Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TSS Inc (TSSI, Financial) achieved a 33% year-over-year revenue growth, reaching $28 million in total revenue for Q2 2024.
- Operating income surged by 530%, and adjusted EBITDA increased by 331%, reflecting significant profitability improvements.
- The company successfully completed a comprehensive operational cleanup and achieved ISO certification, enhancing its operational foundation.
- TSS Inc (TSSI) expanded its production capacity, significantly increasing volume capacity and decreasing cycle time for rack integration.
- The company remains debt-free with an untapped line of credit and over $8 million in cash on hand, indicating strong financial health.
Negative Points
- Total revenue decreased by 16% in Q2 2024, primarily due to a 54% decrease in procurement revenue.
- The procurement business experienced quarter-to-quarter fluctuations, impacting overall revenue consistency.
- The rapid evolution of AI and high-performance computing infrastructure presents challenges in infrastructure procurement and planning.
- The company anticipates potential demand in 2025 that might outstrip its current capacity, necessitating further capacity expansion.
- There is uncertainty in the growth trajectory due to the rapid technological changes and the lumpiness in demand from OEM partners.
Q & A Highlights
Q: Can you provide an idea of how much of your integration business is rack-related and if there are more efficiencies to be gained as you scale?
A: We are on track to achieve our goal of 10x capacity expansion in rack integration. The mix of racks is changing, with a future increase in direct liquid-cooled solutions. We need to accommodate this in our capabilities, and we may need more power, potentially at a different facility. As for efficiencies, absolutely yes, we expect more efficiencies as we scale.
Q: Did you add around 200 employees during the second quarter, and were they put to work right away?
A: No, but we did add more people, and they were put to work as soon as they hit the front door.
Q: Are you working on Elon Musk's xAI Data Center?
A: We can't discuss end-user customers due to confidentiality agreements with our partners.
Q: What percentage of your total revenue comes from your relationship with Dell?
A: We can't publicly discuss the specifics of our relationships with partners like Dell.
Q: Are you considering alternative power sources like solar or nuclear to meet your facility's power needs?
A: We need more electric power to the facility, measured in megawatts. While solar and nuclear are options, they are not immediately feasible. We are exploring all possibilities but currently rely on traditional power sources.
Q: Can you talk about the size and scale of the financing from your partner and the lead time for CapEx before generating revenue?
A: The specifics of the financing are proprietary. However, we are very respectful of our partner's investment, and it doesn't come easy. The lead time for CapEx varies, but we have a good working relationship with our partner to manage this.
Q: How many employees did you have at the end of the quarter compared to the end of last year?
A: We had 83 employees at the end of last year and have more than doubled our headcount in the past six months.
Q: Can you discuss the duration of contracts and revenue visibility for the coming quarters?
A: We have much better signals and information exchange with our partners than ever before. While there are no guarantees, we have a trusted relationship that helps us plan for future demand and investment decisions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
