TSS Inc(TSSI) - 2024 Q2 - Quarterly Report

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$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$1.7 million for the quarter ended June 30, 2024, compared to $1.0 million in the prior year quarter, driven by a 41$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].