guided for $8 million and adjusted EBITDA profitable for Q4 which will be down year over year as last year’s Q4 had big reseller revenues and the company reported $20.4 million.

Moving beyond Q4, we would expect to see the more normalized revenues as management alluded to above.

While the reseller business has created extreme lumpiness in the quarters, it was nice to see that the core business grew at 20% this quarter. The keys in the near term for the company to demonstrate that it can continue to grow its core business, while maintaining profitability. Ultimately, the company needs to diversify it's highly concentrated customer base to avoid lumpiness in growth.

Research

Tue, 18 Aug 2020 04:00:00 GMT

Tss Inc (OOTC:TSSI) ($0.85, $15.1M market cap), a data center facilities and technology services company, announced Q2 2020 results:

Sales of $6.5 million vs $3.5 million in the prior year
Net loss of $0.06 vs net loss of $0.01 in the prior year

We would view any sharp pullback as an opportunity to add to our long position.

Key takeaways from release and conference call:

Delays in orders and supply chain issues, due to COVID-19, caused softness in Q2 and are pushed to Q3
Q3 guidance of $20 million in sales and $1 million in EBITDA
Long term demand still intact once pandemic issues resolve
This is the first time the company hinted that opportunities for customer diversification exist in the near term
Management will likely use debt vs.equity for near-term growth needs.

Press release comments:

“As most companies, we faced a very different business environment in the second quarter primarily driven by the escalation of the COVID-19 pandemic. While we were able to maintain operations during the period, there were a number of internal and external changes to our operations that affected our revenue and costs. Our ability to deliver and deploy at customer locations were subject to changes in timing and particular safety protocols,” said Anthony Angelini, President and Chief Executive Officer of TSS. “We are seeing these issues resolve themselves and are able to proceed under the protocols of the new normal. We expect our third quarter to be especially strong both in revenue and profitability as we make up for deliveries and deployments from the second quarter and have a strong stream of third quarter business. Beyond the third quarter, we expect continued growth in technology infrastructure which directly aligns with the services we provide and should provide an ongoing stream of revenue from all aspects of our business.”

Conference call offers more detailed Q3 guidance:

“Assuming that we can deliver what we expect in the third quarter, our revenue could approach $20 million and results in adjusted EBITDA near $1 million, excluding any benefit from the PPP loan forgiveness that John mentioned. As we look beyond Q3, we are hesitant to provide guidance until we better understand the effects of the pandemic and further reopening of the economy. That being said, there are a number of opportunities in the pipeline that could significantly diversify our customer base.”

New customer/partner acquisitions and credit needs

It seems the company will access credit lines rather than offer equity at current prices if needed to facilitate customer growth plans.

“We currently believe we have adequate trade credit to continue financing our reseller activities as we grow this business during 2020. It is possible as this business evolves and to introduce new partners and customers that we may need access to additional credit to continue growing this business.”

Research

Fri, 22 May 2020 18:23:24 GMT

Tss Inc (OOTC:TSSI) ($1.00, $18.4M market cap), a data center facilities and technology services company, announced Q1 2020 results:

Q1 2020 sales of $10.5 million vs $4.6 million in the prior year
Net loss of $0.02 vs $0.00 in the prior year

TSSI will host its Q1 2020 conference call at 4:30 Pm EST today. Only the 10-Q is currently available. Management tends to offer an outlook on the next quarter during the associated call. According to the 10-Q, the company experienced minor impacts from Covid thus far:

“Revenues in our facilities segment decreased by $0.8 million or 27% compared to the first quarter of 2019 due to lower levels of modular data center deployments, caused by customer deferrals of projects and other restrictions on travel and site access primarily as a result of the COVID-19 pandemic. A significant customer of this segment restricted access to its data center sites, which prevented us from deploying new modular data centers and performing other activities for this customer.”

Research

Wed, 25 Mar 2020 17:39:27 GMT

Tss Inc (OOTC:TSSI) ($1.06, $18.6M market cap), a data center facilities and technology services company, announced Q4 2019 results:

Q4 2019 sales of $20.4 million vs $5.7 million in the prior year
Non-GAAP EPS of $0.01 vs $0.01

“We were very happy with our results for the fourth quarter and the year. We began our reseller program in Q4 which has impacted our results with higher revenue and lower gross margins. As we move through the balance of 2020 we will forecast as best we can, but we are just getting our arms around this new and dynamic revenue stream.” said Anthony Angelini, President and Chief Executive Officer of TSS. “We are almost complete with Q1 and feel good about how the quarter has shaped up. As we look at Q2 we are trying to evaluate the impact that the COVID-19 pandemic will have on our business. We have been designated as a critical infrastructure provider for some of our customers. Therefore, we will remain open for business for now subject to the ongoing risks regarding availability of parts from other supply chains, or infections impacting our workforce. We believe that we can operate profitably through these challenging times.”

Conference call highlights:

Q1 2020 revenue guidance of $9 to $11 million generating positive EBITDA
Reseller business is being used to drive new customers to the core business, management expects these opportunities to help drive growth in 2020 revenues, gross profits and operating profits
Have been deemed essential infrastructure partner so is allowed to remain operational during the Covid-19 crisis

Caveat:

While they currently remain open for business, management stated that they are aware that this may change due to factors beyond their control. Furthermore, management believes that they can weather the coronavirus storm and remain profitable if business takes a short term hit.

There was an interesting piece of information arbitrage on the call. We came across an article a few weeks ago that talked about Dell experiencing some disruptions due to the destruction of several of its third party fulfillment centers, located in Tennessee, as a result of a severe tornado.

"Dell confirmed that multiple partner facilities have sustained damage from the storm, though its own offices in Nashville remain intact."

"This could present a significant challenge to the Dell’s supply chain, and might result in much of its retail volume being routed through other cities."

Although the company has never said that Dell is TSSI's largest customer, investors have widely assumed that this is in fact the case. Management commentary on the conference call clearly supports this conclusion.

On the conference call, the company referenced that the tornadoes in Tennessee affected one of their customer’s fulfillment needs and that they are gaining some work from a competitor who suffered damage during the Nashville tornado:

“because we've been determined a -- because we've been determining the essential infrastructure partner, we're going to be open for key partners or key customers right now. And then on top of it, there was a little bit of another force majeure kind of activity that took place in Nashville that is shifting some business towards us.”

Management did not mention that the customer was Dell, but it's pretty obvious that it is. We believe that because TSII has a great relationship with its "biggest customer", that's getting bigger, that the business they receive from Tennessee will likely be permanent.

Research

Thu, 14 Nov 2019 05:00:00 GMT

Third Quarter 2019 Results

Sales of $4.2 million vs $6.4 million in the prior year
Loss of $0.01 vs EPS of $0.04

“Our revenues and adjusted EBITDA have been relatively consistent the first three quarters of this year. However, with the launch of our reseller program, we expect revenue in the fourth quarter to be higher than the first three quarters combined. In addition, we expect Adjusted EBITDA in the fourth quarter to be nearly double the first three quarters of 2019 combined.” said Anthony Angelini, President and Chief Executive Officer of TSS. “We are excited to have started to deliver on this program in the last week of September, and we believe this program will drive substantial growth, not only in the fourth quarter of 2019, but well into the future. Our expectations are that this will also assist us in expanding relationships with other third parties. We believe this program is a significant opportunity to substantially grow our top and bottom lines well into the future.”

Key commentary takeaways:New reseller business started later than expected; mgmt calling for strong Q4 2019 with revenues surpassing the first 3 quarters combined; adj EBITDA to nearly double the first 3 quarters combined; believe new business path will lead to substantial growth in top and bottom lines well into the future; It should be noted that the conference call suggest fluctuations in reseller activity which could lead to lumpiness in quarterly financials.

Research

Thu, 15 Aug 2019 17:25:33 GMT

Tss Inc (OOTC:TSSI) ($0.72, $12.6M market cap), a data center facilities and technology services company, reportedQ2 2019 results:

Sales of $3.5 million vs $5.4 million in the prior year (the second quarter 2018 revenues include $1 million from operations sold in 2018)
Net loss of $0.01 vs EPS of $0.02

“Although our revenues were down due to some project delays and changes we were able to maintain positive EBITDA earnings in the second quarter,” said Anthony Angelini, President and Chief Executive Officer of TSS. “We expect the second half of the year finishing very strong as new programs are staged to provide substantial growth in 2019 and drive momentum into 2020.”

Conference call offers 2019 full year guidance:

“we expect to end the year with revenue in the mid $25 million to $30 million range and gross margins in the mid 20% range, generating about a $1 million of net income or about $2 million of adjusted EBITDA.

As all of the areas we're focusing on have large growth opportunities, we feel that we will have great momentum exiting 2019 into 2020.

We really look forward to the developments that are going on in our business and we think this is a game changer.”

$1,000,000 in net income works out to about $0.06 per share.

Based on the management's ability to execute this turnaround strategy, we believe that management is setting the company up for stronger future growth. We view any significant pullbacks as opportunities to add to our long position. We believe we might get this opportunity because investors that were not on the conference call were not privy to the information arbitrage related to guidance, as well as growth prospects that were discussed.

Research

Tue, 30 Jul 2019 15:51:30 GMT

Tss Inc (OOTC:TSSI) ($0.72, $12.5M market cap), a data center facilities and technology services company, has seen its shares pullback from hitting new 52 week highs ($1.09) in March. The pullback is likely associated with the asset sale the company announced early this year. Keys we will be looking for in its upcoming Q2 2019 release will be:

An update on the company’s ability to replace the revenues and profits from the above-mentioned asset sale; The company has stated in the last conference call that it expects organic growth to make up for the loss revenues.
We would like to see if management offers any color on the refinance of its high interest bearing related party debt.
Any new information on its acquisition pipeline and/or new product/service offerings to help diversify its customer base.

Research

Thu, 16 May 2019 15:16:54 GMT

Tss Inc (OOTC:TSSI) ($0.87, $15.1M market cap), a data center facilities and technology services company, reported Q1 2019 results:

Sales of $4.7 million vs $4.8 million in the prior year (excluding recent sale of business that occurred in Q4 2018, revenues increased 12%)
EPS of $0.00 vs $0.01 in the prior year ($0.00 vs $0.00)
Adjusted EBITDA of $203,000 vs $340,000 (excluding sale adj. EBITDA was $203,000 vs $186,000)

“Our results showed growth in revenue and Adjusted EBITDA in our core business in the first quarter when we adjust for the sale of the business at the end of 2018.” said Anthony Angelini, President and Chief Executive Officer of TSS. “The company is in a very good position to grow our core revenue, build on solid operating results and utilize our strong balance sheet. We are excited to continue to execute our growth strategy through the balance of the year.”

The conference call echoed past comments about the company being able to execute its organic growth to make up for the loss of revenue that resulted from the asset sale. Because of this, Q1 2019 financial results are similar to those of Q1 2018. Management did mention its growth opportunities via a large customer win, as well as a possible acquisition now that the balance sheet is stronger.

Based on the management's ability to execute this turnaround strategy, we believe that management is setting the company up for stronger future growth and would view a pullback as an opportunity to add to our long position.

Research

Fri, 22 Mar 2019 04:00:00 GMT

Tss Inc (OOTC:TSSI) ($1.00, $16.3M market cap), a data center facilities and technology services company, reported results for its fourth quarter and fiscal year ended December 31, 2018:

Sales of $5.7 million vs. $4.8 million
Non-GAAP EPS of $0.01 vs. $0.01
GAAP EPS $0.07 vs $0.02 (includes gain on asset sale)

Management commentary:

“We are pleased to have completed an extraordinarily successful 2018 with solid revenue growth momentum in our core businesses. In addition, we were able to complete the sale of our Virginia power services business. This was the last piece of the transition of our operations that we began at the end of 2016.” said Anthony Angelini, President and Chief Executive Officer of TSS. “We now have a solid balance sheet and are positioned to invest in growing our core business segments. We expect a strong 2019 and have many opportunities to further evolve the company for the long-term.”

We learned a few things from listening to the related conference call. The company expects to make up lost revenue from its asset sale by organic growth as it is experiencing strong organic growth of at least 25%. We were also happy to hear that they hinted at acquisition opportunities.

We also believe the company could be looking to pay down some of its debt before year end. Given that the company recently opened up a bank line and received cash from its asset sale, we think the company is a better position to potentially firm up its balance sheet by retiring some of its legacy debt. If they did this, earnings per share would get a boost.

Overall the comments on the call were bullish. We could foresee some short-term weakness in the stock, especially due to its recent run-up. Furthermore, investors who don't know the story well and who were not on the conference call might overreact to the loss of revenue that will occur going forward because of the recent asset sale. They also will not have heard that the company is seeking acquisition opportunities.

Research

Fri, 08 Mar 2019 16:22:08 GMT

Tss Inc (OTCQB:TSSI) ($0.95; $15.9M market cap) , is a data center and mission critical facilities and technology services company we've been covering since June 2017 when the stock was trading at $0.19. Th top 5 favorite stock has done very well. We thought it would be useful to lay out our bullish thesis in a PowerPoint presentation as a case study . The company is due to report Q4 2018 earnings soon. As a reminder, during the fourth quarter, the company sold an asset (Virginia power services business) that contributed about $3.8 million to revenues and about $0.03 EPS annually.

We are we are eagerly awaiting management’s commentary on its growth prospects for the remaining pieces of the business and to find out whether it will be able to make up some of the revenue loss. We think there could be some short-term trepidation among investors moving into 2019 as they wait to see how management will deploy the cash it receives from the asset sale. Will it make an acquisition? Will it restructure debt? We are still very bullish on the story but are cognizant of some short term perception risk heading into 2019. We would likely view a pullback as an opportunity to buy. Please see the presentation here , best viewed on desktop or tablet.

Research

Tue, 08 Jan 2019 16:06:07 GMT

Tss Inc (OTCQB:TSSI) ($0.84; $13.7M market cap), a data center and mission critical facilities and technology services company, announced a new credit facility of $1.5 million. The new credit facility comes days after the company’s recent asset sale which we believed would firm up the Company’s balance sheet allowing them to pay down debt and/or get better financing for possible acquisitions.

We would not be surprised if yesterday’s new credit facility is the first step to entering a new chapter in its growth story.

Research

Fri, 04 Jan 2019 16:02:22 GMT

Tss Inc (OTCQB:TSSI) ($0.84; $13.7M market cap), a data center and mission critical facilities and technology services company, announced it has sold certain identified assets used in IPSI’s Virginia-based, installation services of mission critical data center power and cooling and related services business, together with certain identified liabilities, to Innovative Power, LLC for a total cash consideration of $2.5 million.

Without a press release, we think the stock could possibly pull back because the pro forma (adjusted for sale) results will show a decline in sales and EPS from the sale of this division. With no color from a press release, investors may overreact to the asset sale, but we would view a pullback as a significant buying opportunity for our own portfolios.

The transaction will significantly strengthen the Company’s balance sheet. We feel it gives the Company more opportunities for attractive acquisitions to help diversify its customer base (customer concentration is an issue with TSSI), as well as possibly help the company retire some of its long term debt and obtain better terms on new debt.

The transaction was completed with Peter Woodward, who is the Chairman of the Board for TSSI. He has helped fund the Company through its transformation. Accordingly, we do not think he would do anything to jeopardize the growth outlook and progress the Company has made over the last several years.

Research

Tue, 27 Nov 2018 15:34:35 GMT

Tss Inc (OTCQB:TSSI) ($0.99; $16.1M market cap), a data center and mission critical facilities and technology services company, surpassed the $1 mark, hitting a new high of $1.09 in yesterday’s trading session. TSSI has been part of ourRun to One Portfolio since September 20, 2017 when the stock traded at $0.20 per share and our Favorite Model Portfolio since December 2017.

The company recently reported strong Q3 results which we covered here.

Research

Thu, 15 Nov 2018 15:58:37 GMT

Tss Inc (OTCQB:TSSI) ($0.66; $10.8M market cap), is a data center and mission critical facilities and technology services company, announced Q3 2018 results:

Sales of $6.4 million vs $4.9 million in the prior year
Non-GAAP EPS of $0.03 vs non-GAAP EPS of $0.02

“We are pleased with our quarterly results as we continue to execute on revenue growth and bottom line improvement. We nearly doubled our bottom line year over year,” said Anthony Angelini, President and Chief Executive Officer of TSS. “We are positioned for a strong completion of 2018 and carry solid momentum into 2019. Congratulations to our entire team for delivering these results.”

On the conference call, management stated it expects that Q4 sales will be slightly lower than Q3 but higher than Q2 ($5.4 million) and that expects a ramp up into Q1 2019. The sequential decline is due to holiday shutdowns.

We continue to be very bullish on the TSSI story.

Research

Fri, 26 Oct 2018 14:27:38 GMT

Tss Inc (OTCQB:TSSI) ($0.68; $11.0M market cap), is a data center and mission critical facilities and technology services company.

Yesterday, Intel Corporation (NASDAQ:INTC) reported its Q3 2018 results, beating analyst estimates on both the top and bottom line. INTC’s data center group, the company’s second largest revenue generator, beat analyst estimates for the quarter and has shown strong growth for the 9 month period of over 50%. As many technology stocks report mixed results, it is nice to see that the data center area continues to show growth.

We feel this strength in INTC’s data center business likely bodes well for TSSI and strengthens management's comments from Q2 2018 of accelerated growth for the remainder of 2018 and into 2019.

Research

Wed, 15 Aug 2018 14:45:21 GMT

Tss Inc (OTCQB:TSSI) ($0.50; $8.1M market cap), a data center and mission critical facilities and technology services company, announced Q2 2018 results:

Sales of $5.4 million vs $4.2 million in the prior year
Non-GAAP EPS of $0.02 vs $0.00 in the prior year

“We continue to see the growth in revenue and profitability as we anticipated and are pleased with our results,” said Anthony Angelini, President and Chief Executive Officer of TSS. “We are anticipating opportunities to accelerate our growth rate further as we complete 2018 and move into 2019.”

The conference call indicates that this quarter should be the baseline for the rest of fiscal 2018 with possible improvements on these levels. Management also indicated that the company is in expansion mode as the business continues to grow. We encourage you to listen to the conference call replay that can be found here to hear how positive the CEO is about the future of the company.

Research

Thu, 14 Jun 2018 15:10:50 GMT

Adding TSSI To Buy On Pullback Mock Portfolio 7

We are adding Tss Inc (OTCQB:TSSI) ($0.44; $7.7M market cap), a data center and mission critical facilities and technology services company, as the fourth stock in our Buy on Pullback Model Portfolio 7. TSSI joins ZYXI, INTX and EXTR in the folio. For members who may be eyeing up a pullback portfolio that has yet to perform, you may want to look at Portfolio 7. In mid May, TSSI reported its Q1 2018 results. While the results were unexciting, this was anticipated, and the company maintained its 2018 guidance of revenues north of $20 million and for profitability to increase vs 2017.

Research

Wed, 16 May 2018 14:45:16 GMT

Tss Inc (OTCQB:TSSI) ($0.50; $7.7M market cap), a data center and mission critical facilities and technology services company, announced Q1 2018results:

Sales of $4.8 million vs $4.4 million in the prior year
EPS of $0.01 vs $0.02 in the prior year

Quotes from management:

“We have started 2018 off well and we expect strong performance with solid profitability throughout the year,” said Anthony Angelini, President and Chief Executive Officer of TSS. “The foundational steps we have taken the last several years have positioned our data center lifecycle services well for continued growth and profitability into the future.”

The conference call reiterated its 2018 guidance of revenues north of $20 million and profitability to be better than 2017.

Research

Mon, 07 May 2018 04:00:00 GMT

Q1 Earnings Watch:

We wanted to give you some color on which stocks in some of our Model/Mock portfolios that may not be timely in the short-run .

Specifically, Information Analys (OOTC:IAIC) ($0.40, $4.5m market cap) and Rcm Technologies, Inc. (NASDAQ:RCMT) ($5.01, $61.3m market cap) Q1 financial results could disappoint investors. On its Q4 conference call, RCMT indicated that Q1 2018 might see some softness compared to its previous quarters. Thus, short term investors should be aware of this possibility. We do think RCMT is a potential takeover candidate at some point, but we will have to dissect Q1 2018 results to determine if the stock should remain in our favorite stock portfolio.

As for IAIC, the company is still in the early stages of its turnaround plan, and because of its heavy reliance on government contracts, we still expect volatility in quarterly results. Like many stocks in our run to one mock portfolio, time is needed for the story to play out.

We also want to mention Tss Inc (OOTC:TSSI) ($0.50, $7.8m marker cap) . We are still very bullish on the company and believe it will continue to successfully execute its turnaround. But we must be aware that Q1 may not be up to par with what the market is expecting due to Q4 2017 conference call comments that Q1 2018 will be sequentially down from Q4. Regardless, we still think the company will show significant growth in the quarter and throughout 2018.

Conference Call Notes

Tue, 27 Mar 2018 15:04:57 GMT

Tss Inc (OTCQB:TSSI) ($0.55; $8.5 m market cap), a data center and mission critical facilities and technology services company, held a conference call yesterday to discuss its Q4 2017 results which we highlighted in yesterday’s email. While on the call, Maj had an exchange with management discussing possible margin improvements moving forward and new revenue possibilities, including those from blockchain technology, a subject the company touched upon. Here are some of the highlights from the call, which we thought was overall bullish in nature:

Reorganization efforts in late 2016 have had positive impacts on the financial performance. The changes have allowed the company to achieve profitability at much lower revenue levels.
Had some delays in orders that affected Q4 sales levels.
Sales from ongoing operations increased >30% in 2017 vs 2016.
Margins of >40% as they move over $5 million per quarter in revenue.
New opportunities with customer that are trying to use modular concept of data center to exploit the higher power computations of blockchain.
Q1 2018 guidance of $4.5 to $5.0 million at modest profitability due to regular expenses related to those incurred as a public company.
$5 million will be the base target for quarterly revenues in 2018, with a solid structure for consistent profitability.
Looking for opportunities to accelerate top line growth.
Full year 2018 guidance base case is for revenues north of $20 million with profitability (net income, EPS) comparatively higher than 2017.

Research

Mon, 26 Mar 2018 14:13:02 GMT

Tss Inc (OTCQB:TSSI) ($0.51; $7.9 m market cap), a data center and mission critical facilities and technology services company, reported Q4 2017 results via 10-K only. The conference call is scheduled for after hours today. (At this time no press release has been issued)

Sales of $4.8 million vs $7.2 million in the prior year (prior year sales include revenues from discontinued operations)
EPS of $0.02 vs $0.00 in the prior year

The 10-K states:

“Our total revenue of $18.3 million in 2017 was a $9.1 million or 33% decrease from our 2016 revenue of $27.4 million. Our 2016 revenue included $13.6 million from business activities that we either sold or discontinued, which was the primary reason that our annual revenues decreased. Our facilities services revenues decreased by $9.5 million or 44% from 2016 levels. The portions of the facility services businesses that we retained actually grew by $4.1 million or 50% from 2016. Our systems integration revenues increased by $0.4 million or 8% from 2016 reflecting higher demand from our largest channel partner during 2017.

Our changed business model will result in quarterly and annual revenue levels lower than historical levels. We anticipate less fluctuation in our quarterly revenues due to the absence of larger project management and design projects, but higher customer concentration levels with our OEM channel partner, until such time as we can diversify and grow our customer base. Elimination of large one-off projects will also reduce the variability in our working capital, which we believe will also helps us manage our liquidity, and contribute to improved and sustained profitability”

In our September 20, 2017 email we added TSSI to our Run to One Mock Portfolio and established a long position on September 25, 2017. The stock was trading at $0.19 and $0.25, respectively, at those times. TSSI was also added to our favorite stock list on December 4, 2017. Our notes included:

“Very impressive CEO; Turnaround complete; Business has become a higher margin, recurring revenue model; Penny stock that is profitable.”

This quarter confirms that the company’s turnaround is playing out and that the $0.02 quarters seem to be the norm, if not a baseline to improve upon moving forward. We are working on breaking down the K and quarter for an apples to apples comparison. We believe Q1 2018 will be first true comparable period with no revenues from discontinued operations.

Research

Fri, 17 Nov 2017 16:17:47 GMT

Due to our increased confidence in TSS INC(OTCQB:TSSI), we are also now adding it to the Multi-Bagger Portfolio. TSSI entered our radar on June 2017 at $0.19, when we briefly mentioned that we were adding it to our Tier 1 Pink Screen in light of its restructuring efforts which were boosting the bottom line, as well as bullish comments from its Q1 2017 release.

Research

Wed, 15 Nov 2017 16:55:11 GMT

Tss Inc (OTCQB:TSSI) ($0.26; $4.0 m market cap), a data center and mission critical facilities and technology services company, announced Q3 2017 results:

Sales of $4.9 million vs $5.4 million in the priror year
Gross margins of 42% vs 27% in the prior year
Non-GAAP EPS of $0.02 vs a loss of $0.04 in the prior year

Quotes from management:

“We are very pleased with our results this quarter.” said Anthony Angelini, President and Chief Executive Officer of TSS. “We have executed the transition of our business and expect to continue to grow our revenue and improve our profitability as we move forward. Our team is focused and executing for our customers at a very high level.”

If you are not familiar with TSSI, the company is at the end of a multi-year restructuring process where it is replacing its larger revenue base business with a higher margin business. This is why year over year, sales have been down over the last few quarters. On the related earnings conference call, management stated that it is still on track to move towards it goal of achieving a quarterly revenue run-rate of $5 million and is now targeting 2018 revenue to reach $20 million with 10% adjusted EBITDA margins. Meeting these targets would translate to $0.08 in EPS for fiscal 2018, but we believe the company’s guidance does not take into account some of the added growth initiatives discussed on conference call. We are currently very excited about TSSI’s business prospects and upside for the stock.

TSSI entered our radar on June 2017 at $0.19, where we briefly mentioned that we were adding it to our Tier 1 Pink screen in light of its restructuring efforts which were boosting the bottom line, as well as bullish comments from its Q1 2017 release.

See our full reasons for tracking the Company here.

Research

Tue, 03 Oct 2017 14:32:30 GMT

TSSI Full Follow Up

Over the past week we have been discussing TSSI, from adding it to our Tier 1 Pink screen, adding to our Run to One Mock Portfolio and establishing our long position. We stated we would share our full interview summary shortly. As promised, please see our full follow up, “TSSI Transformation Complete – Tremendous Upside” here.

Please see the full follow up here.

Research

Mon, 25 Sep 2017 15:32:50 GMT

**Call To Action - Established Long Position in TSSI

In our September 20, 2017 email we added TSSI ($0.25) to our Run to One Mock Portfolio. We have now established a long position in TSSI and will share our full interview summary shortly.

Research

Wed, 20 Sep 2017 15:41:23 GMT

Adding TSSI to Our Micro-cap Run to One Mock Portfolio

In yesterday's email we stated we had secured an interview with TSSI ($0.19) management. The interview went well and we are now adding TSSI to our Micro-cap Run to One Mock Portfolio. We will follow up with a more detailed research update.

TSSI provides services for the planning, design, development, and maintenance of mission-critical facilities and information infrastructure in the United States. (mainly builds and supports subsystems and racks for technology companies)

Research

Tue, 19 Sep 2017 15:10:18 GMT

TSSI ($0.19) - We have secured an interview with management for later today. We added TSSI to our Tier 1 Pink screen in June 2017 due to restructuring efforts which are boosting the bottom line performance. The interview will hopefully shed more light on if top line growth is in the cards in the near future and its high customer concentration with a few large customers.

Research

Mon, 05 Jun 2017 19:54:32 GMT

TSSI (0.19) - We are adding TSSI to our Tier 1 Pink screen due to restructuring efforts which are boosting the bottom line and bullish commentary from its Q1 2017 earnings release.

"This is the first quarter where we saw the full financial benefits from our realignment efforts. As we expected, we made significant improvement in the quality of our revenue, reduced our operating costs and generated a significant year over year improvement in profitability," said Anthony Angelini, President and Chief Executive Officer of TSS. "Moving forward, continuing to grow our systems integration and modular data center businesses will be key to sustaining and growing profitably. We are seeing many more opportunities in the datacenter lifecycle services market and believe we are now well positioned to benefit."

We are in the early stages of our due diligence process and plan to interview management to determine if top line growth is in the cards for the near future.

TSSI provides a single-source solution for enabling technologies in data centers, operations centers, network facilities, server rooms, security operations centers, communications facilities and the infrastructure systems that are critical to their function.

Liquidity Requirements

Wed, 08 Apr 2015 04:00:00 GMT

Our history of operating losses, continuing use of cash to fund operations, declining revenue, and declining current ratio may cause uncertainty about our ability to continue to operate our business as a going concern. We have reviewed our current and prospective sources of liquidity, significant conditions and events as well as our forecasted financial results and concluded that we have adequate resources to continue to operate as a going concern. We recently extended the term of our bank credit facility to ensure availability of this resource through May 2016. In October 2014 we entered into a customer financing program with our largest customer that allows us to accelerate the receipt of cash from receivables owed by that customer that resulted in the accelerated receipt of $3.1 million from outstanding receivables. In September 2014 we also restructured the repayment terms of our notes payable held by Mr. Gallagher, a director and our Chief Technical Officer, to defer payments of a large portion of this obligation to 2016, further reducing short term liquidity requirements on our business. These steps taken have collectively improved our liquidity position since June, 2014. During the third quarter we also considered various sources of additional debt, convertible debt and equity financing that may be available and so we continue to negotiate with various third parties to see if such financing can be obtained in amounts and on terms acceptable to us.

Comments & Business Outlook

Sat, 24 Apr 2010 04:00:00 GMT

Fortress International Group, Inc. (PINKSHEETS: FIGI), a provider of consulting and engineering, construction management and 24/7/365 site services for mission-critical facilities, today announced that it has been awarded contracts for $27.0 million in new business through the first week of April 2010.