TSSI - Earnings call transcript Q2 2019

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Operator

Welcome to the TSS Second Quarter 2019 Earnings Call. My name is Hilda, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded.

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

John Penver

second and Hilda. conference you our of results. TSS. Good Financial you, the gentlemen. John call XXXX Penver, I'm afternoon, discuss TSS Thank Officer on ladies Thank Chief financial us for to quarter joining

President Joining the the is Executive Chief Anthony today on the Officer me Angelini, call and of TSS.

the release contained call, I That applies everyone we note today's of remind in today. would to statements conference forward-looking press to the cautionary like begin same regarding we to that statements As issued comments call. the language made take language and on

call will this of well accurate information as as as forward-looking today, August So time which XXXX. are contain statements, XX, sensitive

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

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

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

will see we Anthony his that comments for begin review of business then to call the the with changes I the So a and on call the second quarter turn results coming. and the

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

power the previous largely supply delays, well revenue in customer to XXXX and sustain The have quarter and due The Despite that our second into lower the results of on some December cooling in program year our previous were not our XXXX. earnings. level are but of changes sale profit we results. from to should business results been in results XXXX our as our revenues, business. comparability both able the quarter, included account numbers integration Now EBITDA also and take of challenges as some in lower positive of our of to the business

reference our to in are to down core performing to on business differences comments revenues comparable compared assist a our going you throughout understanding I'm year-to-date my XXXX. underlying the a basis. On how basis, X% is

Our profit $XXX,XXX. operating down is

and facilities our cooling and increased of power One goals more which to maintenance profits will and for talk new the with our replace service revenue about shortly. core and had integration business, with businesses, XXXX Anthony from offerings, profits and and in from is revenues the we revenue profits

details XXXX let year-to-date So results. second some the me on provide quarter our more and

the Our $X.X compared in revenue for second of this million million, quarter XXXX XXXX. to of $X.X the was quarter second

cooling power $X critical in contributed quarter and Our the million second business of XXXX.

facilities data rack $XXX,XXX center low down was was of or lot the $XXX,XXX a X%, So a and deployments our level business integration integration activities. centers business and down XX%, for data systems modular or of modular

$X.X the of results. million first XXXX, million cooling of compared half power revenue in On our and XXXX to $X.X a contributed year-to-date basis, the in business $XX.X million and the

decrease year-to-date with business, our compared XXXX revenues down being X%, business. to are our integration So this $XXX,XXX the systems absent in

customer centers, can factors. significantly availability and due modular demand, fluctuate to volumes component including business quarterly, in to integration due data demand system our in The for changes other

forward. of business and on for our and costs the our operating of a because our within ability increasing facility, us goal influence will this key fixed moving profits a be to improve consistency So integration with levels operating associated this volume key

margin we XXXX, the second in of the XXXX. and XX% the the the margin quarter in second we than XXXX margin gross recorded quarter XX% XX% higher first quarter Our of had during up of was from

Looking our XXXX. XX% had XX% forward, business. margins and between on XX% in gross of our to Year-to-date, core still we we same gross in as anticipate margins XXXX remain our was the

fluctuate given second we had gross on in of period. the will however, services not higher and lower the XXXX. mix million margin slightly any Our of than of $X.X lower A could mitigate million $X.X the revenues based this margins of profit impacts our quarter the was quarter

of the to gross Year-to-date, the half and we exclude lower million first X% would or million than be results the million $X.X first gross our our of had this from $X.X is business XXXX. power compared lower the $X.X profit cooling million half profit in XXXX. we comparison, year-to-date $X.X If of

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

due fees compared professional the business in quarter to results. our the annual to quarter decrease first reflects year of order. prior cooling The XXXX operating are of costs associated XXXX, power the absence also including $XXX,XXX the first and [indiscernible] with of There

Year are of of quarter recorded the to an in we After an XXXX, operating in the XXXX. This operating of first our compares the general profit date, the second quarter and of expenses above, XXXX. XXX,XXX to profit X% in operating quarter or administrative XXXX. all of profit second $XXX,XXX compared to $XX,XXX selling, $X,XXX an down of

comparable have business Excluding second the our pro XXXX the operating from our an basis, $XXX,XXX. results shown of a on profit forma XXXX results, solid of quarter of would

pro forma a in tax had quarter of of quarter compared quarter $XX,XXX a income or income $X.X per interest share. or XXXX second from a of net in share XXXX, loss to second $XXX,XXX or of business cost, comparable XXXX. per a net $X.X a After we the would second basis, $X.X and have the cooling and results, share power net shown the excluding our On $XXX,XXX

income share the first power pro income of cooling $XX,XXX loss net or $XXX,XXX the XXXX, $XXX,XXX net of $X.XX XXXX, net our zero or share first our business. excluding forma compared share, per and per the to of Year-to-date half in of half per or $X.XX of and in

Our XXXX. have forma of of profit On the adjusted year and quarter of stock-based been which second this the last pro profit an EBITDA and tax, would a depreciation, excludes $XXX,XXX profit of EBITDA adjusted second an first of to compensation, in $XXX,XXX compared a EBITDA, the quarter interest, amortization was in $XXX,XXX for basis, XXXX. quarter

sheet, Looking any to has real not the our reported changes, been we balance there QX since results. significant

stockholders We have continue capital strong working liquidity, and equity. to

sheet, January was XXXX. a X, to been Topic Codification since under the accounting in large lease the XXXX have Accounting reported a are of There Standards These we standard, due of changes new balance results. fiscal our number changes effective XXX that adoption

required Upon operating our off-balance our the prior liability associated on standard, leased $X on recognized sheet, of Under XXX, we we're account been right effect our with to balance assets use that million date. sheet and balance the sheet, this XXXX. had from all January for $X million to ASC adoption norm new as lease the leases than rather to X,

Absent end $X.X the and with on leases, many million sheet, the not million our at we adoption the were the from of standard cash hand the significant of down quarter end We balance $X.X in capitalization of this slightly closed compared changes there of the the operating XXXX. had XXXX. to

now XXXX, per was of the by the lease end And recording entirely the portion compared liability, of as due GAAP. then almost liability capital this working $XXX,XXX a which current positions accounting adoption new to increased of standards, lease

to capital us We XXXX, provide under fluctuate I and expect to maintenance we liquidity during exploit business our opportunities they working timing revenue the the but position for have flexibility of as due will arise. operate adequate mainly contracts, billings believe to new

drawn $X.X bank an that XXXX, at also, We quarter this not revolving of additional million the to in But a facility point. credit company. the fourth agreements liquidity we've of line added of for source against provide

forward I'll call comments to during changes in XXXX couple a the that, seen results the business with and So XXXX. hand for we Anthony the the on of going

Here you Anthony. go,

Anthony Angelini

Right. Thank John. you,

was quarter journey, quarter our in are happening transitional second are that the While the the much excited a about business. developments within larger we

discuss to get I the that, current quarter. Before I'll

that projects channel postponed some were you a provide we and have as manner. services We in know,

and to a in are end future. within about scope in the million out therefore user sometime moved large that some So quarter, a $X us affected out there timing in the changes

that we positive efforts the adjusted events, were we've for to years achieve breakeven the despite lower we the reflects were -- company. that the EBITDA lower for control, straight still beyond made EBITDA several our Despite able were last point we quarter XXth revenue result mostly The the pleased were over these levels. to

profitable level will and as the have costs, at lower of we We adjusted flow drop revenue benefit the also the so those bottom-line. that incremental to remain of profit can This added period, levels. a from in we has our so add through, that revenues through fixed overhead

in beginning to excited some we am the quarter. that programs tell you third additional have I

that I about is provided out discuss consigned value-add some want Currently, them, as material. I are on additional business services not obvious. point always majority the information As a to of our our

We as services. risk or we'll In in actual hand. We as we a programs are these of procure these perform no engage resell and us now sorts. have that software order a virtually only engaged reseller there delivery have when in hardware, professional is some the in cases,

material The the of markup to incrementally other profitable gross will profit. low, add but our

pulling small partner on adding like winning a relationships, a very additional and achieving percentage is services new while trifecta. So pie, large through a

drive alone handle any and we will capital just of requirements. per If be product of small nature capturing the deals over Due contributions don't that we working will that their as billion believe large very business. incremental you terms, additional to consider $X these of a the significant today, to percentages there year, hardware

end a business we that year, opportunity. the of ourselves the out or in steps our the taken were and company -- have that not I have step the the we sheet we in able move including position point in position the would to last sale type in this year opportunity. this been and at strong win two, Because not today, the will into of we not had we taken past balance of had is to of

to we the with income million that, net the the million margins about mid we revenue based the $X in of expect XX% $XX current of adjusted with in our the end or of and $XX a year $X So gross year -- million to revenue generating on EBITDA. picture, range about expect range, million end mid

we momentum have feel the on of have we XXXX As focusing opportunities, growth great all exiting we're that large into will XXXX. areas

John the to has for think there's not numbers comments. add covered those therefore, very much me well, I

we our our focused are believe execution exciting next TSS. chapter We and will that on goals, beyond and XXXX of an for be

to With any take questions. we're happy that,

Operator

We from Instructions] We Soueidan begin the now will GeoInvesting. session. Maj have question-and-answer [Operator

Maj Soueidan

Hello, Anthony.

Anthony Angelini

Hi.

Maj Souiedan

you distract like here, means discuss diversify can any efforts I pursuit you so a opportunities customer if forward. wondering concentration I'm and some you're question will to moving what opportunities. it seems your organic from exploring have that more to your inorganic of your

Anthony Angelini

Yeah. runway that One couple a on our core I’ll We to organic position even the there's metal customer the in our opportunity a growth to and Well, lot drive enough within of so things ways. is significant think business. pedals opportunities.

that. is one job harvest So and manage

do are and supplement at other things to in looking We opportunities organically.

focus to other just third-party that providers. continue some and hardware we'll puts software of keep programs it in a that -- the The So, pulled beauty with on us we in is that. of relationship

So, that piece an initial standpoint. a is toughest relationship, gives from always get diversification which to us new the customer contract

deal to into us you're trying an have together, -- out to So, is get get which our that company, when that we prospecting in agreement run initial now in business it it's initial a gives contract do place. an always and space, because

and for very think that in feel us about going the places we the and term we're putting to are our efforts bang where are give resources the we and buck. the biggest we So, positive near

Maj Soueidan

anything to one now need change more talk positive seeing aware And you status since of, Are negative be in question the outlook sense I’ll go. to that we’ve quo great. Great, or about. you industry and let any we in

Anthony Angelini

There is here.

the off is particularly first our on chains -- largest of how the impact, et getting chains, in timing as it having around -- and So, material about else, going so, what talk China cetera. cycles, customer you supply had an supply everything things -- and

But fortunate. we're

diverse throughout relationships distributed Our has of lot world. largest or a customer the

good. ability China man their source with will So, if or and the you to China is pretty deliver the tariff

get part, it's others to have -- -- customer issues timing seeing that largest we're customer there's we're going we but in demand we're our with the facing some where disequilibrium market, that it's our the some that they most the size and So -- strong. in coming waves, our for - that, -- is

Maj Souiedan

Great. Thank you.

Anthony Angelini

Maj. Thanks, right. All

Operator

next Naymark comes from Main The question from X Capital. Yaron

Yaron Naymark

Thanks guys. the Hey, for color.

the just, the China have market comment I share. relative kind how related of guess, questions on ask guess, I appreciate I to to guess, and broader end. on industry, into different you last of the Just two a related. I project just it. that's similar But guess, my sounds delays, economically a bit question, trending little way it's to One, visibility your And, like

Anthony Angelini

in So we a different markets. few play

modular market So in an wanted a we maintaining base of we're field, share, example, guys in to strong space in network, an -- and a modular the modular the pretty high like, as installed pretty got centers feel services are that the field. like

On large side, pie. services, right. we very, doing a the which only when got in we're very small integration particular, piece business it's monitor, that very providing And of -- a we're and

$X low, worth but revenue of service look billion really, our So handling might mentioned, we're a material. we like

of say, billion of as you in kind So, guys okay, doing. $X where much, think we worth market, much, about in you of know, a are these opportunity. larger, kind we're taking much multi-billion-dollar That a market if sits are it's stuff. the you what And

scratching that pure like play, to in of are of But a and feel we're we've the that of position that of and years, integration So, the business total Yes, in a we tiny. to we feel like we're capture of surface. the front through that just advantage opportunities got the market. us, last the ourselves available better couple done reorganization over take more now we've business

Yaron Naymark

It's project lost expecting that related. So like like timing its project sounds any purely delays, were win just not the or like anything timing, it's that. to you you

Anthony Angelini

was around there's base delayed, about -- we is of the -- business some modular that was basically lost centers. part not of data there Yes. -- our that year, do so a And the then timing. of but There's installed lost got work some we a

And maintenance about kind those time mile at time it, your Think of XXX,XXX your -- refreshes. car. points require on in

that it. So delayed XXX,XXX got call let's some of miles,

contracts it that as some year what was of of us were the at part So, where hit those -- the of would end renewed.

of delayed the we some also We refresh of a the in field. call what hardware

Yaron Naymark

Got it.

did as of And the year, and of had was, Helpful. $X you I to Okay. hear about $X net same expect do you million the the income? million I question said EBITDA for correctly,

Anthony Angelini

said. we That's what

Yaron Naymark

Got it.

the getting more have implies or some Either in back that that you So pretty meaningful of into a opportunities call? that two-half. the just in all of is step the above? referenced is half, growth organic the up it's delays pushed new on, just the you Or visibility

Anthony Angelini

that Say again. sorry. last I'm part

Yaron Naymark

I two-half. driver half one-half guess new what call? revenue referenced organic it step half? the project opportunities push, the is the the the second from of into pushed biggest the that from, up to on Is it you the first the got just Or delays

Anthony Angelini

It's both.

and playing some felt of over second are some the some in quarter was the things. Those what that's the we So, effect the timing of of quarters. themselves of out third in fourth

with We're So there's this over. that. We never kind agree right. all get Right? going perfect, thing roll quarterly of just to

like you're trends in to really and direction trying the I what right the think -- the trend so is that's As with ask. -- so

our been -- up core business, revenue get goals to to one last new So programs back to our our revenue they and right. margin has and in year, were add up our back level level where of

So we're effectively business. that growing

of What percent $X to $XX million growth is John, get rate million? that to

John Penver

been have Yeah, XX%, a that XX%. would about

Anthony Angelini

top on we're of these that business XX%, programs. adding new still it see growing roughly plus we at So now

by sitting -- the here drive these of October So -- we're middle new in and programs the August. way

the half is of in put. sort quarter that of we happens back million year. timing the guidance delivery got through by of We that of we the gave these of whether $XX it to the the or $XX all at because third like end be happens between what the September, quarter of October, the end – the you question understand So quarter. And understand for this why that's halfway the a at going November, in we're year, feel to revenue we're million we've

Yaron Naymark

it. Got

That’s helpful. all Thank Very had. you. Okay. I

Operator

no I Penver We questions. remarks. call the have would for to Instructions] further back to like final [Operator Mr. turn

Anthony Angelini

over course. take of for I'll John, Okay.

call. really a forward the we attending for So thank We and look all are this our think to on developments that you is business in changer. going the game

updating we season. the to you. look and on forward the tuned stay into fall Thank we results get you So as

Operator

Thank concludes gentlemen, you. conference. participating. for this you Ladies today's and Thank

disconnect. now may You

TSS (TSSI) 14 Aug 192019 Q2 Earnings call transcript