TSS (TSSI) 3 Apr 232022 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the TSS Fourth Quarter and Fiscal 2022 Earnings Call. I would now like to turn the call over to John Penver, Chief Financial Officer. Please go ahead.

Thank you, Mandeep. Good afternoon, everyone. us and conference results. our joining our to for quarter fourth fiscal you on call TSS’ discuss Thank ‘XX financial am the Chief joining the Executive Officer the John of Chief I and TSS. TSS President Financial and me is call Officer on of Darryll Dewan, today Penver,

to would same or which required may the release or raise time-sensitive and April events except to statements everyone forward-looking contained call comments the to X, on that press are to language language this take today’s any we replay begin This today, as like as cautionary indicated, or forward-looking otherwise As or obligations note issued circumstances law. as information update, disclaims forward-looking only regarding applicable That today. of we applies XXXX. amend, call, to TSS I information on otherwise call. reflect made statements after remind of conference accurate the made well call date expressly statements supplement by the as in statements, conference contain will any review

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

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

strategy I overview, to and will over then provide Darryll discuss the our and off Darryll? results then review to will XXXX turn of Darryll direction. call an with fourth our fiscal kick a our quarter today and call

on out, fourth of website release our everybody. at for XXXX. quarter hello, financial will available Earlier results www.tssiusa.com. our copy pointed we a issued press the and announcing release made A John, and fiscal be for that today, as Thanks, John

fourth business. the several our important in we changes quarter, experienced During

complexity programs a changes were was and new what the which our November labor customer announced in First, I CEO customer activity. President There we company projected. our all as the we operating requirement of units of business we CEO. customer, absolute and leadership occurred delivered and the very XX other roles, integration on Further, period during by within busy transition which joined required program for systems of extra The overtime that beyond we business, certain had in did. which

on I this working it say later, say, suffice will to more have now these but to issues. out we’re

to which our XXXX. to We expect cutting remain very is this risk, we of labor now of the execution The cost at prudent not put continue inflated markets QX level thing tight, into costs do.

We are materially and many be future. adjusted QX. not XXXX positive of to in but cost higher persist base them EBITDA forward. business for steps past we taking There remediate to expect continue to do point trends a experiencing that going We strong were to are positive to the

center XXXX data MDC modular XXX% $X.X year. increased deployments, by or or versus Our prior million during

times compared became components our The improved difficult to XXXX available. lead carried or that allowed also climate source were systems more to to supply revenues grow XX% by as long integration readily chain

As a that and be business smaller showed lumpy, company, can we our in QX.

was business integration MDC solid. Our but and business our reseller were down, systems

operational the the bottom quarter report but quarter. from transition. was result, suffered positive we line and fourth to for our a adjusted strong, managed the executive in As revenue our overruns Still, cost EBITDA

while the number adding within segments. in business the three, new profitability; to their current able and number be business further; customers making improve to changes objectives: needed the business We positioning the that, grow company restate customers investing manage current to manage let new profitability, improve the current changes on market are two, it to making and number one, focused scale to three to needed to me strategically

but let it John further, this off provide back financial will me into to detail. I to first some turn dive

Thanks, Darryll.

compared to XXXX, the and We As company $XX.X improved at looking compared XXXX. from XXXX, compared made loss by positive XXXX million. profit as when $X.X XXXX of results improvement. income to our in in operating said, a a XXXX $X $XXX,XXX million or XX% gross to our $XXX,XXX adjusted by or back We we grew EBITDA we XXXX. increased by our our over million in to XX% $X.X to progress million $X.X a operating Darryll million revenues in increased of We

our no to for $X We million operating of managed cash debt, leases. us debt pay flows our long-term off from leaving long-term with also operating except XXXX, during

to details. Now some the turn let with more P&L me

in Our $XX.X main change integration quarter fourth in million million $X.X in of offset and quarter the total reseller of the compared Changes compared $X.X to XXXX. fourth million XXXX was to XXXX increase revenue $XX.X the the compared of This XXXX, revenue decreased in revenue to for the level as the driver by a from XXXX from quarter of fourth million. XXXX. This revenues third procurement was in the are quarter XXXX. reseller fourth total systems million up in quarter of revenues our of million by $X.X the $XX.X of of million to fourth $X.X our quarter of

and or container XXXX. of recorded XX% of $X.X in QX, $X.X due third lower This revenue temporary the the services, center deployment customer the or the than million was $X.X quarter slowdown million of quarter maintenance business, data XXXX. lower million such during quarter from timing includes during generated had Our XXXX. we a facilities which in million revenues of deployment the programs. of than We fourth to XX% was $X.X revenue our and availability modular fourth This largely

deployment of up again XXXX. in first of quarter picked has level the Our

revenues our XX% through deployment grew million deployments our a for XXXX. of backlog XXXX work that for Darryll during Now year, overall the have our by business the in $XX.X their to of been million was XXX% increase as deployments overall year. of the grew as delayed XXXX facilities total pandemic. of the during This or driven And MDCs said, $X.X customers

$X.X full Our of of XXXX. quarter were fourth the year compared $X.X was fourth This This the an revenues our XX% quarter XXXX driven quarter customer OEM particular, cost referred of to for integration of of and million including a first in and by in million fourth deliveries largest from presented the to XXXX. in growth systems or our the liquid the the driver million business, primary Rack Darryll’s offering earlier. complex in increase the excess cooling solutions, new and $X.X

chain the and of the improved XXXX. XX% This by challenges XXXX. definitely the have XXXX. year-to-date a overall during first from or integration On supply business in $X.X revenues operation issues million And XXXX increased where half they to were in more $X.X impacted supply million basis, by from have chain was

takes recognizing for completing a us from on work. our only However, issues and a a single this to that to project customer play from absence and be project it the component then prevent would delayed, revenue

on integration will supply us. We of going anticipate in anticipate costs. And the integration higher go future recapture to levels who the continue as into at customers quarter from into that our levels feedback to to XXXX. level these we our based from for interact supply issues stay ongoing business vendors XXXX We do next our services operating material improve of to our increase pricing will to foreseeable and able we similar some were

control. million of fourth transactions $X.X but Our $X.X XX% and third decreased the the they XXXX, the or than our XXXX. million revenues by compared quarter reseller often quarter The beyond reseller volume is of procurement to of these were timing higher and

to total volume the year, in XXXX that the For from dollar increased reseller XXXX. of we million $XX processed in $XX million transactions

the the fee we of have commission agent amount during of GAAP any these of or fourth that were transactions, transactions we as Now call we reseller where XXXX, revenue recognize quarter paid. most procurement what

the $X.X of of $XXX,XXX The the to allowed reported based Now and in million value profits fourth that quarter. large, accounting compared of can fourth into some million quarter in $XX volume these of higher was quarter to gross the But on transactions, the $XX the increase translated $XX of by reseller the business million during transactions the this fourth the treatment fact, quarter. be of revenue quarter the third in transactions million agent services from procurement XXXX. during to compared gross $XX million and all agent us and quite

year-to-date to $XX.X the from XX% million on our gross in So of million profits basis, $X.X level to higher by decreased due revenue procurement compared to $XX.X or XXXX a $X.X and million by agent have to million reseller But XXXX services our when compared transactions. increased ‘XX. in

to increased We for offset by the in fourth interest margin pricing by from XX% in our recommend these the to the profits. our deals XX% the increase on of fourth In procurement most period interest $X.X XXXX that of increased in gross Higher this latter We financing profit from our the interest for time. in short a business, for was we investors part of and We gross services caused profit be account transactions. protect rate to our up of these financed costs quarter during continue and total, to higher of focus quarter XXXX. profit rates will report. generated million an which

compared of our total revenues revenues is is And the gross and QX facilities our of the of type mix revenues. our, of towards reseller margin which between are In factors, the seeing Our fourth arrangements, XX% and business total XXXX. our margin revenues for influenced the improved agent revenues in number gross XX% revenues our accounting prior to sorry, we skewed was were compared directly XXXX, integration, year. a the reseller including quarter by profit our profit the reseller to systems maintenance reseller of of why

of decline reseller improved our I sorry, our or through our in XXX,XXX in business, to total our procurement gross were despite profits the higher XXXX for in we of a alluding for did that revenues XXXX. from revenues a to prior was fiscal compared This to the earlier. Absent impact overall, explains by margins And value, ‘XX, increased see and helps business XX% dollar the year. XXXX. in where From in profit gross in XXXX compared gross in costs to XX% year margin in actual XX% mix profit XX% lower integration – $XXX,XXX systems XX% perspective, revenues this QX

from remaining the compared for had million. in $XXX,XXX selling, XXXX. The of our year, higher were CEO selling, costs, along quarter. to $X.X staffing Approximately general to XX% attributable Our our fourth and and of consider due integration systems costs, one-time the quarter was a what of expenses the expenses This expenses the the $X.X increase increase was million We expenses increase. incurred up or our And quarter million with fourth $X.X level in obviously and during this fourth the to administrative in portion million this the connection XXXX with occurred expense. $XXX,XXX we in caused the was general administrative change and primarily higher the were of during XXXX. employee The transition of higher or of $X this CEO business. XX% related that

the The clear incurring. of in also cost transition Not activity OEM delivering labor during within executive executing So new level we’re solution the let and unit, option. in changes business combination quarter. costs overtime for me or the more an of personal about the the resulted but customers be excess leadership, offerings incurred the our our and water-cooled partner our is required not program from more of high

will these to QX these but take planned revenue costs how model changes with back higher executing effect, our sourcing than remain and labor should normal are Costs in into alignment as see and training will plans come normalize. We thereafter. clearly

never of above, our difference. Discussing that the an $XXX,XXX positive should of cost a excesses in but to XXXX this After fourth response loss fourth occurred is CEO quarter deliver an everyone customers and positive, of customer cost I to complex and trust to we programs. loss operating the the $XXX,XXX us in on compared statement demand of remind represents XXXX. of The most recorded quarter in is operating this new transition

XXXX, operating loss fiscal to in we ‘XX, an operating $XXX,XXX of in compared operating showing million year. income recorded $X.X of in have an XXXX previous improvement of $XXX,XXX income For the to compared

the in and After of loss $XXX,XXX fourth a loss or net costs, we compared This $X.XX XXXX. or tax a interest in of had net quarter share share of to a the quarter $XXX,XXX XXXX. fourth of $X.XX a

net in $X.X our net share and year $X.XX $X.XX which $XX,XXX, to share XXXX, per was calendar of a in basis, the X,XXX,XXX is which loss or million. XXXX For of was an compared loss improvement a

quarter a costs profit the EBITDA XXXX quarter Our $XXX,XXX of which of excludes the an adjusted stock-based XXXX adjusted income calendar in taxes, $XXX,XXX transition the amortization, of fourth of was in in EBITDA, a compensation of year fourth we XXXX. interest, adjusted $XX,XXX an to that improved by $X,XXX,XXX that had compared $X.X depreciation, profit and CEO XXXX adjusted XXXX, EBITDA to our compared XXXX. million of in to basis, meaning adjusted we in income EBITDA On compared EBITDA

turning Now to balance the sheet.

healthy. balance cash yet collecting but due the Our a the as to proceeds in costs pay sheet related year service cash remains providers. the balance and payments we transactions on reseller the transactions. of position million since customers payable to vendors year of many receipts but our transactions cash definitely around The ended accounts from events deferred had timing comparable and accounts with had are reseller sheet has and on balances and related $XX inventory material been of timing where increase impact changes payable hand, We reseller in and primarily over our we’ve of to the the a prior level

We to us that to the it adequate continue credit beyond. us cash of growing continue to the balance assist to to flows. we we future as believe in about and during We this reseller ways have and financing will grow looking good our XXXX business at available utilize strength trade activities feel are sheet

all Capital. our existing outstanding balances, We to accrued this using In repaid on interest repay debt able MHW full to July, from funds the of notes were in hand. we including payable

where receive be been in debt, from included since have the proceeds our anti-dilutive with underlying outstanding in July. to per $X.X have ‘XX. warrant the share us they those this in computation XXXX except allowing exercise million back warrants periods in exercised and MHW connection it Now Those shares in had that been warrants been will earnings granted issued for

have now a sheet. our So debt we outstanding lease-related liabilities, long-term clean and excluding no balance

evolving his the Darryll. back hand Thanks, the to we will I Darryll call into on how that, see fourth With business and for the comments quarter XXXX.

John, Appreciate thank you a lot very Hey, much. numbers. of

in Let comments focusing what on me make on. couple a we’re of think I

So the investors my back was first with first call in in day November. job, my

need our I’m additional opportunity months good have share view excitement the X under to about underline future. John it’s belt, my just of business point future. share presented I of the excited to each now my my about to So and what with that. very this of really And our

CEO that which ended we have So months, lasted on XXXX. to XX about transition as reported, X.X we as December CEO structured

financials You how how quantify handoff can see just QX, this impacted to was. our in but it’s really this hard helpful

adjustments in selection, today. a I make you and put so execute. many my data did the will you That’s I liken more and being with and words do. us and what information role and player tactical development, valuable the to go-forward allowed coach, right address what quickly communicate past, form historically strategic head game the people in we right of plan – and me you mainly allowed While the sharing in we also to jobs, which goals, it the

that. that We’re do we making sure

of our customer, have have been them. this we with largest we time change, engaged by and challenged During

have more I The they business. very was they scale message our yet to value me far guessed, clear, ability than TSS to question our would

are We this on. challenge head taking

deliver more We ability to in in issues customer to address cost plus in capabilities we improve remediate have issues and volume that to short-term order investing and impacted talent to are our QX, the programs complexity. in

our strategy. considering growth aggressively are we Finally,

our to we before. quarter-by-quarter our are and challenges optimizing this and To clearly in opportunities. reduce and which hired to So we’ve material to lot integration on let labor gaining our to its execution. systems one, customer total success Number but engagement. operational leaders our and performance new have Number business, plan integration also which labor amid have maker plans me three, compensation two, invest our taken will visibility our Number has a we’ve demand address visibility, improved sales we incentive has new didn’t cost in its better where implemented candidly, Number four, to business, for better. focused action. we the be demand force we QX people systems very can issues training. we foster Critical

have demand, level volumes. to we We swings which will dramatic in with lived higher work at out

and within functions hindered our ability that five, we’ve organization people team. as leadership work talent or and identified the Number remove a to

set do operating We growth. Number planned will continue profitable are driving goals six, to annual this. XXXX for that based on

We also internally based have on a but stretch goal growth. it’s profitable all

plan have scale. we to quick taken to action Now

facility. cost our Rock analysis Number and the management includes one, in operational integration updates our needed underway. is management. to Round of data improvement automation is to This schedules, warehouse systems, This improve

industrial a business an flow, predictability for provide We and allowing our have scale our business. systems of we of are completing and process review, will rack our namely design – stack which redesign and integration

Xx that Xx. building We capabilities, profitably to facility our of facility, over Xx current to are in scale our to Xx

two operational the the with activity Number here is demand on improvement, gas. generation step

generation our growth. to customer demand we as our relationship goal monetize ways internally to profitable So, is to build and find say,

have new key units, business our demand made of management and systems in on facilities a focusing to generation and growth. revenue We couple hires generate integration our

hires One in goals top logos to of reach from company. will our of us These the new goals. revenue our our five obtain to is help XX% XXXX company

begun the remain very strategic things identify to value ways business. that the additional to to planning doing the add why This our excited process reasons relate We company. translates have to about to I

that and reseller, core as these We systems have management we overlap. facilities report functionally, businesses businesses integration,

Round centers management over and deployment hand may facilities systems and for our in in maintenance. business data then integration we them complete team the modular For to example, our Rock, facility

capabilities our performed offerings but stuff. with will, There the larger, often our and is OEM to increasing we do you in customer A other integration those leverage the deployment, from cost in to more role that combination are and our markets. our positioning technology our we new playing Clearly, is associated hard or We more lower white require this if an integrators, glove of key of service. the challenging programs, flexibility value customers need growth lives.

opportunities capture modular to require the such extensions Our large edge services, centers data growing and the of offerings, center, and more be XG IT We may OEM growth to ranging go-to-market telco non-commodity infrastructure. for directed computing markets their partner plans and capability. as has to offerings hyperscale high-value to current our partner of for are want from enterprise data market

We prove to customer customers new invest and our in alongside current will XXXX. differentiation our

new strong and opportunities to have a We attack. base of business, teams management energized market

I have joined TSS because our grow to business. I believe opportunity significant is a there profitably

We have truth and The tried investments. as QX operating view explain we today the QX is, not experiencing. but costs to I instead do carefully are as higher these costs,

in the to investing are substantially grow sales and and and able We be systems company. profitably our to people, training

a will and successful short and plan game We for window our emerge from the future players for shareholders. with the right this the company

over cheers. John? With over the we you that, and lose Did back to may questions turn we call have. I will John, any John, can go

should Mandeep moderate to anybody We any hand may have. the Sorry. that questions call to back

Very good.

comes the Instructions] line first Maj Our proceed. from of [Operator [ph]. question Gail Soueidan Please from Investing

great some Thanks. perspective. things and Darryll. Hello really been there It’s call a in

hear Darryll. like am answered the base. your you had you some diversifying I your of questions. lot of this sorry, I was But of am here, my a locking might your outside. – question think reach to customer I I one goals some noise so

that doing might think really concentration. to do view said Is like easier reduce that that. organically? are those long of there XX% customer it reach want acquisition revenue goals, all point And the an to to from way I be you of that opportunities from you get

your this team that with believe you with answer I in Maj, is it we the when for hear and I the By our the organically, and mode, would it good mean? current think did voice, thanks does current – mean way, way. – question. say you that can I to do what our operating

Yes.

step yes. start. want we not in to the direction. XX% short but is where it’s answer So, the a to is up, end It’s

of current of XXXX? to how kind – that do grow inorganically, able right I you acquisitions? your so be exists do mean, outside to that’s what now So, that from it to current to opportunities – your infrastructure. through look team possibility in that the is like going What market Is and Is type – that? – there are does

mean are I Yes. we plan. that building

facts maybe are expression is I friendly. there it’s think an that all the

sorts, that what be at now, all could market. the anything. I looking we a who in us the picture, a would up at to in knowledge to like – where you it facilities, looked revenue platform that Right our past, or will, is market are is that a leverages ways our who and flow to are people we in avenues build partner So, in going, bigger a Ultimately, find have playing ways of opens if expertise, of combination our new either the recurring of revenue acquire. new

building I anybody to now, that heady, Board and are sense. kind makes but of am sounds So, – the that if on Right is at scale against through good think I I looking acquisition not we know don’t plan. team management ways the they

picture We to of time, trying same growth, is is at the I go because where to at too, growth. dull. growth do two cost profitable give going which any need bigger to grow to up. the want tactical we But growth that underline us kind when are tactical strategic is tactical which things we

scale, is our new better to operations So, build formally look do up sure and much manage did demand signal key manage clean than past in get for and time for at we the with operations, properly profitably. that that opportunities – growth a from our this customer, we tactical better our same well make the

out to and you that ways would might you evaluate if you question, too, at the can – of Great. the Darryll, because your Are but make minutes consistent? smooth one more are there lumpy. I first some resale work and them going. get you volatile few things help looking call, can is think there can missed address I be business And are and that that quite

you questions. can’t Good I am than and questions. you good call. more going three shut have another No, off to Yes.

just I OEM with alongside especially Fed customers, hired here We some the lady, efforts business Maj. fun in key am development a and So, to our space our having space. work in the

We the skill doesn’t demand thing customer build kind if to more expect you one happen. the and knowledge her of, coverage, allow of if happen, thing lady gives another will that that this and set does her our us us will,

So, we are the game. in pipeline development

We demand. have got help out is is right. have to oftentimes enough an us coverage smooth of the lumpiness The to expression there football,

wind, You throw run the the score. you

throwing are win a you or score, big you either If you lose big.

We have got which effect pipeline. to what up about building game, establish our is is running talking in are we

Great. That’s I all got.

Alright. Happy to you. to talk

bet. You

to Darryll would call over closing to I now like turn the for Dewan remarks.

Okay.

little have I closed I out as have am about very of But I schedule. As think team. I said said business excited ahead the our earlier, might I and earlier, a

of and who we win. building have a to team We to that’s more exciting, work people got want are some And do.

also As investments make reduce carefully to we need improve and we then mentioned, to we working operating scale. costs the them and are our ways on

also I this will and and I stronger think exciting not to and our our we our from be a customers earlier, but emerge, shareholders. employees, company period as to hopefully only also as to said more

So, our am appreciate everybody’s I proud say of with support like moderator. here, you. I back and it will I that, to would and our team. thank to help I turn

today’s participation. conclude call. gentlemen. and ladies does This you for your you, Thank Thank

You now disconnect. may