We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
TSS Stock Drops 13.2% Despite Record Q4 Earnings & AI Growth
Read MoreHide Full Article
Shares of TSS, Inc. (TSSI - Free Report) have lost 13.2% since reporting fourth-quarter 2024 results. This decline significantly outpaces the S&P 500 index’s 1.6% fall over the same period. Over the past month, the TSSI stock has dropped 19.8%, underperforming the S&P 500’s 4.1% dip. The stock's performance suggests a strong reaction from investors despite robust earnings, likely influenced by forward-looking factors, such as margin variability and capital expenditure.
Revenue & EPS Surge Y/Y on AI Demand
TSS posted a substantial 105% revenue upsurge in the fourth quarter of 2024 to $50 million from $24.4 million in the prior-year period. Top-line growth was fueled by strength across all three business segments. Systems integration, a higher-margin segment that includes AI rack solutions, led the charge with a 264% rally to $7.9 million. Procurement revenues jumped 95% to $40.5 million, while facilities management increased 11% to $1.6 million.
Net income for the quarter skyrocketed 471% year over year to $1.9 million from $335,000. Diluted earnings per share (EPS) surged 300% to 8 cents from 2 cents in the year-ago quarter. Gross profit soared 121% to $7.2 million, whereas adjusted EBITDA climbed 267% to $3.4 million.
Systems Integration & AI Rack Momentum: The systems integration segment has become a central growth engine for TSS. In 2024, revenues for this unit surged 157% to $22.6 million, reflecting heightened demand for AI-enabled infrastructure. This business grew from $2.2 million in the fourth quarter of 2023 to $7.9 million. The multi-year agreement with the company’s largest customer contributed to this momentum, enhancing revenue visibility and supporting capital investments for expanded integration capacity.
Procurement Services’ Expansion: Procurement services represented the bulk of revenues, skyrocketing 205% to $117.5 million for the year. Fourth-quarter revenues in this segment nearly doubled to $40.5 million. Though lower in margin, procurement remains pivotal to top-line growth. TSS noted that a large portion of these transactions are linked to federal government demand, introducing seasonal fluctuations.
Facilities Management: The facilities management segment, primarily related to modular data centers (MDCs), reported $1.6 million in fourth-quarter revenues, up 11% year over year. Though comprising just 5% of total revenues, this unit boasts a robust gross margin, averaging 62% for the year, up from 57% in 2023. Management sees MDCs as a strategic long-term growth lever, especially as enterprises adopt AI infrastructures requiring flexible deployment models.
Management Commentary
CEO Darryll Dewan characterized 2024 as a "transformative" year, citing not only revenue and EPS records but also operational milestones. He emphasized the rapid evolution of AI technology and its implications for rack integration, power and cooling infrastructure.
The Georgetown, TX-based facility, expected to be fully operational by June 2025, was highlighted as a cornerstone for future growth. The new facility more than doubles operating space and increases power capacity dramatically from an initially planned 4.5 megawatts to an eventual 40 megawatts, reflecting the company’s adaptation to emerging AI chip demands.
CFO Danny Chism pointed to improved operational efficiency, with SG&A expenses as a percentage of gross profit dropping year over year to 59% from 76%. He also noted that adjusted EBITDA for 2024 soared 283% to $10.2 million, while the cash flow from operations swung from a negative $8.3 million in 2023 to a positive $15.3 million in 2024.
Key Drivers
TSS's financial results were driven by the increasing demand for AI-driven data infrastructure. The multi-year customer agreement insulated the company from some of the volatility in supply and demand while justifying significant capital investment. Pricing for rack integration services is expected to evolve alongside the complexity and value of deployments.
Seasonality in procurement revenues, along with the company's large exposure to a single customer, may have contributed to investor caution despite otherwise strong results. Additionally, one-time severance costs in the fourth quarter slightly dampened net income.
Outlook
Management expects first-quarter 2025 revenues to exceed the fourth-quarter 2024 actuals. The integration segment is projected to outpace the prior-quarter performance. For the year, adjusted EBITDA is forecast to be at least 50% higher than that reported in 2024. However, GAAP net income may face temporary pressure from depreciation and interest costs associated with the new facility.
The company remains focused on long-term profitability, with expectations for improved pricing in rack integration and higher utilization rates at the new facility, contributing to elevated returns on invested capital.
Other Developments
TSS made notable strides in infrastructure investment in the fourth quarter of 2024, securing a $20-million term loan from Susser Bank (with an optional $5-million increase) to fund its new Georgetown facility. The build-out, including advanced power and cooling capabilities, is central to supporting the company's long-term growth ambitions. Additionally, TSSI received ISO certification and completed uplisting to the Nasdaq, underscoring its operational maturity.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
TSS Stock Drops 13.2% Despite Record Q4 Earnings & AI Growth
Shares of TSS, Inc. (TSSI - Free Report) have lost 13.2% since reporting fourth-quarter 2024 results. This decline significantly outpaces the S&P 500 index’s 1.6% fall over the same period. Over the past month, the TSSI stock has dropped 19.8%, underperforming the S&P 500’s 4.1% dip. The stock's performance suggests a strong reaction from investors despite robust earnings, likely influenced by forward-looking factors, such as margin variability and capital expenditure.
Revenue & EPS Surge Y/Y on AI Demand
TSS posted a substantial 105% revenue upsurge in the fourth quarter of 2024 to $50 million from $24.4 million in the prior-year period. Top-line growth was fueled by strength across all three business segments. Systems integration, a higher-margin segment that includes AI rack solutions, led the charge with a 264% rally to $7.9 million. Procurement revenues jumped 95% to $40.5 million, while facilities management increased 11% to $1.6 million.
Net income for the quarter skyrocketed 471% year over year to $1.9 million from $335,000. Diluted earnings per share (EPS) surged 300% to 8 cents from 2 cents in the year-ago quarter. Gross profit soared 121% to $7.2 million, whereas adjusted EBITDA climbed 267% to $3.4 million.
TSS Inc. Price, Consensus and EPS Surprise
TSS Inc. price-consensus-eps-surprise-chart | TSS Inc. Quote
Segment Highlights & Business Metrics
Systems Integration & AI Rack Momentum: The systems integration segment has become a central growth engine for TSS. In 2024, revenues for this unit surged 157% to $22.6 million, reflecting heightened demand for AI-enabled infrastructure. This business grew from $2.2 million in the fourth quarter of 2023 to $7.9 million. The multi-year agreement with the company’s largest customer contributed to this momentum, enhancing revenue visibility and supporting capital investments for expanded integration capacity.
Procurement Services’ Expansion: Procurement services represented the bulk of revenues, skyrocketing 205% to $117.5 million for the year. Fourth-quarter revenues in this segment nearly doubled to $40.5 million. Though lower in margin, procurement remains pivotal to top-line growth. TSS noted that a large portion of these transactions are linked to federal government demand, introducing seasonal fluctuations.
Facilities Management: The facilities management segment, primarily related to modular data centers (MDCs), reported $1.6 million in fourth-quarter revenues, up 11% year over year. Though comprising just 5% of total revenues, this unit boasts a robust gross margin, averaging 62% for the year, up from 57% in 2023. Management sees MDCs as a strategic long-term growth lever, especially as enterprises adopt AI infrastructures requiring flexible deployment models.
Management Commentary
CEO Darryll Dewan characterized 2024 as a "transformative" year, citing not only revenue and EPS records but also operational milestones. He emphasized the rapid evolution of AI technology and its implications for rack integration, power and cooling infrastructure.
The Georgetown, TX-based facility, expected to be fully operational by June 2025, was highlighted as a cornerstone for future growth. The new facility more than doubles operating space and increases power capacity dramatically from an initially planned 4.5 megawatts to an eventual 40 megawatts, reflecting the company’s adaptation to emerging AI chip demands.
CFO Danny Chism pointed to improved operational efficiency, with SG&A expenses as a percentage of gross profit dropping year over year to 59% from 76%. He also noted that adjusted EBITDA for 2024 soared 283% to $10.2 million, while the cash flow from operations swung from a negative $8.3 million in 2023 to a positive $15.3 million in 2024.
Key Drivers
TSS's financial results were driven by the increasing demand for AI-driven data infrastructure. The multi-year customer agreement insulated the company from some of the volatility in supply and demand while justifying significant capital investment. Pricing for rack integration services is expected to evolve alongside the complexity and value of deployments.
Seasonality in procurement revenues, along with the company's large exposure to a single customer, may have contributed to investor caution despite otherwise strong results. Additionally, one-time severance costs in the fourth quarter slightly dampened net income.
Outlook
Management expects first-quarter 2025 revenues to exceed the fourth-quarter 2024 actuals. The integration segment is projected to outpace the prior-quarter performance. For the year, adjusted EBITDA is forecast to be at least 50% higher than that reported in 2024. However, GAAP net income may face temporary pressure from depreciation and interest costs associated with the new facility.
The company remains focused on long-term profitability, with expectations for improved pricing in rack integration and higher utilization rates at the new facility, contributing to elevated returns on invested capital.
Other Developments
TSS made notable strides in infrastructure investment in the fourth quarter of 2024, securing a $20-million term loan from Susser Bank (with an optional $5-million increase) to fund its new Georgetown facility. The build-out, including advanced power and cooling capabilities, is central to supporting the company's long-term growth ambitions. Additionally, TSSI received ISO certification and completed uplisting to the Nasdaq, underscoring its operational maturity.