TSSI - Earnings call transcript Q3 2019

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Operator

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

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

John Penver

quarter and Good Chief call TSS. for third TSS I'm and Adrianne. this Officer you, the today is Chief thank Penver, to financial the John afternoon, our joining conference Thank and for TSS Anthony of everyone you Angelini, Executive Financial President results. Officer on joining discuss on me XXXX call us the

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

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

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

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

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

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

compared third new from material lines quarter the quarter results as profits our achieve we bit we call from quarter first revenue until similar see some did in did more from We upon will we a where revenues the second results this quarter to third we in the impact business services service record level with overall reseller later. the not providing of little had a were anticipated to previous growth this and expand the higher Our although in will quarter. our similar very fourth

year. core well sustain some have EBITDA to compared the we as still the earnings is Our business delays able to and quarter year, these Despite down as integration challenges prior supply due positive program this slightly throughout some largely changes customer to business. on challenges, been each

cooling year the of take results a you in assist previous Now numbers, are XXXX. business how included comparable XXXX going business the core account basis. to the comparability throughout is reference performing power to into my December I'm should The comments the differences our in understanding for our XXXX the results. not our and underlying business in results but in that on

year-to-date basis, our to are XXXX our down a profit X% On operating down revenues is and $XXX,XXX. core business compared

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

third me quarter year-to-date more So on provide detail let results. our some and XXXX our

up the in the million. and third is compares quarter from for million $X.X second This of revenue $X.X XXXX to million quarter third of XXXX. quarter $X.X XXXX was Our the in

XXXX. power sold, Our $X.X the business contributed in we third that and quarter cooling million

year. in was business, or based $X.X business was number our million of a or prior up on year but XX% the facilities down modular facilities $XX,XXX the compared deployments higher and for prior compared year, actually data businesses to power the centers this to our absent X% results cooling Now, the

year-to-date same business the integration period [ph] down the $X.X integration The last revenue $XX.X and million and of XX% On XXXX. system modular data compared XXXX year million of in a power contributed $XX.X cooling to to levels center our or is business results. activities. Rec third the on compared basis, $XXX,XXX lower quarter of The million in

As I business business. system said, or $XXX,XXX volumes year-to-date this XXXX to revenues are absent down lower predominately in with being our X% the decrease our integration compared from

other operating business Now quarterly volume customer significantly changes for component within our including availability fluctuate because can data the demand with demand operating fixed of in costs to and system due factors. will centers, And of modular associated ability integration level facility, volume forward. us our a goal profit of improve increasing of integration influence inconsistency and and key key our moving this business be to for are this within volume on

customers are actively system growth seeking of to facility drive and services profits. add and our integration more the in utilization to increase We to

upon recognize our hardware, close revenue a date we system quarter revenue of that the the software to is product. behalf customer. their me system to Now discuss our used and from in we components completed on that the services we upon third the our services activity XXXX. our completion completed We of usually as the let third-party generate procure fees services professional are deliver in to integration recognized briefly which of these new reseller to the customer. We integration reseller we We commenced shipment charge customers from services then the to the integrate ship procurement activities revenue the

cases sold of our recognize and or to which the resold customer. in arrange entitled In that time transaction expect that hardware, acting is the directly amount the some software, from customers for we purchase instances, our OEM professional to the these the including commission at third-party the through that recognized are an product we merely in the of agent being services we transaction we to be and any we our are to as Now customer. revenues, field

Now systems than our for integration are lower services. facilities reseller on services the margins traditional materially and

our however, our in result reseller new will take these these integration in significant partners for as have materially diversity and drive customer So volume in of transactions to of services lower to the our the potential dollars and profit gross of our to operating growth the many services our margins, margins seek in gross of absolute level profit material In growth base our capabilities. ability business. advantage

activity material So of fluctuations in revenues reseller margins. quarterly fluctuations lead in and the to reported might volume gross profit

mix XX% million fluctuate And mitigated and to services The period. our margin while quarter power year third gross XXXX, during XXXX third from business. quarter and compares continue XX% the profit on impact of of of gross is than the revenues margin to of and the than was XX% quarter XXXX. down prior in the margin Year-to-date in million third quarter had of second in slightly of margin given cooling previous the $X.X lower XX% in lower of lower the profit a XX% XXXX from of our the was our from XXXX it and $X.X results the the quarter margins of excluding of our the based the this we

to gross down you comparison cooling nine our $X.X months we our first had than of million year-to-date profit year. profit if year-to-date is months $X.X power million results first XXXX, the lower $X.X is in and compared from and the the of of nine exclude this the or Now XX% the gross last million $X.X million

in of were year-to-date decrease to compared the $XX,XXX in and from Our year $XXX,XXX third personnel down or the had down XXXX our of second quarter $X.X selling, our or were the administrative of costs XXXX $XXX,XXX power operating the costs, million up to and selling, and XXXX. XX% million but that's to expenses general, higher the X% quarter to costs really the related due and compared general cooling third number of the we XXXX. XXXX business administrative $X.XX prior reflects compared quarter the expenses during This absence are recruiting

the After an XXXX. would from in of XXXX an on all profit an have above, the third in of XXXX quarter results of quarter an of basis business exclude our [ph]. operating $XXX,XXX of profit shown forma of our third compare the operating This sold the pro if $XXXX operating in third recorded you the profit the XXXX. second to quarter XXXX quarter and operating comparable does of we results, a $XXX,XXX $XX,XXX loss And

per forma we net cooling quarter of our share third $XX,XXX compared a or of $X.XX of on per of XXXX. a third nine or After quarter or compares Year-to-date $X.XX a share $XX,XXX share the share. been or power loss in quarter $X.XX costs, our basis On comparable business income net have loss first per XXXX. and would of XXXX have this or per and was $X.XX net to months results, XXX,XXX basis, interest which forma of $XXX,XXX $X.XX the a share million our net tax XXXX. pro $X.XX or This share income in and $XXX,XXX the pro net third a $X.XX would have excluding in year, to the last income shown from

Now compares of This EBITDA the in and a adjusted forma amortization to which in second $XXX,XXX excludes quarter for of third XXXX. compensation XXXX. of interest XXXX pro of EBITDA, was depreciation, profit and stock-based third tax the our of quarter the quarter $XXX,XXX adjusted $XXX,XXX

to since around our changes major we our results. commenced our reseller in as QX services, the activities sheet sheet, looking some there's reported balance been Now we balance new

and And and increasing, level our to October. advance of large and increases This flows in in business September these $X.X our approximately payable in reseller inventories, payable. as this the will we inventory increases we drive purchased cash result our our in in accounts in receivables, transactions. of accounts million manage So in resaved in products our likely inventory as around shipping customers

been operating under off-balance on changes Standards balance due Accounting continue on for was capital, account required we XXX standard lease standard liquidity, that norm. Codification XXXX reported We to has ASC January the new balance large XXXX. the fiscal sheet, in of working adoption all sheet, than There the results, our stockholders' new as we rather our accounting And under also since to sheet Topic that the our leases X, strong to equity. and have been are some had effective

million recognized ASC and $X So upon lease associated our liabilities the XXX, adoption sheet the balance effect on million January XXXX. of use $X this assets X, leased to of right of with we

$XXX,XXX GAAP. $X.X to the end And million by quarter had slightly million down due standard those on accounting lease the hand So position we which new QX. $X.X XXXX liability almost with And accordance of capital cash we a in into of of the portion the million recording adoption the net with from for closed lease and account the XXXX. of compared was entirely had to reference as working we decreased at of end $X.X liabilities

the operate due will but the fluctuate to do believe in the We us opportunities business timing revenue explore have flexibility provide maintenance continue potential capital of they and contracts, to expect to for the arrive. billings to adequate we working position as our liquidity

We million also in credit the additional $X.X line we of yet source first to not bank quarter revolving that a liquidity, drawn facility. against have provide added XXXX an agreement of

I see the comments we So XXXX over now call to with business Thanks. moving next that, hand the on year. results Anthony? Anthony our for into how his and will forward

Anthony Angelini

Thank you, John. Right.

third are a customer we transformations diversify While don’t the range really looked results, the our expand the to quarter the he tell and numbers our like services service help second us business base. taking offerings quarter to grow within lot our you of about

the deployment channel around several modular in customers delays over We of and last its projects a quarters number the to partner experienced business. from was that our end primarily have

to operating segments we the of quarter the been over impacts our events straight the the delayed achieve activities. and point our revenue beyond integration overhead we we product Despite EBITDA costs able have This these control, than despite therefore for pleased done were adjusted our we deployment it breakeven control of couple work mostly the last that company of the able as have subsequent were the years positive both of lower anticipated to lower and for are levels. fixed the and that to still XXth because

delay first in of anticipated some initial recorded September. started revenue components. reseller we we to later our activities than a The due John project As the from indicated,

that confident fourth in growth our will We quarter. revenue this drive are in substantial

quoted program be we higher than expect the our As our up. in revenue I reseller press our fourth first release, three quarter quarters ramped to as combined

XXXX In nearly the we EBITDA in expect the first quarters adjusted addition, to three combined. double

a that on of of material. value year, add on our $X the our product are last all call provided We services is majority over almost I predominantly conscientious. consigned billion handle as that hardware indicated

order activities will in as virtually prior involve procurement. hand customers for Our delivery of where some that, to this but reseller believe we there our portion have no we volume risk is

services. professional and software, hardware, resell and procure will We

profitable reseller will lower for The capital believe don't any no mark additional our incrementally We and us to this will with there but be gross of operating require business. will add up process. overhead to and working these purchases requirements significant profits

should of parties will As lower opportunities. of have absolute in reseller growth that this program driving revenue profits volume gross the gross business margins, revenues, services with quarterly but expect we the establish drive additional result grows additional third as revenue benefits and will added new you higher believe substantial relationships a

We about additional are opportunities already excited in traction are that the we seeing.

addition, we've party sales added a executive work In on focus third into drive senior XXXX. to this

drive and as strong in and the as of and predict do we business, but these to profit. this and difficult long-term well to as XXXX in growth stage result undertaking profit revenue will is expect operating a We impact gross revenues it early are our anticipate services how this our we year-over-year growth

we revenue range $X.X the in year high million end our $XXX,XXX million on and in between income current Based adjusted in $XX with generating range, picture, net $X.X $XX gross to low the margins XX% expect EBITDA. or to about $XXX,XXX the in to to

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

believe are momentum great that on of We into we with our going execution focused XXXX. successful a will up and wrap goals XXXX we

any happy we're to questions answer have. that, With you

Operator

our Thank And you. question [Operator from Instructions] Ian Castle. first comes

open. is line Your

Unidentified Analyst

a Hi, questions. thank you. I have of couple

program how first about, curious was the just I that? pertains reseller that to program. about The reseller curious just kind yes, one of came

Anthony Angelini

value different aggregating partners integration deployments, our is them OEMs within cetera, primary of an number provide and and solution what services to into overall been we're to we've an a groups working been sold able what is, end-user. and we've added Well, in do multiple that doing now Sure. with gets doing et

to us and and that ultimate process that has together services procuring now aggregating an and that then an software, professional step putting overall end-user. So solution in hardware, that both that in selling

Unidentified Analyst

reseller the overall that into strategy? the pulled how or you with Okay, verticals and customer that does additional into curious program, has I'm just that ties

Anthony Angelini

Yes, number of of so this. comes there's a out benefits that

So attach before every and professional those to of we relationships have the our in from OEM our and other now addition service first with services offering partners, day deals we each off, services. core hardware, relationships both core in multiple and establishing software

with ability master we've develop them we've because have got grow with that to opportunities party we based. opportunity and them group go third so And to with now that a agreement got are the other

Unidentified Analyst

Okay in question and is, the have into and be remarks, last Business I color more his of little you if VP opening hired your addressing? so he mentioned I will can a a when what you bit areas role wonder Development, us you give

Anthony Angelini

third the tenets OEM so these party program, how process Sure, with that he three opportunities want [indiscernible] of develop these going obviously is, so as of maximize Matt a growing drive One we that focus additional we've we through to embarked on we hired, focus groups. those this have lot relationships revenue do we to other on relationships really into, on. kind the is Matt's individual we're to going as that this there's

still is third-party or In be looking so he that our be then customer look in potential OEMs, addition, diversify M&A that, space. other relationships he'll we focusing we're and going offering base, on to at as service our to expand at

those Dell to on strengthened is to just really have I tenets. have opportunity, all good of and in opportunities three exploit great on front we of able focused kind we really got Matt So we is us, and are growth it a to in tenets. there. saw opportunities develop our team was like continuing It much the those so feel opportunity Karen the that [ph] we've those bring a luckily we were board and

Unidentified Analyst

Okay, excellent. Thank you.

Anthony Angelini

thank Ian. right, you, All

Operator

the Instructions] questions. call to have no turn final over further Anthony we comments. [Operator Angelini And I for back will

Anthony Angelini

that's and and can everybody So that the we're good to see what XXXX. quarter a we call. call look into appreciate I to appreciate question and attendance see, really We've I really joining so the forward any this doing in on got fourth good

exciting at be to So it time TSS. going is an

very XXXX. thank much well, we again So you will to in talk you and

Operator

Thank now for disconnect. concludes you conference and participating, today's call. gentlemen, this may you, ladies Thank you

TSS (TSSI) 14 Nov 192019 Q3 Earnings call transcript