TSS, Inc. Q3 FY2024 earnings call

• Darryll Dewan celebrates two-year anniversary with TSS and highlights strong Q3 results across key metrics.
• Procurement revenues exceeded $50 million target with $60.5 million in Q3, up from $5.4 million in Q3 2023.
• AI-enabled rack integrations began in Q2 and demand is robust; a multi-year agreement with a primary customer was signed, reducing demand fluctuation risks.
• Facility management revenue up 8% with moderate growth, and potential for more robust growth in 12-18 months due to AI adoption.
• Plan to relocate factory and headquarters to a new facility near current location, with $25M-$30M investment for expanded capacity and power access.
• Appointed Michael Fahy as Independent Director; uplisted to NASDAQ Capital Market.
• Awarded Professional Services Best Deployment Partner Award for rapid adaptability and customer service.

For the third quarter, total revenue was $70.1 million. The Systems Integration segment saw total revenue increase from $7.1 million in Q3 2023 to $68.1 million in Q3 2024. This includes $7.6 million from integration services (up 361% from $1.7 million in Q3 2023) and $60.5 million from procurement services. Facility management revenue was $2 million, up 8% from $1.8 million in Q3 2023. Procurement revenues were $60.5 million, a significant increase from $5.4 million in Q3 2023.

• Expect Q4 profitability to be slightly below Q3 due to timing of incoming projects and smaller procurement deals in Q4 compared to Q3.
• Anticipate first half of 2025 to be in line with Q2 and Q3 2024 in aggregate.

• Procurement revenues can fluctuate due to quarter-to-quarter variations in gross vs. net deals.
• Seasonality in procurement revenues related to Federal Government budget cycles.
• Potential impact of power and chip availability on growth trajectory.

Q: Talked about potential xAI supercomputer and buyout interest.

A: Darryll stated they are focused on execution and nothing is off the table but singularly focused on execution.

Q: Thoughts on facilities management business long-term?

A: Darryll mentioned IDC stats show 12%-13% CAGR growth in MDC space, optimistic about MDC growth around AI with potential revenue in 2025-2026.

Q: Concern about new facility capacity?

A: Darryll said current facility is sufficient for now, with options for additional space if needed, and operations team has growth scenarios planned.

Q: Utilization during June project?

A: Darryll said not operating near full capacity, with capacity to grow 10x and timeline depending on demand signal.