NASDAQ:TSSI TSS Q2 2024 Earnings Report $6.94 -0.01 (-0.14%) As of 09:47 AM Eastern Earnings History TSS EPS ResultsActual EPS$0.06Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/ATSS Revenue ResultsActual Revenue$12.16 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/ATSS Announcement DetailsQuarterQ2 2024Date8/14/2024TimeN/AConference Call DateWednesday, August 14, 2024Conference Call Time4:00PM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by TSS Q2 2024 Earnings Call TranscriptProvided by QuartrAugust 14, 2024 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Good afternoon. My name is Brianna, and I will be your conference operator today. At this time, I'd like to welcome everyone to the TSS Second Quarter 2024 Earnings Call. Please note that today's call is being recorded. All lines have been placed on mute to prevent any background noise. Operator00:00:16After the speakers' remarks, there will be a question and answer session. I will now turn the call over to Danny Chisholm, CFO. Please go ahead, sir. Speaker 100:00:33Thanks, Brianna, and good afternoon, everyone. Thanks for joining us for TSS' conference call to discuss our Q2 2024 financial results. Joining me today on this call is Daryl Duane, the President and CEO of TSS. As we begin the call, I'd like to remind everyone to take note of the cautionary language regarding forward looking statements contained in the press release we issued today. That same language applies to comments and statements made on today's conference call. Speaker 100:01:02This call will contain time sensitive information as well as forward looking statements, which are accurate only as of today, August 14, 2024. TSS expressly disclaims any obligation to update, amend, supplement or otherwise review any information or forward looking statements made on this conference call or replay to reflect events or circumstances that may change or arise after the date indicated except as otherwise required by applicable law. For a list of the risks and uncertainties that may affect our future performance, please refer to our periodic filings with the SEC. In addition, we will be referring to non GAAP financial measures. A reconciliation of the differences between these measures with the most directly comparable financial measures calculated in accordance with U. Speaker 100:01:48S. GAAP is included in today's press release. Daryl will kick off the call with an overview and commentary about the quarter and year to date performance. Then I'll provide more details about our financial quarter results. And then turn the call back over to Daryl to recap our strategy and direction. Speaker 100:02:05Daryl? Speaker 200:02:06Thank you, Danny, and welcome to our team. Danny joined us in early June and he's already making a significant impact bringing energy and innovative ideas to help drive our growth strategy. With over 3 decades of experience, Danny has a proven track record of delivering sound financial strategies and improving operational efficiencies during periods of rapid growth. His expertise spans crucial areas that will be increasingly important to TSS, including transactional experience, capital raising and Investor Relations. His addition to our leadership team is a key part of our ongoing commitment to building and strengthening our organization. Speaker 200:02:49Speaking of growth and opportunities, let me share some insights on our current position and future trajectory. 2024 marks a pivotal transition for TSS, building momentum for accelerated growth and expansion for 2025 and beyond. Our current trajectory demonstrates significant progress, setting the stage for even greater achievements ahead. On today's call, I will provide additional context to illuminate our position and share why we're optimistic and poised for acceleration. Our turnaround strategy has progressed through key milestones as we previously communicated in the earnings call and announcements. Speaker 200:03:28To review, we began with a comprehensive operational cleanup completed in the first half of this year and culminating in our ISO certification. Next, through our investment in people, systems and physical layout of our main facility, we successfully demonstrated our ability to scale within our current capacity, addressing a crucial concern for our customers. Now we're entering a 3rd phase, ramping up revenue, earnings and cash flow. We are already seeing the beginning of this growth as our Q2 results reflect. Our execution has been established by solid operational foundation and proven scalability positioning us for accelerated expansion ahead. Speaker 200:04:15Our performance in the first half of this year underscores our significant progress. We delivered $28,000,000 revenue total revenue, a 33% year over year revenue growth while simultaneously investing in the business and expanding profitability. The growth was driven by our more profitable businesses, our Systems Integration and Facilities Management. This growth translated to even more impressive bottom line results. Operating income surged 5 30%. Speaker 200:04:48Adjusted EBITDA increased 331 percent and we achieved $1,400,000 in net income, a remarkable turnaround from last year's $500,000 loss. Our financial performance stems from our unwavering focus on operational excellence, our commitment to strengthening and expanding our team and our enhanced go to market efforts. This strategic approach has not only driven our financial success, but also solidified our position as a trusted partner in delivering infrastructure crucial for AI and high performance computing occurring in our increasingly digital world. As we move forward, these results validate our strategy and set the stage for continued growth and innovation. We're not just improving our numbers, we're helping to shape the future of digital infrastructure. Speaker 200:05:41Operationally, our success is driven by our ability to meet the demands of rapidly evolving AI landscape and the need for high performance computing infrastructure while remaining responsive to our customers' needs. The demand for AI continues to catalyze our expansion, creating significant opportunities for TSS as we support our primary OEM partner, expand capacity and enhance services to meet their needs as well as those of other prospective partners and end customer. Allow me to share some insights on the AI market, current state, cutting through the speculation of Dominate's headline. AI presents significant challenges in infrastructure procurement and planning primarily due to the rapid evolution of compute power. At the data center level, we're seeing an unprecedented surge in power density. Speaker 200:06:33Just recently, a single rack would typically consume 10 kilowatts to 15 kilowatts of power. Today's AI racks push 80 kilowatts and we anticipate soon reaching 120 kilowatts to 150 kilowatts in the next couple of generations. Industry roadmaps project over 200 kilowatts within a couple of years. This is an incredible growth in power density in a remarkable short period of time. This swift advancement is causing uncertainty for data center equipment buyers and may cause the lumpiness in our growth trajectory. Speaker 200:07:10However, there's no doubt that AI is dramatically accelerating the overall data center capacity pipeline. Moreover, this compute density increases increase brings a formidable challenge heat. Cooling methodologies are evolving rapidly to keep pace with the increasing power density. This evolution presents both challenges and opportunities. PSS is positioned not just to adapt, but to lead in this rapidly changing landscape. Speaker 200:07:40Our nimble operational model enables us to adjust quickly as customers seek to make on the fly architecture changes. And our rapid testing capability provides more immediate feedback to customers by narrowing configuration options, including cooling. During Q2, we made a significant investment in our production capacity, which came online at the beginning of June. This expansion significantly increased our volume capacity and decreased the cycle time to complete each rack within our existing facility. The expansion was driven by the surge in demand for server rack built in the pipelines of our customer OEM customer. Speaker 200:08:24Our committed OEM customers are seeing the benefits of our actions and are very supportive. We have in recent times received customer funding for capacity and capability expansion to meet future needs, a compelling reflection of our customers' view of us as a partner. We continue to actively engage in discussions with them to further expand our capacity as we fulfill their need and execute our goal to become a primary production partner for their future AI related endeavor. We value our relationships. This is truly a partnership for success. Speaker 200:09:01Demand increased in Q2 and we began delivering complex AI integration solutions on time. And I want to stress on time, including the first stage of a highly publicized program. That initial program began in June and is being carried out in Q3. As a result, we finished the quarter with a record run rate of RAC integration revenue. RAC integration revenues from first half of this year are just a bit under what we achieved for all of 2023. Speaker 200:09:31Our procurement business, where we source third party hardware, software and services delivered another solid performance in Q2, although it was down slightly year over year. Following the modest slower Q2, Q3 projections for our procurement business indicate very robust growth, potentially surpassing $50,000,000 in revenue for the quarter. For those familiar with our history, you'll recall that our procurement segment often experiences quarter to quarter fluctuations due to size, timing and revenue recognition methods of the deal. However, its overall trajectory remains upward, consistently contributing to our profitability. While we're encouraged by this growth trend, we maintain a prudent outlook on this business line and remain cautiously optimistic. Speaker 200:10:17Our modular data center business or MDC business continues to show year over year growth and remains a promising long term opportunity for TSS. While the overall MDC market hasn't expanded at the rate analysts initially predicted largely because rapid industry growth favored greenfield site development over capacity augmentation using MDCs, modular data centers. We're now seeing sizable potential shift. The challenges I've highlighted earlier, rapidly increasing compute density evolving cooling requirements may finally usher in the area for modular solution. Whether this materializes is predicted remains to be seen. Speaker 200:11:02However, PSS, we are strategically positioned to capitalize on this trend, particularly if AI clusters start being delivered as freestanding rack or module. To be clear, the overall volume ramp that we've been anticipating is now underway. Our OEM customers have very robust pipelines and we're seeing deals begin to close. We believe our Q2 performance is a harbinger of the good things to come. Our strategic conclusion in key customer programs signals a bright future as OEM pipelines materialize. Speaker 200:11:39This growth trajectory may not be a smooth upward linear line. The pipeline deals of our OEM partners are large and we anticipate some variability as the market adapts to rapid technological changes. But make no mistake, we're witnessing a dawn of a transformative era in our industry and PSS is at the forefront. This is not just exciting, it's validating. It confirms our strategy, our investments and more importantly, the tireless efforts of our exceptional team. Speaker 200:12:13I'm proud of this team and as we navigate this dynamic landscape, we're just not riding the wave of AI revolution, we're helping to propel it forward. So now let me turn it back to Danny to discuss our number. Danny? Speaker 100:12:25Thanks, Daryl. I'm excited to be here and excited to share the detailed financial results of another strong quarter for TSF. Before I jump into the earnings for the quarter, I'd like to make a couple of observations about our financial position. We again ended the period debt free with an untapped available line of credit and just over $8,000,000 of cash on hand. As Daryl mentioned earlier, an OEM partner with whom we work closely agreed to fund a significant portion of the capital investments we made during the quarter to enhance our capacity to rapidly build AI enabled server and network rack for them. Speaker 100:13:01You can see this $1,700,000 capital investment in our statement of cash flow. The portion of the reimbursement not yet amortized into revenue is included in our balance sheet as part of the deferred revenue balance. You'll also notice a $2,600,000 increase in inventory compared to December 2023. That relates to configuration and systems integration work that was ongoing at the end of June. Our contract and other receivables also increased by just under $3,500,000 as the majority of our annual facilities maintenance management contract were renewed July 1 and the invoices for those were sent out shortly before quarter end. Speaker 100:13:43The revenues for those as in past years will be recognized primarily over the next 12 months. Now I'd like to turn to the operating results for the Q2. Ordinarily, I wouldn't be very enthusiastic about sharing with you a 16% decrease in our total revenue. However, if you look at the gross profit for the quarter, it's up 41%, driven by a revenue shift mix to higher yielding services. The revenue decrease was driven by a $5,700,000 or 54% decrease in our procurement revenue. Speaker 100:14:17It's a great business that adds to the bottom line and we'll take as much of it as we can get, plus it provides some cross selling opportunities for systems integration work. The movements in revenues from the procurement business itself have a much smaller impact on our overall gross profit and bottom line than the movements in our Facilities Management and Systems Integration businesses. We had a 46% growth rate in revenues from Facilities Management activities, largely tied to a couple of discrete projects during the quarter and an impressive 108% increase in systems integration revenue. The last item is particularly exciting as it was driven largely by our starting to integrate AI enabled RAC, which began late in Q2. At least in the near term, we expect the demand from this business to be a bit lumpy as Daryl mentioned, with some spikes and valleys in demand from our OEM partners and customers and somewhat dependent on the timing of the next generation of AI chipsets from the big chip manufacturers. Speaker 100:15:18That being said, in the 1st 6 months of the year, our systems integration team processed more than 80% of the system rack we integrated in all of 2023. As of the date of this call, we've already eclipsed the number of racks we integrated in the full fiscal 2023. Our SG and A expenses increased a bit in dollar terms and improved 8 percentage points to 59% of gross revenues from 67% this quarter last year. Through effectively leveraging our expense structure, the 41% growth in gross profit translated into a 74% improvement in operating income ending the current period at $1,700,000 Our net interest expense represents almost exclusively the cost of factoring our accounts receivable from our largest customer. This factoring arrangement ends up having an effective interest rate of only around 6%, a far lower rate than we could get if we were to utilize a bank loan or revolving line credit to finance those receivables ourselves. Speaker 100:16:24The net result of the above factors is that net income swelled to $1,400,000 up 3.45 percent from this quarter last year and EPS moved from $0.01 in the prior period prior year period to $0.06 per share in the current period. Adjusted EBITDA, which excludes interest, taxes, depreciation, amortization and stock based compensation was just under $2,000,000 up from $1,200,000 this quarter last year. Now let's take a look at the 6 month period into June 30 compared to the comparable period of 2023. Total revenues were up 33% with a good portion of the overall growth in total revenues coming from higher yielding costs improved to 70% of gross profit from 90% in the prior year to date period. Adjusted EBITDA was a bit more than threefold what we produced year to date last year ending the period at $2,500,000 The gross value of procurement transactions processed in the Q2 of 2024 was $21,000,000 compared to $42,900,000 in the Q2 of last year. Speaker 100:17:43In the current year to date period, we processed $40,900,000 of gross value procurement deals compared to $49,600,000 this period last year. Procurement revenues are highly dependent on the timing of customer needs and can fluctuate widely from quarter to quarter. All in all, it was a great quarter for us financially and we look forward to achieving similar results as we continue to scale the business. With that, I'll turn the call back over to Daryl to share some insights into our expectations for the future and provide some closing content. Speaker 200:18:16Daryl? Thanks, Kesh. It's great to have you on board, Budd. Thank you. We, TSS, remain strategically positioned to drive growth in both the burgeoning generative AI market and traditional cloud computing. Speaker 200:18:29AI's transformative impact spans every sector and TSS along side our partners stands ready to meet the surging demand. Looking ahead, we anticipate continued growth in our rack integration business. Expansion of our capacity completed in Q2 will yield significant benefits throughout the second half of twenty twenty four and into 2025. Our ability to also provide on rack site on I'm sorry, on-site rack integration on a customer site with cabling services opens up new high margin opportunities for TSS, expanding our total addressable market and customer base. Our expertise in handling complex integrations and our maintenance capabilities uniquely position us to capitalize on these trends and growing market demand. Speaker 200:19:20We believe we have the physical capacity to handle near term growth that we anticipate. We also believe there is a potential demand looking into 2025 that might and may outstrip our capacity. We have begun initial exploration into further capacity expansion. Our procurement business remains strong despite quarterly fluctuations and our modular data center business while we've seen year to year over year improvement, we're now engaged in promising discussions with prospective customers. Our focus is on building a solid backlog to fuel revenue growth in 2025 and beyond. Speaker 200:20:04We're observing increased refresh activities in existing installations, though new builds are taking longer, particularly for AI solutions due to high GPU demand and anticipated technology releases, in the long term, we see potential synergy between AI and modular form factors, especially for use cases like autonomous vehicles and other time sensitive applications and underserved areas. So in conclusion, PSS now has the capacity, expertise and track record to deliver for our partners and customers. We are very well positioned for the next wave of growth and we continue to explore avenues to enhance our growth potential. I'm very optimistic of our future and proud of our team. And with that, open the line up for any questions. Speaker 200:20:52Operator? Operator00:20:54Thank Our first question comes from Maj Dwivedan with GEO Investing. Please go ahead. Speaker 300:21:20Hi, Daryl. Thanks for taking the call. Hi, Darryl. Fine, fine. Speaker 200:21:25I Speaker 300:21:25have a couple of questions really and then I'll just go in the queue then. So obviously, it looks like you got some growth in your rack integration, which was what we've been waiting for to see how that looks. We're kind of getting an idea what that looks like in terms of the bottom line based on your new kind of what you've done in terms of efficiencies. So I guess my question is a couple of things here. Number 1, can you start giving us an idea in terms of how much of your integration business is RAC? Speaker 300:21:57So we can maybe start modeling a little bit in terms of your 10x kind of capacity expansion kind of goals moving forward? And number 2, I'm sorry, go ahead. Go ahead. I'll let you answer that. Speaker 200:22:11That's okay. Don't make this too complicated. I'm trying. Speaker 300:22:17No, because I'm in the airport here, I want to make a noise here. And so do you see more we're getting a glimpse of what you can do when you scale here under RAG integration. Are there more efficiencies down the line as you keep on growing that business? We're just trying to get an idea what the margin picture might look like. And maybe the same with the same question really with as modular gets going, trying to understand the margin picture there as we move forward. Speaker 300:22:42That's really right now. Speaker 200:22:44Okay. See if I can take this apart. So first of all, to your question on 10x, yes, I think we're on track to go do that. That is measured in terms of the quantity of RACs. The mix of RACs is changing and that we're getting more, we're getting I think we're planning for the future where the mix there's going to be increase in direct liquid cooled solutions as compared to what we have today. Speaker 200:23:16When I mentioned about heat and cooling, the future is looking like it's going to move to a larger percentage of direct liquid. So we've got to accommodate that in our capabilities in our factory and what we're going to run out of this power. And we're not sounding like anybody else, right? I mean, customers are clamoring for power and they're trying to figure it out. And we're not that much different. Speaker 200:23:44So at some point, depending on the percentage and the timing and the forecast that we're going to get, we are planning for more power and it may be at a different facility being blunt. And we're going to do that real carefully, and we're not going to go just run away and just do it for the sake of doing it, but we're going to have to lean in and make some decisions on that pretty soon. Now on your I think on the modular, and by the way, I think we've got the capacity to grow here, depending on the mix of business. But if it rapidly shifts to direct liquid, then we're going to have to more rapidly move to another facility. We have some sites in line. Speaker 200:24:30We're planning for it, but we're just not ready to fully make a decision on that. Speaker 100:24:35Daryl, if I can jump in for just a second. One point I would make there also is we do have the ability to do some direct liquid cool today. We have that infrastructure. It's just not at the volume that we expect that to be in the future. Speaker 200:24:48Okay. And under modular question, Part of the issue, Maj, is the lead time for componentry. When I first joined the company, I was told lead time is anywhere from 8 to 12 months to get a container to get the power units, etcetera. And I said, that's nonsense. We can fix that. Speaker 200:25:11Well, we can't. But we can build tighter relationships with the folks who are doing that work like the Virta's, the Schneiders, the Eaton's, etcetera. And we're doing that. We're taking steps to go get closer to those partners. What's that translate to? Speaker 200:25:29We do have we have an internal goal on the backlog and the pipeline that we want to build that will turn into revenue in 2025 and beyond given the lead times. We're not where we need to be yet, but we're making progress. We've got a couple of deals that have closed, and we've got a couple of others in sight and we're working as aggressively as we can. I don't know if I answered your question, but if I did, let me know. Speaker 100:25:58Yes, that was good. Yes. Speaker 400:26:00I mean, Speaker 300:26:01maybe, I guess one of my questions, if we can get more specific on it, just maybe yes or no on it. Do you think that there's a lot there's more efficiencies to come down the line here as you scale? We got a glimpse of it here in Q2. Do you think the margin profile continues improves as you scale the business, especially the rack integrations, how does the business make it and maybe even modular? Speaker 200:26:23The answer is absolutely, yes. Speaker 300:26:25Okay. That was important there. Cool, cool. Speaker 100:26:28Yes, that's all I have Speaker 300:26:30for now, man. Thanks. Speaker 200:26:31All right. Thanks, Budd. Good to hear your voice. Operator00:26:36Our next question comes from Jonathan Alvarado, Private Investor. Please go ahead. Speaker 500:26:42Hi, congratulations. Hey, Jonathan. I've heard reports that you guys added around 200 employees during the Q2. Is that true? Speaker 200:26:52No. We did add more people. Speaker 500:26:58Okay. And were they largely all put to work right away? Speaker 200:27:04As soon as they hit the front door. Speaker 500:27:07All right. And we've heard reports that you're working on Elon Musk xAI data center. Is that true? Speaker 200:27:16Jonathan, what we can't do is talk about the end user customer because it's very confidential to our relationship with our partner. So I wish I could answer that, but Speaker 100:27:29I can't. Speaker 500:27:31Okay. But you are a Dell premier partner and would you get more work if Dell get larger deal? Speaker 200:27:44We are a Dell Services partner and we work very hard to get as much business as we can with our relationship. So, it is our hope and our desire that as, the market expands and Dell succeeds and potentially other customer partners succeed, we will succeed as well. We're also embarking on a game plan to go direct to the end user on certain services that would not be in conflict with any relationship that we do have with Dell or anybody else. And we're in the early stages of that. But right now, it's not material to report. Speaker 500:28:29And the current performance on your existing contracts that you've just completed, does that set you up for more work on those same projects? Speaker 200:28:43Jonathan, we hope so. We want as much business as we can get. So the better we do, the more we want. Great. I would just say Speaker 100:28:57the level of expertise to which we executed, I think demonstrates the skills that we've built internally and the expertise. And I do anticipate that, that will be recognized and probably should result in us winning more business. Speaker 500:29:15Very well. Continued success. Thank you. Speaker 100:29:18Thank you. Thanks, Jonathan. Operator00:29:21Our next question comes from Paul Simon, shareholder. Please go ahead. Speaker 600:29:27Hello, congratulations and great results. I just have a couple of questions that I think you may not be able to answer it based on your last answer, but what I was going to ask what percentage of your total revenue comes from relationship with Dell? Speaker 200:29:46That's not a I think we can we don't talk about that publicly. Speaker 600:29:51No problem. No problem. I just like I said, you can't answer it maybe because you just said you can't talk about relationship. That's fine. It's just something I had on my mind. Speaker 600:30:03But the second thing is you Speaker 200:30:04mentioned power Speaker 600:30:06and I'm curious about one I haven't read anything about it or anything. I'm impressed with your results. Congratulations for everyone. I saw the stock jump up to $2.75 right before this thing, it's nice. Now when you said power, are you considering solar or nuclear power or anything else to power these things? Speaker 600:30:27Because I understand that there's huge power demands and like you said, you don't have enough power. Are you any other methods you're trying to use to make power, generate power? Speaker 200:30:40What we need is power to the facility, electric power, and it's measured in megawatts. We've got a good amount of megawatts to power in our current facility and the lead time to go get additional megawatts is longer than we want. And like, so what do you do? You go to another facility and you do the pricing and the costing and you make a decision on timeframe and money. And we're looking at that. Speaker 200:31:10Yes. Solar, nuclear, if you think about what is consistent that you can count on, with probably nuclear probably comes the closest, but what I've seen so far is not many people want to put a nuclear portable unit next to their facility. Not yet anyway, but I just purchased a Speaker 600:31:34company today that does something like that. It's called NNE. But anyway, that's not why I called, of course. Speaker 200:31:39Okay. Speaker 600:31:40I was just curious about Speaker 200:31:44nuclear. Go ahead. Speaker 600:31:45This company is making portable nuclear or not so much portable, but more portable than what normal huge thing would be like 3 Mile Island or whatever they call it. No, it's pretty on a truck, it's portable. So, anyway Speaker 200:32:02I look into the company We were introduced to a company that's based up in Silicon Valley that is doing something on a portable nuclear level. And we were engaged. I don't know if it's the same company, but what we're looking for is simply is just that we need more power to the facility. And we'll consider anything. Anything that can help us get there, we consider. Speaker 200:32:25But realistically, in a short term, we haven't seen anything that really we could talk about today besides the regular power. Speaker 600:32:35Solar can be bad depending on the weather. And also you have to have a lot of land for that. Or actually roof space actually roof space usually works, but or sometimes. But no, thanks for the answer. And thanks for the great results. Speaker 600:32:50Like I said, I just noticed the thing jumped up to 275. I don't know. It just happened right at the end of the day, I guess. Thank you for the great results. Speaker 200:32:59Yes. And Paul, for you and our other investors, I think on behalf of now myself and management team, we appreciate your trust in the business. And if you're going to put money into our company, we've got an obligation to do everything we can to give you kind of a very good return on your investment. So we're focused on that and customer values. So thanks for your investment. Speaker 600:33:19Well, thank you, sir. And I have a feeling you're going to we're going to see a rise tomorrow because I think these over the counter markets obviously don't do much extended hours. I think tomorrow you're going to see a U drive. That's just a prediction. I can't guarantee anything. Speaker 200:33:34Paul, we're just focused. We are focused on execution and everything else happens 5th grade. Execution, that's the case. Speaker 600:33:42Well, that's hey, I don't buy any stock that I don't see as executing. I guarantee you that. And every single one I have is executing. And so you are definitely one of them. A guy at E*TRADE told me, hey, you know, hey, that thing doesn't have much volume. Speaker 600:34:00Hey, this, that, and the other. I said, dude, look, I'm going to buy it for a dollar 75 and let's let's see what you say. Now it's 275. Let's see what he says tomorrow. Anyway, yeah. Speaker 600:34:13Oh, he was just saying, you know, these small cap things are there's no volume, there's this and that. I said, listen, man, I know how to analyze. I went to college and I have a finance degree. Listen, this company has dominated this entire year. So don't tell me about small cap, large cap. Speaker 600:34:29If you dominate, you dominate. So thank you very much and have a great next quarter. Speaker 200:34:35Thanks, Paul. Appreciate it, Budd. Operator00:34:39Our next question comes from Mitch Swergold, a Private Investor. Please go ahead. Speaker 400:34:45Hi, guys. Congratulations on a really great quarter. It looks like you're managing the growth of the company very, very effectively. And I was impressed that you are receiving financing from your partner. Can you talk a little about the size and scale of that as well as how far in advance do you have to put the CapEx in before you can then generate revenue off of it? Speaker 400:35:12And then I have a follow-up question. Speaker 200:35:15So like earlier, I wish I could give you the answer to your question, but that's proprietary. Not out of disrespect to you, it's just private. Sure. And it's I'll underscore it by it doesn't come easy. And we are very respectful of our relationship with our partner and the fact that they put some money into what we're doing. Speaker 200:35:44It's a beautiful thing. As far as the other part of your question, I'm not quite sure I know how to answer that. Speaker 400:35:57Okay. The other question I had for you is, I also have heard that you've done some significant hiring. So just wondering if you can tell us, I think you had 80 employees at the end of last year. Can you tell us how many employees you had at the end of the quarter? Speaker 200:36:14We've gone public before. We had 83, which is the last time we quoted any volume. And I think for the sake of confidentiality, we're not going to get into a whole lot more, but we've doubled at least our headcount. And we need to do that to accommodate. Go ahead. Speaker 400:36:43I didn't mean to interrupt you. So in 6 months, you've more than doubled your headcount? Speaker 200:36:49Yes. Nice try. Speaker 400:37:01Would it be safe to say that it is closer to triple than double? Speaker 200:37:05No. Okay. I respect where you're going with it, but I don't want to go any further with it. Speaker 400:37:13Okay. Have you had a lot of turnover? Speaker 200:37:18Not unexpected based on the hiring trajectory we had. No, it's within I got to do a shout out to our Chief People Officer and the management team. We were prepared and we were planning for growth at some point. And we did a lot of it through automation and heavy duty interviewing and we were working weekends and night making this team what it is today. So I just need to do a shout out to the team, the management leadership team for making that happen. Speaker 200:37:59It would not have happened if we hadn't planned for it, when implemented some of the processes and the systems and we had the people we've got in leadership position. So we did some really unique things in a very short period of time. Speaker 400:38:15That's great. Last question, go ahead. Can you talk about the duration of what kind of duration and revenue visibility do you have? Duration on the contracts and revenue visibility for the coming quarters? Speaker 200:38:37We have let me answer it this way. We have much better signals today in information exchange between our factory leadership and also our partner than we've ever had. And while there's no guarantees in life, we have a working relationship, we've got trusted relationships that we know how it works. And I'm also that, we have a working relationship. We've got trusted relationships that, we know how it works. Speaker 200:39:03And I'm also at Dell. So not that, that means a whole lot other than when if you have any relationships with Dell people, a lot of it's based on trust and integrity and relationship. And we really work hard on that, especially as it relates to future demand and investment decisions we're making because it impacts people, it impacts our business, and our partner knows that. So it's a good, I call it bidirectional relationship, but I can't get into some of the details. Please understand I'd like to, but I can't. Speaker 400:39:42Totally understand. Thanks so much for your candor. Speaker 200:39:46Okay. You're welcome. Thank you. Operator00:39:49We have no further questions at this time. I will now turn the call back to Daryl Dewan for any closing remarks. Speaker 200:39:56Yes. Thanks, Brianna. To everybody here on behalf of the leadership team, we really do appreciate everybody's support of the company and what we're doing. Your info and involvement is respected. We appreciate it. Speaker 200:40:13We're optimistic about the future. We know what we have to do. We're focused on ROI for everybody, return on investment and profitable growth. So thanks for participating in the call. Wish everybody good evening and afternoon wherever you're at and wish us luck. Operator00:40:34This concludes today's conference call. Thank you all for your participation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallTSS Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) TSS Earnings HeadlinesTSS, Inc. CEO Named Entrepreneur of The Year 2025 Southwest Award FinalistApril 24, 2025 | finance.yahoo.comTSS, Inc. (TSSI): A Bull Case TheoryApril 16, 2025 | insidermonkey.comNew breed of trader (Wall Street hates us?)Wall Street big wigs and old-money bankers can’t touch this 1 type of stock. And that opens the door for traders like you and me. They couldn’t touch this tech stock that ran from $1.50 to $98.40 in a week. Great – more for us. They wouldn’t touch this little-known imaging company. That’s fine – my friends and I were happy to ride it from $6 to $35 over breakfast.May 8, 2025 | Timothy Sykes (Ad)TSS: A Fast-Growing AI Data Center Systems IntegratorApril 13, 2025 | seekingalpha.comWith EPS Growth And More, TSS (NASDAQ:TSSI) Makes An Interesting CaseMarch 31, 2025 | finance.yahoo.comEarnings call transcript: TSS Inc Q4 2024 sees revenue surge, stock dipsMarch 29, 2025 | uk.investing.comSee More TSS Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like TSS? Sign up for Earnings360's daily newsletter to receive timely earnings updates on TSS and other key companies, straight to your email. Email Address About TSSTSS (NASDAQ:TSSI) offers planning, design, engineering, construction management, commissioning and maintenance services. 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There are 7 speakers on the call. Operator00:00:00Good afternoon. My name is Brianna, and I will be your conference operator today. At this time, I'd like to welcome everyone to the TSS Second Quarter 2024 Earnings Call. Please note that today's call is being recorded. All lines have been placed on mute to prevent any background noise. Operator00:00:16After the speakers' remarks, there will be a question and answer session. I will now turn the call over to Danny Chisholm, CFO. Please go ahead, sir. Speaker 100:00:33Thanks, Brianna, and good afternoon, everyone. Thanks for joining us for TSS' conference call to discuss our Q2 2024 financial results. Joining me today on this call is Daryl Duane, the President and CEO of TSS. As we begin the call, I'd like to remind everyone to take note of the cautionary language regarding forward looking statements contained in the press release we issued today. That same language applies to comments and statements made on today's conference call. Speaker 100:01:02This call will contain time sensitive information as well as forward looking statements, which are accurate only as of today, August 14, 2024. TSS expressly disclaims any obligation to update, amend, supplement or otherwise review any information or forward looking statements made on this conference call or replay to reflect events or circumstances that may change or arise after the date indicated except as otherwise required by applicable law. For a list of the risks and uncertainties that may affect our future performance, please refer to our periodic filings with the SEC. In addition, we will be referring to non GAAP financial measures. A reconciliation of the differences between these measures with the most directly comparable financial measures calculated in accordance with U. Speaker 100:01:48S. GAAP is included in today's press release. Daryl will kick off the call with an overview and commentary about the quarter and year to date performance. Then I'll provide more details about our financial quarter results. And then turn the call back over to Daryl to recap our strategy and direction. Speaker 100:02:05Daryl? Speaker 200:02:06Thank you, Danny, and welcome to our team. Danny joined us in early June and he's already making a significant impact bringing energy and innovative ideas to help drive our growth strategy. With over 3 decades of experience, Danny has a proven track record of delivering sound financial strategies and improving operational efficiencies during periods of rapid growth. His expertise spans crucial areas that will be increasingly important to TSS, including transactional experience, capital raising and Investor Relations. His addition to our leadership team is a key part of our ongoing commitment to building and strengthening our organization. Speaker 200:02:49Speaking of growth and opportunities, let me share some insights on our current position and future trajectory. 2024 marks a pivotal transition for TSS, building momentum for accelerated growth and expansion for 2025 and beyond. Our current trajectory demonstrates significant progress, setting the stage for even greater achievements ahead. On today's call, I will provide additional context to illuminate our position and share why we're optimistic and poised for acceleration. Our turnaround strategy has progressed through key milestones as we previously communicated in the earnings call and announcements. Speaker 200:03:28To review, we began with a comprehensive operational cleanup completed in the first half of this year and culminating in our ISO certification. Next, through our investment in people, systems and physical layout of our main facility, we successfully demonstrated our ability to scale within our current capacity, addressing a crucial concern for our customers. Now we're entering a 3rd phase, ramping up revenue, earnings and cash flow. We are already seeing the beginning of this growth as our Q2 results reflect. Our execution has been established by solid operational foundation and proven scalability positioning us for accelerated expansion ahead. Speaker 200:04:15Our performance in the first half of this year underscores our significant progress. We delivered $28,000,000 revenue total revenue, a 33% year over year revenue growth while simultaneously investing in the business and expanding profitability. The growth was driven by our more profitable businesses, our Systems Integration and Facilities Management. This growth translated to even more impressive bottom line results. Operating income surged 5 30%. Speaker 200:04:48Adjusted EBITDA increased 331 percent and we achieved $1,400,000 in net income, a remarkable turnaround from last year's $500,000 loss. Our financial performance stems from our unwavering focus on operational excellence, our commitment to strengthening and expanding our team and our enhanced go to market efforts. This strategic approach has not only driven our financial success, but also solidified our position as a trusted partner in delivering infrastructure crucial for AI and high performance computing occurring in our increasingly digital world. As we move forward, these results validate our strategy and set the stage for continued growth and innovation. We're not just improving our numbers, we're helping to shape the future of digital infrastructure. Speaker 200:05:41Operationally, our success is driven by our ability to meet the demands of rapidly evolving AI landscape and the need for high performance computing infrastructure while remaining responsive to our customers' needs. The demand for AI continues to catalyze our expansion, creating significant opportunities for TSS as we support our primary OEM partner, expand capacity and enhance services to meet their needs as well as those of other prospective partners and end customer. Allow me to share some insights on the AI market, current state, cutting through the speculation of Dominate's headline. AI presents significant challenges in infrastructure procurement and planning primarily due to the rapid evolution of compute power. At the data center level, we're seeing an unprecedented surge in power density. Speaker 200:06:33Just recently, a single rack would typically consume 10 kilowatts to 15 kilowatts of power. Today's AI racks push 80 kilowatts and we anticipate soon reaching 120 kilowatts to 150 kilowatts in the next couple of generations. Industry roadmaps project over 200 kilowatts within a couple of years. This is an incredible growth in power density in a remarkable short period of time. This swift advancement is causing uncertainty for data center equipment buyers and may cause the lumpiness in our growth trajectory. Speaker 200:07:10However, there's no doubt that AI is dramatically accelerating the overall data center capacity pipeline. Moreover, this compute density increases increase brings a formidable challenge heat. Cooling methodologies are evolving rapidly to keep pace with the increasing power density. This evolution presents both challenges and opportunities. PSS is positioned not just to adapt, but to lead in this rapidly changing landscape. Speaker 200:07:40Our nimble operational model enables us to adjust quickly as customers seek to make on the fly architecture changes. And our rapid testing capability provides more immediate feedback to customers by narrowing configuration options, including cooling. During Q2, we made a significant investment in our production capacity, which came online at the beginning of June. This expansion significantly increased our volume capacity and decreased the cycle time to complete each rack within our existing facility. The expansion was driven by the surge in demand for server rack built in the pipelines of our customer OEM customer. Speaker 200:08:24Our committed OEM customers are seeing the benefits of our actions and are very supportive. We have in recent times received customer funding for capacity and capability expansion to meet future needs, a compelling reflection of our customers' view of us as a partner. We continue to actively engage in discussions with them to further expand our capacity as we fulfill their need and execute our goal to become a primary production partner for their future AI related endeavor. We value our relationships. This is truly a partnership for success. Speaker 200:09:01Demand increased in Q2 and we began delivering complex AI integration solutions on time. And I want to stress on time, including the first stage of a highly publicized program. That initial program began in June and is being carried out in Q3. As a result, we finished the quarter with a record run rate of RAC integration revenue. RAC integration revenues from first half of this year are just a bit under what we achieved for all of 2023. Speaker 200:09:31Our procurement business, where we source third party hardware, software and services delivered another solid performance in Q2, although it was down slightly year over year. Following the modest slower Q2, Q3 projections for our procurement business indicate very robust growth, potentially surpassing $50,000,000 in revenue for the quarter. For those familiar with our history, you'll recall that our procurement segment often experiences quarter to quarter fluctuations due to size, timing and revenue recognition methods of the deal. However, its overall trajectory remains upward, consistently contributing to our profitability. While we're encouraged by this growth trend, we maintain a prudent outlook on this business line and remain cautiously optimistic. Speaker 200:10:17Our modular data center business or MDC business continues to show year over year growth and remains a promising long term opportunity for TSS. While the overall MDC market hasn't expanded at the rate analysts initially predicted largely because rapid industry growth favored greenfield site development over capacity augmentation using MDCs, modular data centers. We're now seeing sizable potential shift. The challenges I've highlighted earlier, rapidly increasing compute density evolving cooling requirements may finally usher in the area for modular solution. Whether this materializes is predicted remains to be seen. Speaker 200:11:02However, PSS, we are strategically positioned to capitalize on this trend, particularly if AI clusters start being delivered as freestanding rack or module. To be clear, the overall volume ramp that we've been anticipating is now underway. Our OEM customers have very robust pipelines and we're seeing deals begin to close. We believe our Q2 performance is a harbinger of the good things to come. Our strategic conclusion in key customer programs signals a bright future as OEM pipelines materialize. Speaker 200:11:39This growth trajectory may not be a smooth upward linear line. The pipeline deals of our OEM partners are large and we anticipate some variability as the market adapts to rapid technological changes. But make no mistake, we're witnessing a dawn of a transformative era in our industry and PSS is at the forefront. This is not just exciting, it's validating. It confirms our strategy, our investments and more importantly, the tireless efforts of our exceptional team. Speaker 200:12:13I'm proud of this team and as we navigate this dynamic landscape, we're just not riding the wave of AI revolution, we're helping to propel it forward. So now let me turn it back to Danny to discuss our number. Danny? Speaker 100:12:25Thanks, Daryl. I'm excited to be here and excited to share the detailed financial results of another strong quarter for TSF. Before I jump into the earnings for the quarter, I'd like to make a couple of observations about our financial position. We again ended the period debt free with an untapped available line of credit and just over $8,000,000 of cash on hand. As Daryl mentioned earlier, an OEM partner with whom we work closely agreed to fund a significant portion of the capital investments we made during the quarter to enhance our capacity to rapidly build AI enabled server and network rack for them. Speaker 100:13:01You can see this $1,700,000 capital investment in our statement of cash flow. The portion of the reimbursement not yet amortized into revenue is included in our balance sheet as part of the deferred revenue balance. You'll also notice a $2,600,000 increase in inventory compared to December 2023. That relates to configuration and systems integration work that was ongoing at the end of June. Our contract and other receivables also increased by just under $3,500,000 as the majority of our annual facilities maintenance management contract were renewed July 1 and the invoices for those were sent out shortly before quarter end. Speaker 100:13:43The revenues for those as in past years will be recognized primarily over the next 12 months. Now I'd like to turn to the operating results for the Q2. Ordinarily, I wouldn't be very enthusiastic about sharing with you a 16% decrease in our total revenue. However, if you look at the gross profit for the quarter, it's up 41%, driven by a revenue shift mix to higher yielding services. The revenue decrease was driven by a $5,700,000 or 54% decrease in our procurement revenue. Speaker 100:14:17It's a great business that adds to the bottom line and we'll take as much of it as we can get, plus it provides some cross selling opportunities for systems integration work. The movements in revenues from the procurement business itself have a much smaller impact on our overall gross profit and bottom line than the movements in our Facilities Management and Systems Integration businesses. We had a 46% growth rate in revenues from Facilities Management activities, largely tied to a couple of discrete projects during the quarter and an impressive 108% increase in systems integration revenue. The last item is particularly exciting as it was driven largely by our starting to integrate AI enabled RAC, which began late in Q2. At least in the near term, we expect the demand from this business to be a bit lumpy as Daryl mentioned, with some spikes and valleys in demand from our OEM partners and customers and somewhat dependent on the timing of the next generation of AI chipsets from the big chip manufacturers. Speaker 100:15:18That being said, in the 1st 6 months of the year, our systems integration team processed more than 80% of the system rack we integrated in all of 2023. As of the date of this call, we've already eclipsed the number of racks we integrated in the full fiscal 2023. Our SG and A expenses increased a bit in dollar terms and improved 8 percentage points to 59% of gross revenues from 67% this quarter last year. Through effectively leveraging our expense structure, the 41% growth in gross profit translated into a 74% improvement in operating income ending the current period at $1,700,000 Our net interest expense represents almost exclusively the cost of factoring our accounts receivable from our largest customer. This factoring arrangement ends up having an effective interest rate of only around 6%, a far lower rate than we could get if we were to utilize a bank loan or revolving line credit to finance those receivables ourselves. Speaker 100:16:24The net result of the above factors is that net income swelled to $1,400,000 up 3.45 percent from this quarter last year and EPS moved from $0.01 in the prior period prior year period to $0.06 per share in the current period. Adjusted EBITDA, which excludes interest, taxes, depreciation, amortization and stock based compensation was just under $2,000,000 up from $1,200,000 this quarter last year. Now let's take a look at the 6 month period into June 30 compared to the comparable period of 2023. Total revenues were up 33% with a good portion of the overall growth in total revenues coming from higher yielding costs improved to 70% of gross profit from 90% in the prior year to date period. Adjusted EBITDA was a bit more than threefold what we produced year to date last year ending the period at $2,500,000 The gross value of procurement transactions processed in the Q2 of 2024 was $21,000,000 compared to $42,900,000 in the Q2 of last year. Speaker 100:17:43In the current year to date period, we processed $40,900,000 of gross value procurement deals compared to $49,600,000 this period last year. Procurement revenues are highly dependent on the timing of customer needs and can fluctuate widely from quarter to quarter. All in all, it was a great quarter for us financially and we look forward to achieving similar results as we continue to scale the business. With that, I'll turn the call back over to Daryl to share some insights into our expectations for the future and provide some closing content. Speaker 200:18:16Daryl? Thanks, Kesh. It's great to have you on board, Budd. Thank you. We, TSS, remain strategically positioned to drive growth in both the burgeoning generative AI market and traditional cloud computing. Speaker 200:18:29AI's transformative impact spans every sector and TSS along side our partners stands ready to meet the surging demand. Looking ahead, we anticipate continued growth in our rack integration business. Expansion of our capacity completed in Q2 will yield significant benefits throughout the second half of twenty twenty four and into 2025. Our ability to also provide on rack site on I'm sorry, on-site rack integration on a customer site with cabling services opens up new high margin opportunities for TSS, expanding our total addressable market and customer base. Our expertise in handling complex integrations and our maintenance capabilities uniquely position us to capitalize on these trends and growing market demand. Speaker 200:19:20We believe we have the physical capacity to handle near term growth that we anticipate. We also believe there is a potential demand looking into 2025 that might and may outstrip our capacity. We have begun initial exploration into further capacity expansion. Our procurement business remains strong despite quarterly fluctuations and our modular data center business while we've seen year to year over year improvement, we're now engaged in promising discussions with prospective customers. Our focus is on building a solid backlog to fuel revenue growth in 2025 and beyond. Speaker 200:20:04We're observing increased refresh activities in existing installations, though new builds are taking longer, particularly for AI solutions due to high GPU demand and anticipated technology releases, in the long term, we see potential synergy between AI and modular form factors, especially for use cases like autonomous vehicles and other time sensitive applications and underserved areas. So in conclusion, PSS now has the capacity, expertise and track record to deliver for our partners and customers. We are very well positioned for the next wave of growth and we continue to explore avenues to enhance our growth potential. I'm very optimistic of our future and proud of our team. And with that, open the line up for any questions. Speaker 200:20:52Operator? Operator00:20:54Thank Our first question comes from Maj Dwivedan with GEO Investing. Please go ahead. Speaker 300:21:20Hi, Daryl. Thanks for taking the call. Hi, Darryl. Fine, fine. Speaker 200:21:25I Speaker 300:21:25have a couple of questions really and then I'll just go in the queue then. So obviously, it looks like you got some growth in your rack integration, which was what we've been waiting for to see how that looks. We're kind of getting an idea what that looks like in terms of the bottom line based on your new kind of what you've done in terms of efficiencies. So I guess my question is a couple of things here. Number 1, can you start giving us an idea in terms of how much of your integration business is RAC? Speaker 300:21:57So we can maybe start modeling a little bit in terms of your 10x kind of capacity expansion kind of goals moving forward? And number 2, I'm sorry, go ahead. Go ahead. I'll let you answer that. Speaker 200:22:11That's okay. Don't make this too complicated. I'm trying. Speaker 300:22:17No, because I'm in the airport here, I want to make a noise here. And so do you see more we're getting a glimpse of what you can do when you scale here under RAG integration. Are there more efficiencies down the line as you keep on growing that business? We're just trying to get an idea what the margin picture might look like. And maybe the same with the same question really with as modular gets going, trying to understand the margin picture there as we move forward. Speaker 300:22:42That's really right now. Speaker 200:22:44Okay. See if I can take this apart. So first of all, to your question on 10x, yes, I think we're on track to go do that. That is measured in terms of the quantity of RACs. The mix of RACs is changing and that we're getting more, we're getting I think we're planning for the future where the mix there's going to be increase in direct liquid cooled solutions as compared to what we have today. Speaker 200:23:16When I mentioned about heat and cooling, the future is looking like it's going to move to a larger percentage of direct liquid. So we've got to accommodate that in our capabilities in our factory and what we're going to run out of this power. And we're not sounding like anybody else, right? I mean, customers are clamoring for power and they're trying to figure it out. And we're not that much different. Speaker 200:23:44So at some point, depending on the percentage and the timing and the forecast that we're going to get, we are planning for more power and it may be at a different facility being blunt. And we're going to do that real carefully, and we're not going to go just run away and just do it for the sake of doing it, but we're going to have to lean in and make some decisions on that pretty soon. Now on your I think on the modular, and by the way, I think we've got the capacity to grow here, depending on the mix of business. But if it rapidly shifts to direct liquid, then we're going to have to more rapidly move to another facility. We have some sites in line. Speaker 200:24:30We're planning for it, but we're just not ready to fully make a decision on that. Speaker 100:24:35Daryl, if I can jump in for just a second. One point I would make there also is we do have the ability to do some direct liquid cool today. We have that infrastructure. It's just not at the volume that we expect that to be in the future. Speaker 200:24:48Okay. And under modular question, Part of the issue, Maj, is the lead time for componentry. When I first joined the company, I was told lead time is anywhere from 8 to 12 months to get a container to get the power units, etcetera. And I said, that's nonsense. We can fix that. Speaker 200:25:11Well, we can't. But we can build tighter relationships with the folks who are doing that work like the Virta's, the Schneiders, the Eaton's, etcetera. And we're doing that. We're taking steps to go get closer to those partners. What's that translate to? Speaker 200:25:29We do have we have an internal goal on the backlog and the pipeline that we want to build that will turn into revenue in 2025 and beyond given the lead times. We're not where we need to be yet, but we're making progress. We've got a couple of deals that have closed, and we've got a couple of others in sight and we're working as aggressively as we can. I don't know if I answered your question, but if I did, let me know. Speaker 100:25:58Yes, that was good. Yes. Speaker 400:26:00I mean, Speaker 300:26:01maybe, I guess one of my questions, if we can get more specific on it, just maybe yes or no on it. Do you think that there's a lot there's more efficiencies to come down the line here as you scale? We got a glimpse of it here in Q2. Do you think the margin profile continues improves as you scale the business, especially the rack integrations, how does the business make it and maybe even modular? Speaker 200:26:23The answer is absolutely, yes. Speaker 300:26:25Okay. That was important there. Cool, cool. Speaker 100:26:28Yes, that's all I have Speaker 300:26:30for now, man. Thanks. Speaker 200:26:31All right. Thanks, Budd. Good to hear your voice. Operator00:26:36Our next question comes from Jonathan Alvarado, Private Investor. Please go ahead. Speaker 500:26:42Hi, congratulations. Hey, Jonathan. I've heard reports that you guys added around 200 employees during the Q2. Is that true? Speaker 200:26:52No. We did add more people. Speaker 500:26:58Okay. And were they largely all put to work right away? Speaker 200:27:04As soon as they hit the front door. Speaker 500:27:07All right. And we've heard reports that you're working on Elon Musk xAI data center. Is that true? Speaker 200:27:16Jonathan, what we can't do is talk about the end user customer because it's very confidential to our relationship with our partner. So I wish I could answer that, but Speaker 100:27:29I can't. Speaker 500:27:31Okay. But you are a Dell premier partner and would you get more work if Dell get larger deal? Speaker 200:27:44We are a Dell Services partner and we work very hard to get as much business as we can with our relationship. So, it is our hope and our desire that as, the market expands and Dell succeeds and potentially other customer partners succeed, we will succeed as well. We're also embarking on a game plan to go direct to the end user on certain services that would not be in conflict with any relationship that we do have with Dell or anybody else. And we're in the early stages of that. But right now, it's not material to report. Speaker 500:28:29And the current performance on your existing contracts that you've just completed, does that set you up for more work on those same projects? Speaker 200:28:43Jonathan, we hope so. We want as much business as we can get. So the better we do, the more we want. Great. I would just say Speaker 100:28:57the level of expertise to which we executed, I think demonstrates the skills that we've built internally and the expertise. And I do anticipate that, that will be recognized and probably should result in us winning more business. Speaker 500:29:15Very well. Continued success. Thank you. Speaker 100:29:18Thank you. Thanks, Jonathan. Operator00:29:21Our next question comes from Paul Simon, shareholder. Please go ahead. Speaker 600:29:27Hello, congratulations and great results. I just have a couple of questions that I think you may not be able to answer it based on your last answer, but what I was going to ask what percentage of your total revenue comes from relationship with Dell? Speaker 200:29:46That's not a I think we can we don't talk about that publicly. Speaker 600:29:51No problem. No problem. I just like I said, you can't answer it maybe because you just said you can't talk about relationship. That's fine. It's just something I had on my mind. Speaker 600:30:03But the second thing is you Speaker 200:30:04mentioned power Speaker 600:30:06and I'm curious about one I haven't read anything about it or anything. I'm impressed with your results. Congratulations for everyone. I saw the stock jump up to $2.75 right before this thing, it's nice. Now when you said power, are you considering solar or nuclear power or anything else to power these things? Speaker 600:30:27Because I understand that there's huge power demands and like you said, you don't have enough power. Are you any other methods you're trying to use to make power, generate power? Speaker 200:30:40What we need is power to the facility, electric power, and it's measured in megawatts. We've got a good amount of megawatts to power in our current facility and the lead time to go get additional megawatts is longer than we want. And like, so what do you do? You go to another facility and you do the pricing and the costing and you make a decision on timeframe and money. And we're looking at that. Speaker 200:31:10Yes. Solar, nuclear, if you think about what is consistent that you can count on, with probably nuclear probably comes the closest, but what I've seen so far is not many people want to put a nuclear portable unit next to their facility. Not yet anyway, but I just purchased a Speaker 600:31:34company today that does something like that. It's called NNE. But anyway, that's not why I called, of course. Speaker 200:31:39Okay. Speaker 600:31:40I was just curious about Speaker 200:31:44nuclear. Go ahead. Speaker 600:31:45This company is making portable nuclear or not so much portable, but more portable than what normal huge thing would be like 3 Mile Island or whatever they call it. No, it's pretty on a truck, it's portable. So, anyway Speaker 200:32:02I look into the company We were introduced to a company that's based up in Silicon Valley that is doing something on a portable nuclear level. And we were engaged. I don't know if it's the same company, but what we're looking for is simply is just that we need more power to the facility. And we'll consider anything. Anything that can help us get there, we consider. Speaker 200:32:25But realistically, in a short term, we haven't seen anything that really we could talk about today besides the regular power. Speaker 600:32:35Solar can be bad depending on the weather. And also you have to have a lot of land for that. Or actually roof space actually roof space usually works, but or sometimes. But no, thanks for the answer. And thanks for the great results. Speaker 600:32:50Like I said, I just noticed the thing jumped up to 275. I don't know. It just happened right at the end of the day, I guess. Thank you for the great results. Speaker 200:32:59Yes. And Paul, for you and our other investors, I think on behalf of now myself and management team, we appreciate your trust in the business. And if you're going to put money into our company, we've got an obligation to do everything we can to give you kind of a very good return on your investment. So we're focused on that and customer values. So thanks for your investment. Speaker 600:33:19Well, thank you, sir. And I have a feeling you're going to we're going to see a rise tomorrow because I think these over the counter markets obviously don't do much extended hours. I think tomorrow you're going to see a U drive. That's just a prediction. I can't guarantee anything. Speaker 200:33:34Paul, we're just focused. We are focused on execution and everything else happens 5th grade. Execution, that's the case. Speaker 600:33:42Well, that's hey, I don't buy any stock that I don't see as executing. I guarantee you that. And every single one I have is executing. And so you are definitely one of them. A guy at E*TRADE told me, hey, you know, hey, that thing doesn't have much volume. Speaker 600:34:00Hey, this, that, and the other. I said, dude, look, I'm going to buy it for a dollar 75 and let's let's see what you say. Now it's 275. Let's see what he says tomorrow. Anyway, yeah. Speaker 600:34:13Oh, he was just saying, you know, these small cap things are there's no volume, there's this and that. I said, listen, man, I know how to analyze. I went to college and I have a finance degree. Listen, this company has dominated this entire year. So don't tell me about small cap, large cap. Speaker 600:34:29If you dominate, you dominate. So thank you very much and have a great next quarter. Speaker 200:34:35Thanks, Paul. Appreciate it, Budd. Operator00:34:39Our next question comes from Mitch Swergold, a Private Investor. Please go ahead. Speaker 400:34:45Hi, guys. Congratulations on a really great quarter. It looks like you're managing the growth of the company very, very effectively. And I was impressed that you are receiving financing from your partner. Can you talk a little about the size and scale of that as well as how far in advance do you have to put the CapEx in before you can then generate revenue off of it? Speaker 400:35:12And then I have a follow-up question. Speaker 200:35:15So like earlier, I wish I could give you the answer to your question, but that's proprietary. Not out of disrespect to you, it's just private. Sure. And it's I'll underscore it by it doesn't come easy. And we are very respectful of our relationship with our partner and the fact that they put some money into what we're doing. Speaker 200:35:44It's a beautiful thing. As far as the other part of your question, I'm not quite sure I know how to answer that. Speaker 400:35:57Okay. The other question I had for you is, I also have heard that you've done some significant hiring. So just wondering if you can tell us, I think you had 80 employees at the end of last year. Can you tell us how many employees you had at the end of the quarter? Speaker 200:36:14We've gone public before. We had 83, which is the last time we quoted any volume. And I think for the sake of confidentiality, we're not going to get into a whole lot more, but we've doubled at least our headcount. And we need to do that to accommodate. Go ahead. Speaker 400:36:43I didn't mean to interrupt you. So in 6 months, you've more than doubled your headcount? Speaker 200:36:49Yes. Nice try. Speaker 400:37:01Would it be safe to say that it is closer to triple than double? Speaker 200:37:05No. Okay. I respect where you're going with it, but I don't want to go any further with it. Speaker 400:37:13Okay. Have you had a lot of turnover? Speaker 200:37:18Not unexpected based on the hiring trajectory we had. No, it's within I got to do a shout out to our Chief People Officer and the management team. We were prepared and we were planning for growth at some point. And we did a lot of it through automation and heavy duty interviewing and we were working weekends and night making this team what it is today. So I just need to do a shout out to the team, the management leadership team for making that happen. Speaker 200:37:59It would not have happened if we hadn't planned for it, when implemented some of the processes and the systems and we had the people we've got in leadership position. So we did some really unique things in a very short period of time. Speaker 400:38:15That's great. Last question, go ahead. Can you talk about the duration of what kind of duration and revenue visibility do you have? Duration on the contracts and revenue visibility for the coming quarters? Speaker 200:38:37We have let me answer it this way. We have much better signals today in information exchange between our factory leadership and also our partner than we've ever had. And while there's no guarantees in life, we have a working relationship, we've got trusted relationships that we know how it works. And I'm also that, we have a working relationship. We've got trusted relationships that, we know how it works. Speaker 200:39:03And I'm also at Dell. So not that, that means a whole lot other than when if you have any relationships with Dell people, a lot of it's based on trust and integrity and relationship. And we really work hard on that, especially as it relates to future demand and investment decisions we're making because it impacts people, it impacts our business, and our partner knows that. So it's a good, I call it bidirectional relationship, but I can't get into some of the details. Please understand I'd like to, but I can't. Speaker 400:39:42Totally understand. Thanks so much for your candor. Speaker 200:39:46Okay. You're welcome. Thank you. Operator00:39:49We have no further questions at this time. I will now turn the call back to Daryl Dewan for any closing remarks. Speaker 200:39:56Yes. Thanks, Brianna. To everybody here on behalf of the leadership team, we really do appreciate everybody's support of the company and what we're doing. Your info and involvement is respected. We appreciate it. Speaker 200:40:13We're optimistic about the future. We know what we have to do. We're focused on ROI for everybody, return on investment and profitable growth. So thanks for participating in the call. Wish everybody good evening and afternoon wherever you're at and wish us luck. Operator00:40:34This concludes today's conference call. Thank you all for your participation. You may now disconnect.Read morePowered by