Shares of TSS, Inc. (TSSI) have gained 31.9% since reporting results for the first quarter of 2025. This compares with the S&P 500 index’s 0.8% growth over the same time frame. Over the past month, the stock has surged 74.1% compared with the S&P 500’s 12.7% rally, reflecting investor enthusiasm around the company’s latest results and advancements in AI infrastructure.Robust Revenue & Earnings GrowthFor the first quarter ended March 31, 2025, TSS reported a dramatic surge in financial performance, underpinn ...

Financial Data and Key Metrics Changes - Total revenue grew by 523% year over year to $99 million, up from $15.9 million in Q1 2024 [19][20] - Diluted earnings per share increased to $0.12, a significant improvement from breakeven a year ago [29] - Net income for Q1 2025 was $3 million, compared to $15,000 in Q1 2024 [28] - Consolidated gross margin was 9.3%, down from 17.1% in the prior year quarter [24] Business Line Data and Key Metrics Changes - Procurement services revenue surged by 676% to $90.2 million, representing 77% of total procurement revenues for all of 2024 [22] - Systems integration revenue increased by 253% to $7.5 million, driven by AI-enabled rack integration [20][21] - Facilities management revenue declined by 40% to $1.3 million, representing just over 1% of total revenue [10][21] Market Data and Key Metrics Changes - The demand for AI infrastructure is rapidly growing, with significant capital flowing into high-performance compute environments [17] - The modular data center market is evolving, with expectations for increased adoption of modular solutions for AI [12] Company Strategy and Development Direction - The company is focused on scaling operations to capture a significant share of the AI infrastructure market [6] - A new facility in Georgetown, Texas, is being built to support increased demand for AI rack integration, with a planned investment of $25 million to $30 million [17][30] - The company anticipates a payback period of approximately two years for the new facility, indicating a strong return on investment [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about sustained high growth in AI infrastructure as customers ramp up investments [9][36] - The company is closely monitoring the impact of tariffs on IT hardware costs and supply chain dynamics [33] - Management expects total revenue in the first half of 2025 to exceed that of the second half of 2024, reflecting strong customer demand [36] Other Important Information - Cash flow from operations for Q1 2025 was $20.6 million, significantly higher than $2.6 million in Q1 2024 [30] - The company is actively optimizing its facilities management segment to focus on high-growth opportunities [21] Q&A Session Summary Question: How is the company managing the transition to the new facility? - Management acknowledged the complexity of the transition but emphasized successful execution and commitment from the team [39][40] Question: How does the company view competition from NVIDIA and Dell in integration services? - Management believes that the increasing complexity of AI integration will maintain the need for their services, despite advancements from competitors [41][42] Question: What is the outlook for facilities management revenue? - Management remains optimistic about the facilities management segment, which is transitioning to support AI applications [75][76] Question: What visibility does the company have on demand from AI clients? - Management indicated good visibility on demand, with a fluctuating but generally positive outlook for the rack integration business [108]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-33627 TSS, INC. (Exact name of registrant as specified in its charter) Delaware 20-2027651 (State or other jurisdiction of incorporation or organization) 110 E. ...

EX-99.1 2 tssi_ex991.htm PRESS RELEASE EXHIBIT 99.1 TSS Reports First Quarter 2025 Revenue of $99.0 Million, Up 523% EPS of $0.12, Up from $0.00 ROUND ROCK, TEXAS – May 15, 2025 – TSS, Inc. (Nasdaq: TSSI), a data center services company that provides AI and high- performance computing integration, deployment and related services, today reported results for its first quarter ended March 31, 2025. "We are off to a strong start in 2025, with exponential increases in both our top and bottom lines, driven by rob ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-33627 TSS, INC. FORM 10-K (Mark One) (Exact name of registrant as specified in its charter) Delaware 20-2027651 (State or other jurisdiction (I.R.S. Empl ...

Financial Performance - TSS reported a record revenue of $148.1 million for FY 2024, representing a 172% increase compared to FY 2023[4] - The company achieved earnings per share (EPS) of $0.24, up from breakeven in 2023[3] - Adjusted EBITDA for FY 2024 was $10.2 million, reflecting a 283% increase from the previous year[4] - Fourth quarter revenue reached $50.0 million, a 105% increase year-over-year, with procurement revenues up 95% to $40.5 million[5] - TSS's gross profit for FY 2024 was $22.4 million, up 103% due to growth across all service lines[4] - The company ended FY 2024 with a net income of $6.0 million, compared to $74,000 in 2023[4] Strategic Developments - TSS signed a multi-year agreement with its largest customer, enhancing its role in AI rack integration[3] - The company expects significant EBITDA growth in 2025, driven by contributions from a new facility expected to be operational by June 2025[6] Revenue Composition - Procurement services accounted for nearly 80% of revenues in 2024, characterized by higher revenue variability and lower margins[6] Asset Growth - TSS's total assets increased to $94.3 million in December 2024, up from $25.6 million in December 2023[17]

Revenue Growth - Total revenues increased 689% to $70.1 million in Q3 2024 from $8.9 million in Q3 2023, with procurement revenues up $55.0 million (1,016%) and systems integration revenues up $5.9 million (361%) [84]. - Total revenues for the nine-month period ended September 30, 2024, reached $98.2 million, a 227% increase from $30.0 million in the prior year [102]. - Procurement revenues surged by 334%, increasing from $17.7 million to $77.0 million for the nine-month period [105]. - Recognized revenue for procurement deals increased from $17.7 million to $77.0 million, a growth of 335% year-over-year [106]. - The gross value of all procurement transactions increased by 94% from $40.9 million to $79.6 million in Q3 2024 [90]. - Gross value of revenues including netting rose 33% from $90.5 million to $120.6 million year-to-date [106]. Profitability and Income - Consolidated net income improved to $4.1 million in the current year-to-date period from a loss of $0.3 million in the prior year-to-date period [101]. - Operating income increased by 431%, from $0.7 million in Q3 2023 to $3.8 million in Q3 2024 [97]. - Operating income increased by 461% from $1.0 million to $5.7 million year-to-date [111]. - Net income for the current period was $4.1 million, compared to a net loss of $0.3 million in the prior year [113]. - Cash provided by operating activities surged to $36.9 million from $8.6 million year-over-year [120]. Expenses and Margins - SG&A expenses as a percentage of gross profit improved from 72% to 49% year-over-year, despite a 90% increase in dollar terms [96]. - SG&A expenses increased by $2.5 million (39%) primarily due to higher headcount and compensation costs [110]. - Consolidated gross margin decreased from 26% to 15% due to a higher proportion of lower-margin procurement deals [107]. - Gross margin based on recognized value of transactions decreased from 19.8% in the prior year to 6.9% in the current year [105]. Capital Expenditures and Investments - Capital expenditures of approximately $25 million to $30 million are anticipated for improvements to the new facility to support increased production capabilities for AI-enabled racks [77]. - The company plans to invest approximately $25 million to $30 million in a new facility to support AI-enabled computer racks [115]. Customer Agreements and Services - A multi-year agreement was signed with the largest customer to provide systems integration services for AI-enabled computer racks, ensuring consistent revenue to cover fixed and variable costs [77]. - Maintenance and integration services traditionally earn higher margins, with maintenance contracts typically renewing annually, providing revenue predictability [82]. - The company has focused on smaller scaled jobs connected with addition/move/retrofit activities to achieve better margins and more predictable earnings [82]. Supply Chain and Market Conditions - Supply chain issues may impact non-AI rack integration services, causing delays in revenue recognition [86]. - The company expects procurement revenues to remain elevated for the next three to six months but does not anticipate maintaining the same high levels long-term [88].

Financial Performance - Third quarter revenue reached $70.1 million, an increase of 689% year-over-year[2] - Net income surged 1,166% to $2.6 million, with diluted EPS rising to $0.10 from $0.01[6] - Procurement revenues alone were $60.5 million, up 1,016% compared to the same quarter last year[6] - Year-to-date total revenues for 2024 reached $98 million, more than three times the amount from the same period last year[5] - Gross profit for the third quarter was $7.9 million, up 179%, driven by higher margin services[6] - Adjusted EBITDA for the third quarter was $4.3 million, an increase of 358%[6] - Net income for Q3 2024 reached $2,646 million, a significant increase from $209 million in Q3 2023[20] - EBITDA for Q3 2024 was $4,002 million, compared to $787 million in Q3 2023, reflecting strong operational performance[20] - Adjusted EBITDA for the nine months ended September 2024 was $6,748 million, up from $1,726 million in the same period of 2023[20] - The company reported an increase in adjusted EBITDA margin, indicating improved profitability metrics[20] - For the nine months ended September 2024, net income was $4,063 million, a recovery from a loss of $262 million in the same period of 2023[20] Operational Developments - The company signed a multi-year agreement with a major customer for AI rack integration, enhancing future earnings visibility[4] - The company plans to relocate to a larger facility in early 2025 to meet increasing demand for AI-enabled technologies[4] - TSS, Inc. uplisted to the Nasdaq Capital Market, enhancing market presence and visibility[4] - The company expects revenue and profit trajectories to remain strong through the first half of 2025[5] Cost and Expense Management - Interest expense, net, increased to $1,128 million in Q3 2024 from $482 million in Q3 2023, indicating higher borrowing costs[20] - Depreciation and amortization expenses rose to $208 million in Q3 2024, compared to $72 million in Q3 2023, suggesting increased asset utilization[20] - Stock-based compensation for Q3 2024 was $299 million, up from $153 million in Q3 2023, reflecting changes in compensation strategy[20] - Income tax expense for Q3 2024 was $20 million, slightly down from $24 million in Q3 2023, indicating effective tax management[20] Future Outlook - Future outlook remains positive with expectations of continued revenue growth and operational efficiency improvements[20]

Revenue Performance - Revenue for the three-month period ended June 30, 2024, was $12.2 million, a decrease of $2.4 million (16%) compared to $14.5 million in the second quarter of 2023, primarily due to a $5.7 million decrease in recorded procurement revenues[76]. - Total revenues for the six-month period ended June 30, 2024, were $28.1 million, an increase of $6.9 million (33%) compared to $21.1 million in the prior year[89]. - Procurement revenues increased by $4.2 million (34%) for the six-month period ended June 30, 2024, while facility management revenues rose by $0.6 million (17%) and non-procurement systems integration revenues increased by $2.1 million (42%) compared to the same period in 2023[89]. Gross Margin and Profitability - Consolidated gross margin improved to 37% for the three-month period ended June 30, 2024, compared to 22% for the same quarter of 2023, driven by a smaller proportion of total revenues from procurement services[80]. - Non-procurement integration service and maintenance gross profit reached $3.8 million, representing a $2.2 million (141%) increase from the comparable period of 2023[80]. - Operating income increased by $0.7 million (74%) compared to the prior year quarter despite the decrease in recorded total revenues[76]. - Operating income increased by 74% to $1.7 million for the quarter ended June 30, 2024, compared to $1.0 million in the prior year quarter, driven by a 41% growth in gross profits[85]. - Net income for the quarter was $1.4 million, or $0.06 per diluted share, compared to a net income of $0.3 million, or $0.01 per diluted share in the same quarter of the previous year[87]. Expenses and Cost Management - Selling, general and administrative (SG&A) expenses as a percentage of gross profit improved from 67% in the quarter ended June 30, 2023, to 60% in the current quarter, reflecting better cost leverage[84]. - Selling, General and Administrative (SG&A) expenses as a percentage of gross profit improved from 90% to 70% in the current year-to-date period, while SG&A expenses increased by $0.7 million (16%) due to higher headcount[95]. Procurement and Supply Chain - The gross value of all procurement transactions decreased by 51% from the second quarter of 2023, from $42.9 million to $21.0 million in the quarter ended June 30, 2024[79]. - The gross value of all procurement transactions decreased by 17% from $49.6 million to $40.9 million in the six-month period ended June 30, 2024[91]. - Supply chain disruptions continue to impact the timing of systems integration revenue, with expectations of ongoing issues for several quarters[77]. Cash Flow and Financial Position - Cash used in operating activities was $1.7 million for the six-month period ended June 30, 2024, compared to $4.0 million of cash provided in the same period of 2023[103]. - As of June 30, 2024, the company had cash and cash equivalents of $8.3 million, down from $11.8 million as of December 31, 2023[102]. Strategic Focus - The company has focused on maintenance and integration services, which typically yield higher margins and provide consistent revenue streams[75]. - The integration of AI-enabled server racks began in June 2024, contributing to revenue and earnings growth in the systems integration segment[76].

Revenue Growth - Revenue for the three-month period ended March 31, 2024, was $15.9 million, an increase of $9.3 million or 142% compared to $6.6 million in the first quarter of 2023[78] - Procurement services revenue increased significantly from $1.7 million in Q1 2023 to $11.6 million in Q1 2024, contributing to the overall revenue growth[80] Cost and Profitability - Cost of revenue as a percentage of revenue was 83% for Q1 2024, up from 74% in Q1 2023, reflecting higher costs associated with procurement services[81] - Gross profit margin for Q1 2024 was 17%, down from 26% in Q1 2023, primarily due to the higher percentage of revenue from procurement services[85] - Operating income improved by $0.9 million or 138% in Q1 2024, reaching $253,000 compared to an operating loss of $665,000 in Q1 2023[87] - Net income for Q1 2024 was $15,000 or $0.00 per share, compared to a net loss of $786,000 or $(0.04) per share in Q1 2023[89] Expenses and Financial Management - Selling, general and administrative expenses increased by $127,000 or 6% in Q1 2024, primarily due to higher compensation and professional fees[86] - The company anticipates that as the percentage of revenues from procurement services increases, gross profit margins will decrease due to lower margins associated with these services[82] - Management plans to implement cost reductions if future results do not meet expectations, which may affect product offerings and financial results[97] Cash Flow and Liquidity - Cash provided by operating activities was $2.6 million for the three-month period ended March 31, 2024, a significant improvement compared to cash used of $13.5 million in the same period of 2023[94] - Cash and cash equivalents increased to $14.4 million as of March 31, 2024, up from $11.8 million at the end of 2023[93] - Cash used in investing activities was $39,000 for the three-month period ended March 31, 2024, compared to $185,000 in the same period of 2023[95] - Cash used in financing activities was $55,000 for the three-month period ended March 31, 2024, primarily for stock purchases related to tax obligations[96] - The company believes it will continue to be profitable on a quarterly and annual basis in 2024 and beyond, indicating confidence in future cash flows[92] - The company may require additional capital for business acquisitions or to introduce new lines of business, which could impact liquidity[98] - The company has no off-balance sheet arrangements as of March 31, 2024[99] Operational Challenges - The company faced ongoing supply chain issues that impacted the timing of systems integration revenue, expected to continue for several quarters[79] - As of March 31, 2024, the company had an accumulated deficit of $66.3 million, despite recording operating and net income in the last four quarters[91] Accounting Policies - There have been no material changes to critical accounting policies since the last annual report[100]