TSS (TSSI) 18 May 202020 Q1 Earnings call transcript

Welcome to the TSS First Quarter 2020 Earnings Call. My name is Darrell, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note that, this conference is being recorded.

the to turn Penver. now will call John over I John, begin. you may

quarter and Good Executive call for first TSS, I'm and Darrell. this Officer you, Chief today is Chief thank Penver, to financial the John afternoon, our joining conference Thank and for TSS' Anthony TSS. everyone, you Angelini, Officer Financial President results. of on joining discuss on me XXXX call us the

to cautionary to XXXX. applies information the issued This begin as made of like I are today's regarding sensitive call forward-looking take in as conference as note contained statements, call, the which comments call. statements language and today. well we only everyone time XX, we As to will the of would May contain accurate language same on release today, statements forward-looking remind press That

events amend, TSS or replay, made this to by conference supplement call forward-looking as applicable arise otherwise indicated, otherwise required except review reflect circumstances expressly obligations the statements disclaims information or after the on or law. any or date that may update, any to

the list periodic Securities risks filings Exchange the uncertainties, affect future which of performance, the please with a For and Commission. company's may refer to and

non-GAAP financial in today's differences press In addition, will most GAAP also included A measures with is be referring these calculated reconciliation release. of financial we the measures comparable measures. to between directly the with in accordance

results and we comments the I’ll begin turn on XXXX changes and this call of then business see the quarter with a over first for the to review call coming. Anthony his our

a at first on our press quarter -- www.tssiusa.com. release is website the available financial for we copy today, So that released announcing a containing of earlier of XXXX, and our results release

are TSS, activities on significantly increased reseller reseller $X.X to million was quarter our quarter IT to services. of compared of $X.X third you'll have our much or see services And XXXX, the traditional Our and in mixed of first for the services this revenue. that million, so reselling by commenced quarter XXX%. quarter the first reflects in revenues our This the decreasing performance we of resulted XXXX. XXXX compared lower first business, margins than margins gross From

services equipment, are we and software customers perform to and integration third-party as hardware, using deliver a solution this our services then for our We and procuring completed customer.

drive new service So, across also and customer establish services help the all ecosystem factory, to an reseller customer us help can we build for services that relationships, leverage relationships. integration and of help hardware, us of our software providers our

in that we’ll for profits help margins, systems increase facility. believe integration growth these lower record the operating and of to utilization contribute business, will we services our fuel TSS. And gross improve Ultimately, overall integration we although, will net our

Absent our pandemic this, our first reflect COVID-XX business. the the on of quarter impacts results

customer facilities this or uncertainty particular, in deployments. customer compared access We had first infrastructure the saw segment, in impact to $X.X our center by facilities throughout data were and restrictions Our travel chain deemed the and its continue of quarter million pandemic related integration XX%, to Supply have a and on critical site decreased of a provider revenues systems and business. issues modular shutdowns. operate however an XXXX, deferral resulted as

have annual fees around our Now, SEC professional audit we first of is calendar incur operating we our where year expenses, quarter reporting. our also level each traditionally as highest our of and

customer XXXX development in drive to We and diversity. business in headcount also additional invested

increased last have our headcount So related expenditures from been year.

quarter. expenses this return duration an decreasing the combined years. to we do operating grow resulted business, in although, in this expenditure second loss We not expect us with in to incurring know we the expected COVID-XX anticipate So and than pandemic second time only three do for to less the the the quarter revenues revenues higher and our extent last the on and of second profitability in quarter operating

results. of let quarter me some our on that, with detail first more provide So XXXX

of revenue up of quarter revenues quarter that included the the Our XXXX XXXX. for from to $XX $XX.X $XX.X in of it's million reseller first XXXX of first that $X.X and had was million. million compared million quarter we the in fourth This

XXXX As $X.X I revenue reseller said before, million our from our included activities.

business deployments Our IT COVID-XX $X.X or $X.X our to data the to XXXX as million, $X.X services, to centers as the quarter of from quarter and XXXX, or be we was not delayed. pandemic XX%, XXX%, of offering imposed the integration The up facilities XXXX. which caused first systems in down our first reseller million business was to of a compared due XXXX, travel included million, the quarter restrictions number site compared the number were of first customer modular of

pandemic. Absent mainly business, XXXX, from of to down our business was this to integration the due or X%, constraints reseller COVID-XX compared system first quarter and other impacts $XX,XXX, negative the supply

systems the stability the the fixed business is key our volume and facility. associated for of of sustaining profits overhead the this integration with our operating Our and because increasing increasing in volume to high company, the

on As to component in due and factors. data in demand, changes quarterly volumes we other XXXX, customer witnessed including availability demand modular centers, can a fluctuate significantly for basis,

utilization reseller to more and ways integration in the are add in growth our services actively system we and this. and services customers we’re accomplish drive the of one to facility the So of seeking to which profits our to increase had

this in our first in million, and in Margins mid in was XXXX XXXX. in reported significantly X% remain quarter our quarter Our the gross decrease. XX% what the our the quarter quarter first lower first quarter than business on of from year-over-year The XXXX. the was result, caused high they of quarter of during were profit the and which first XXXX lower first reseller for we of X% the XXs to gross services margin down recorded of was our core than on impact $X.X the of what XX% the profit margin is

were administrative to and selling, Our compared up first quarter $XXX,XXX of XXXX They were first million. XX%, had in or we $X.X quarter million general of expenses the the $X.XX during XXXX. the

in prior customer development than diversity will as related periods. additional the and that business invested drive future we headcount expenses year, benefit new and our to higher were personnel Our

the to quarter XXXX after XXXX. recorded we loss operating operating $XXX,XXX profit profit of share XXXX. loss the XXXX. of first $XXX,XXX and an of share quarter a costs, first first a the in After $XXX,XXX compared in an of loss $X.X This net quarter operating in had tax per interest of XXXX, per the first compared $X.XX the or quarter of above, net in to of of or in in $XX,XXX And $XX,XXX of fourth quarter the we

first loss EBITDA, adjusted interest, to loss in quarter of compares in and amortization the years. adjusted This a Our of profit taxes, four EBITDA of first excludes $XX,XXX quarter which EBITDA of in XXXX. depreciation, was stock-based first an XXXX; our $XXX,XXX the compensation

vendors business approximately reseller XXXX, what Now where to from the collect including we’ve operating fourth positive cash reseller our had impact the to generated we sheet, the flows $X large than balance XXXX. business, looking million on in our paid activities, In during we're quarter funds quarter to sheet the our has balance a of first for of greater the business. able reseller

flow in quarter this one XXXX As the we of reseller contract cash large first reversed. situation completed

to result, $X.X to first the down in $X reseller connected down $X.X million million quarter, the quarter. and a during all payable As operations activities using cash $X fluctuations the inventories primarily and in were million in us receivables the million, down contributed during

these on a impact to our liquidity, We in trade activities minimize the activities. using able to overall to the such been finance have way structure credit as our way reseller by primary

due to possible end However, particular see to it's in basis fluctuations period. a reporting contracts at the for on a timing, quarterly reseller progress of

grow activities business on reseller hand we on of end during QX, trade XXXX. the more with in $X.X of And believe quarter at closed have but we no at financing We projects progress to the credit do our reseller We these in doing will the million XXXX. the continue of $X.X had cash we'll we adequate of this second we from the down end had contracts beginning quarter. million hand, be as

by And our our And of the integration to the payroll amount Aid, of utility the which $XXX,XXX. Relief Corona to payments loan net subsequent sum subsidiary, our QX. will costs, eight-week of loan sum to we us we the be the under the to accordance XXXX made investments decreased LLC, received. or this in There Act of the net lender and calculated for equal any eligible due to Protection and the from amount, working of no We through incurred quarter to Small approximately of for applied our bank the Economic CARES of may $XXX,XXX apply period and end but forgiveness during loan capital Business forgiven rent receive by is all covered VTC facility following of terms that guarantee loan, during proceeds effective Security the of Administration date the Program Payroll XXXX, amount a in fixed we primarily the position the end of the Act. of the for compared loss with may forgiveness

call With Anthony that, the I'll for his hand over comments. just to

John. you, Thank Okay.

explained, traditional other and the for increased in first costs included quarter our cost plans. quarter John audit including first our As our our

field furthermore, quarter, up increase chain deployments COVID-XX other supply the because the as well as the to reseller of addition ramp of and additional the as we business staff the for costs related and In business. impacted systems end in at third-party integration of our in

as we've areas then that of the normal the well as quarter So costs mentioned, which – some COVID-XX. incremental John had and basically so those as costs increased staff those were three the – impacted impact

quarter additional employees. manage additional strong safe benefit our be delays our maintain facility, a costs for and these to PPE Our with for production however, in along to social second to will facility costs our distancing looks from despite

guidance we on the year, provide pandemic of we to the back As and to of better reopening at and the the the the effect regards of IT net that. we're until effects look country, half hesitant in the industry understand

we half in confident year, we the we June. of visibility the get back as However, profitability better in feel later maintain can

call the now the open I rest believe John's covered will questions. for and

[Operator have a Capital Thank And First Yaron Main from ahead. you, Go question Naymark [ph]. we from Anthony. Instruction] [ph]

curious, well legacy so the the business, reseller Hey, on said as just you should I color. you as we Thanks. assumption guys. what that the as core underlying – business? that QX, back for Thanks all well I think is for thanks profitability expect all half, the for the for the guess as color,

of chime at as a can Sure. kind I'll in. it's previously, John it business is, and it's take choppy. The reseller new you explained and shot we

have they're a into looped days reseller advance to generally we don't we a lot XX that to visibility program. particular programs, out to be going XX know So, of in we're

of end taken year, some of additional the the a to So we we've we the expect cut also, know and know, into do have things ones program. at but there's which through we

So the got And quarter little we're now quarter between in being we a of good first conservative to core the going June. to year, of resolved. business and some that's been regards – the visibility issues supply we've half happen to back our the everything of end and second on negative will end chain saw basically at effects the and that of the deployments the

shortfall in some the So that quarter. the second we'll of up quarter pick first from

that, Beyond to into my months as the sorry going as to through the I’m like, months summer as through are rest what somebody in world kind of was cautious get just summer of we door. trying and to we're go the is, and look the things

opened as summer months through will August we the picture monitoring I the have situation, towards quarter. John, know trying don’t going September, all things how up, countries the like. a we if July As better end and want October, And situation we the we'll look up, into to June, pick et and to get estimate -- as But that to look, what to--? you get as to We're of and think cetera. fourth what November, we're hopefully, go back in that's then I of

that I think I think fairly to comment visibility you mean, the is I'd short-term is add I that solid. had Well, --

the a results. due think that is to the pandemic, And we help second Anthony place understanding longer certain the uncertainty around will the I in picture with now said, take overall have programs quarter unclear. little As just term that reseller demand

does long-term, the work to normal. public in to return resembling going busy the short-term, we've something things it how clients. over been take So, to long with for But just for

get. visibility impaired our little is to you So, more how a out further

Thanks. it. Got

we And time. at Instructions] this [Operator have questions more no

Okay. much attending things Well, today. keep We'll thank for posted. you all very

We still everything business are pushing can. for we through open and that

exit situation So, safe summer. everybody as hopefully, through the itself hopefully, we down the stay and COVID winds

today's concludes this you Thank and ladies thank And conference. you gentlemen, for participating.

You disconnect. now may