TSS (TSSI) 15 May 232023 Q1 Earnings call transcript

Ladies and gentlemen, good afternoon. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the TSS First Quarter 2023 Earnings Conference Call. Today’s conference is being recorded. [Operator Instructions] Thank you. turn over now Chief John will Officer. Financial I the to conference Penver, And

begin. may You

financial Abby. today and you, for us to quarter TSS. the Penver, conference joining everyone. President Officer Financial call on call am for XXXX TSS. is the first Dewan, Chief the joining Thank Officer discuss afternoon the our Chief Good me Executive Thank And I John on results. you for Darryll

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

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

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

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

provide I forward. our strategy some our to Darryll will will direction to over on kick call and call our going off the Darryll detail today’s and I’ll quarter overview, turn XXXX an first with results, Darryll? then discuss

financial A for press everybody. available that Hello, will copy the our be www.tssiusa.com. release Earlier first very announcing you released thank XXXX. at John, a website today, on release made of quarter much. results our we

strides on QX. great Overall, in plan our made we

strengths to were where business. not of call, our integration position customers build own drive plan that ability be to as can to demonstrate and we that alongside in This our operationally XXXX QX drive customer our latter markets in cases, heavily able high-level earnings team. we’re the capabilities OEM go to on part and selling two, up to to up ability services. new in Number develop that business, be as, single summed scale loss-making customer, must out about to one, our continue talked We were long-term and we our we systems our number on three, end existing demand restructure significant core and support We will going to Our our partner. key in focus forward. a for large OEM we and a many directly rely to build Number open our growth. a

slippage transactions, impacted the Our were were line with, of largely first representing quarter results directly in although $XXX,XXX profit. two combined by large almost reseller they in

We have quarter. the or expect to close second those transactions in

in larger something deals, to to not our call in situations, with something of commented pipeline earnings that QX on common recovered develop on. focus for While types more and continue these we we we need

in the December overall second increased fulfillment impact stack quarter the labor customer to of contract in and headcount, rack as of the a from integration lower profitability. labor this beyond. return this both activities of has the to Operations our you run higher improve During this Vice of business of to up lot factory demand. to improve costs by in progress QX, our we rate our XX% business first and done business total see Compared ‘XX. President were revenues ‘XX, Senior and XX% Marrott, Todd to efficiency including and our this our and particular. made in to efficiency our reduced significant since quarter will And our We’ve business, systems XX, in

and made We growth both have integration and hired facilities during planned growth business drive management to sales systems in quarter. our revenue this investments experienced also our an leader business. We

and are quarters, leads We see services, benefits we profitability. you over the expect, show looking results that base and We will revenues substantial more of increase will that will several a next second to expand customer generate our the anticipate for these and our investments. quarter return in our we

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

Darryll. Thanks,

several by we the first looking expected that second in As quarter. to shipped had quarter, close $X.X One Darryll were million really the at and quarter. deal said, results the reseller already first has revenue the of impacted during transactions has

any The EBITDA close us positive in second operating would quarter. the $XXX,XXX income of provided to have is allowed transactions have first to at anticipated time. two These and

moving second revenue you these our quarter, around into items quarter. should With to the turn second in profits and anticipate the

at look let’s first So the quarter.

fourth driver quarter decreased our of first XXXX revenues in the $X.X total Our in quarter first of total of or – compared driver total the compared ‘XX, revenue change was XXXX. the procurement in of quarter business revenue was the XXXX. in $X.X of quarter $X.X reseller of growth the $XX.X level million. million from Changes compares $X.X of and quarter are and system reseller main revenue Increased million million XXXX million our the primary of for to to the million. as of first compared of to $X.X in by revenue the integration the fourth This to revenue

in the fourth of million quarter of So quarter million $X.X $X.X was that XXXX and XXXX. the first in

higher business, deployment we business completed after of $X.X XX% no fourth fourth the having we of $X.X last the revenue deployments had than such as was the facilities million $X quarter and of quarter this X% facilities large our This our the or the in XXXX. quarter generated includes was Our of first And ‘XX. or MDC during quarter a quarter higher of year. during XXXX million in modular million first the than during million data deployment in center first which maintenance services, revenue $X.X

QX quarter and systems both were our significant from revenue said, in integration most perspectives. XXXX. change in was operational as of Revenues, The the I million $X.X in first

prior growth was compared XX% RAC large drove year XX% by strong preceding the growth. that from to to the of This seen fulfillment business compared our project in driven and revenue further we’ve So increase a the growth substantial quarter. and

will Our within help RAC We’ve OEM growth in at has visible quarter business in which schedule as largest levels more of we still QX. grown XX% from later We as stay our our that efficiency, our XXXX in partner. of labor in strong still level will to compared labor our the impacted issues to second these similar production the several processes also operating revenue demand not severe the and drive needed strong And in improve restructured experienced to anticipate although business is supply efficiency are year. the is chain production, what integration XXXX. availability cost. services by The be due components

$X.X reseller revenues of were quarter Our XXXX. the same the as of million the in level first

they $X.X XXXX. timing fourth is to resell As quarter control. and transactions, beyond the I said, volume compared The of million often our down were these and of procurement

first We of of commission paid, during quarter. quarter we procurement the based XXXX. during as continue agent fees the reseller and investors agent that and we agent the transactions. into this first GAAP XX were had all But on the of XXXX, recorded generated call million $XX.X $X.X we be $XX that what treatment first the we quarter revenue some can report. quarter of transaction, the that XX of of million or fourth which by perspective The the large. There, $X.X compared reseller in quarter quite in the recognized the of we to million. of accounting profit transactions transactions, of which recommend on in During transactions gross we growth will transactions also million gross amount and XXXX value the Put are business, focus revenue these have to and our

quarter We $XXX,XXX XXXX value to of account the financed transactions increased shorter higher the in we We expense interest our of for short protect Higher these and a in this rates procurement interest lower transactions deals that services most of business gross with to fourth of our time. impact these a pricing our $XX,XXX – and was associated the rates period interest earnings. down for from period for the of part of because the financed. latter for

of in the quarter during gross was XX% XX% of in first quarter total, XXXX. up XXXX, In from profit from of quarter first but it margin of the fourth down XXXX our the was XX%

compared the influenced the reseller QX up been and reseller our to reseller total is integration, have million. directly revenues first XX% factors, between total margin of of and facilities Our actual the by several mix in ‘XX, X% of to of In revenue the the revenues. systems agent the our including profits quarter gross revenues revenues XX% accounting were gross $X.X towards our first overall, transactions. compared quarter and XXXX of of XXXX, were to resale these revenues And skewed profit

and with non-recurring to P&L expenses quarter million million that Marrott. down first were in to In fourth of $XXX,XXX the of transition and was any incur compared in of QX $X.X the $XXX,XXX. CEO first we the had transition selling, don’t including $X.X had we $X.X impact transition. expect changes also leadership the the remaining XX% Our quarter of These to It – or recorded relating in administrative This was ‘XX, the the quarter XXXX. during addition our general transaction were million. from the occurred Todd leadership up we We approximately associated quarter, XXXX. the these expenses costs

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

amortization XXXX, for interest, first adjusted loss the EBITDA excludes $XXX,XXX in an and of first XXXX. which quarter of and compared of that the was of depreciation, EBITDA, adjusted Our to compensation, a $XX,XXX stock-based profit taxes, quarter

to sheet. the balance Turning

due the remains partially events balance sheet, material balance and reseller changes to inventory the our and in receipts At definitely but approximately a the at are payable was impact balances customers $XX cash inventory end vendors payable cash those deferred transactions. to This resulted reseller yet during our timing position number million reseller had by be vendors sheet of of reversed year-end cost XXXX, payments the healthy. Our on increase since we offset quarter. of projects. This transactions, were an primarily paid paid decrease payable The has around XXXX, and accounts transaction the million, of transaction timing even we and in procurement pay in we when in increases first April. for accounts reseller to end to the same for our cash those of related completed to a we of are to related by of our a now the this a able $X in increase which that

to of XXXX as week, another line credit customer to we credit facility are feel financing and strength as looking us to continue also for $X.X assist future credit provides balance during to at activities ways continue cash flexibility of us our with financial and attempt base. renewed business we the SASSA the term Bank. about us and This grow trade additional good We reseller to line We will have our growth to the diversify sheet, of XX-month beyond. believe the we extended was adequate in Last with it revolving flows. growing available million utilize we we and

give the XXXX. back that, comments With we for I’ll Darryll. business the evolving the Darryll how Thanks, remainder to see some over over call and of

thank John, Hey, you.

revisited of TSS, I outset plan moving our fronts. for the At we’re all and the quickly Okay. call on today,

Let me kind of that. review

business. with Let’s in systems efficiency our begin integration operational

in our scale. We are lower we because labor for the force, our our gain improved to important the costs, balancing labor between assembly do overall provide and process lines direct real velocity to intent thing have to and a flow that’s

We compared this helps to strength a the projects. do key from product based was get customer, confidence are signal in XXXX. and this business we now into the balance to of had visibility our We and QX, will Our XX% which that out XX%. good a progress demand over earlier, of our customer on increased play first and us better rack quarter lot. In we relationships year QX, stack getting our the the upcoming by a

the expand to current run rates. We even and continue this space are business expecting on from

competitive our capabilities we of our and are to our a A our There more require in new on and integration offerings in We is systems service. value of have challenging also differentiation lower-cost refocused integrators, and deployment. performed OEM are with glove customers combination associated those that key white the integration larger from flexibility but business. customers programs other in often more levels our customization greater

we customer more mindful As competitive factory programs. our efficiently, invest a onboard systems we in that differentiator. speed to and of run the to we is have flexibility This are

have in we honed this our are resonates As finding we on messaging, with customers. it

Second, we In leader has SI team building us impact. out with as made with his are an mentioned months a immediate I in earlier. first players. our six business, eight our Todd Todd

the weeks business, customer with are announced experienced we as that facilities new believe Todd, the today well customers business in potential that we I impacting, Beyond ago, involved exciting am our five for release. hired our significantly an I as management in with exciting more existing now press and space. this revenue in conversations And leader

We profitable business our in facilities business. and are each maniacally our of our management segments in and focused integration and business resale fulfillment growth stack on rack

facilities we in and potential are potential, Our a expand new this lot business. with to of conversations partners has business management active

we a with centers. times note Component to are complex. to this longer track. this industry modular deploys and integration business play the and it’s maintains important data critical services. data gen long and leader and and on step, lead that a feel Hiring sell term reminder, and about our We modular excited demand reseller space. business, right a and be process we this centers the to is time, pre-integrated takes business we As to a on continue configured compared are it’s leaders enclosed consulted is this Growing

We have management urgency in a TSS. team the at high level of

restructuring high-value have integration opportunities. on while days, business market paired our to talent, explore with we It’s and deployment for is we begun so of bringing early believe there and but integration critical infrastructure. And systems maintenance new new demand

business. convinced In I joined months am because opportunity it summary, about last and to TSS have that I I there I significant going to said more I it. again five our this am later. believe say grow I because a is believe in our call, profitably business

tried to experienced of carefully have are forward. We lower the today we higher run rate the the QX and costs QX we those to taking and explain going costs steps

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

With any and let to the call me that, may turn over back John? you questions John, we will over have. go

see listeners. if Okay. have any let’s from Actually, questions Abby, we our

at [Operator Maj question apologize. turn Instructions] We with no do GeoInvesting. And will with – I I received from just questions Soueidan a this time,

open. is line Your

a Thanks nice have Darryll. the your from – just for the quick of Hi again away question today. largest diversification summary I in OEM. terms on

what doing the I we what in to you your could be future? you And that? expect that about think but that? upon are to And do want to how – touched are maybe like of kind what I the it, know more customers plans

where business, diversification, you when general an stack or asking Well, in say are a – and system in area in you like integration of about or…? you are asking you our rack particular,

Yes.

I think am about really similar really integrations the – are there. where we I thinking

that Okay. end customer a Well, do delight everything and to you think that from and jump. customer we take we I can a demand user. we Maj, And we know signal their

will We will do continue and it do that, we to with scale.

work that the been Todd capability facility to our leading through we work. has growth the do of So, more have volume now within good that

us on particular with expanding. And development I relationship Federal OEM to got our tremendous we our also a leader is mentioned, have now. going and – team the have as help He with also customer. focus business that We we we are hired,

demand you are is, track We enough, it’s seeing if No increasing we never sales will, early are our sector force our results improving. never Unfortunately, that and doing is we good it of pipeline, how and sales enough. better. how but force, it’s matter our implementation,

exciting conversations a a and time teaming is earlier or expand time the And in that have have there is up their of on just no for also space, process. and if supply, announced really are Jim facilities business, units, selling the Jim get digging the few these who lead our we a today, these Jim is the to lead we leader time our addition modular absolutely business, will, lead we in team had and that into front with in have that think required you that Olivier, to doubt that building our Woodward will weeks. data of I is I we opportunity out management units area center in deploying and

So, give the you a and user – customer companies There center. data buy are what to in consulting that specific. let modular end whether me influence a on

to haven’t talked those people. We ever

now I to bear an will influence that are We is them. talking That activity think hopefully fruit.

additional drive We with are initiated And there, beyond need which are And more times, many, demand exciting. conversations OEMs. conversations looking we many we at we having have we what said go as today. to is doing some

receiving, We and the in get we driver have now make seat have happen. it to got been

So, there dev a little in are We a areas business the some with about bus talked [indiscernible] new bit leader. business. our

more more insight. you that our little partner, and sell and inside more do gives customer, our help Jim’s Hopefully, Jim are a do leadership our Woodward business. teaming in business of facilities management going with them We exciting with will we existing up things stack a rack lot the with bit to of that

at And remarks. call back this closing Darryll Mr. to to [Operator like the time, Dewan further turn for questions with Instructions] no would I

where is what so in we to call of Thank your appreciate, acceptable, do, your to an the this we today got being Thank have I everybody certainly, with we are order. think look have we I plan. at our here, forward wrap explained appreciate, appreciates end for But and you interest up, profitable do participating you a not sharing QX today and results with Hopefully, period, you. the plan. not update support, we To story. team we

thank keep and safe. So, you

participation. this conference We and today’s you your call. concludes for Ladies gentlemen, thank

disconnect. You now may