Kingdom Capital Advisors, a private investment firm, released its fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. The firm started the business four years ago with a clear goal of investing in overlooked microcap companies that yield exceptional returns. Despite significant challenges in 2025, including a bankruptcy in January, a key investment losing customers in May, and a cyberattack on the largest holding in June, the firm achieved a 17.45% return net of fees, illustra ...

TSS, Inc. (NASDAQ:TSSI) is one of the best-performing small-cap tech stocks in the past three years. On December 1, Lucid Capital Markets initiated coverage of TSS with a Buy rating and a $15 price target, implying roughly 56% upside from the $9.63 price cited at the time of the report. Why Lucid Sees AI Tailwinds Driving Long-Term Upside for TSS Despite Near-Term Revenue Drop Carol Gauthier/Shutterstock.com Lucid’s pitch is simple: TSS is leveraged to the AI data-center buildout as a systems integrato ...

Core Insights - TSS, Inc. has released a leadership paper focusing on trends in high-performance computing (HPC) and data center technology for 2026, emphasizing the importance of infrastructure decisions in the context of the growing prevalence of artificial intelligence (AI) [1] Company Summary - TSS, Inc. operates in the data center services sector, providing AI and HPC infrastructure along with software integration services [1] Industry Summary - The release of the leadership paper highlights the increasing significance of HPC and data center technology as AI becomes more widespread, indicating a shift in procurement and integration strategies for industry leaders and partners [1]

Core Insights - TSS, Inc. (TSSI) shares have experienced a significant decline of 20.8% following the release of its fiscal third-quarter 2025 results, compared to a 3.1% drop in the S&P 500 during the same period [1] - Over the past month, TSSI shares have decreased by 52.9%, while the S&P 500 has only slipped by 1.2% [1] Earnings & Revenue Performance - In the September-end quarter, TSSI's revenues fell by 40% year over year to $41.9 million, primarily due to a sharp decline in procurement activity [2] - Procurement revenues decreased by 49% to $31.1 million, while Systems Integration revenues increased by 20% to $9.2 million, and Facilities Management revenues dipped by 19% to $1.6 million [2] - Gross profit fell by 41% year over year to $4.6 million, reflecting lower volumes and new operations-related depreciation in the cost of goods sold [2] Net Income and Adjusted EBITDA - The company reported a net loss of $1.5 million compared to a net income of $2.6 million a year earlier, with diluted EPS swinging to a loss of 6 cents from earnings of 10 cents in the prior-year quarter [3] - Adjusted EBITDA declined by 66% to $1.5 million [3] - For the first nine months of 2025, revenues rose by 88% to $184.8 million, and adjusted EBITDA increased by 59%, despite a 27% decline in net income [3] Business Metrics - TSSI's revenue mix is heavily skewed towards procurement, which accounted for 84% of year-to-date 2025 revenues but only 58% of gross profit [4] - Systems Integration and Facilities Management together represented 42% of gross profit while generating only 16% of revenues [4] - Systems Integration remains a critical growth driver, supported by rising demand for AI-enabled rack integration, although third-quarter volumes fell below expectations due to operational bottlenecks [4] Balance Sheet Strength - Cash and equivalents increased to $70.7 million as of September 30, 2025, from $23.2 million at year-end 2024, aided by operating cash flow of $18.5 million and proceeds from a secondary offering [5] - Working capital improved to $34.3 million from $1.3 million over the same period [5] - The company invested $32.2 million year to date in building its new Georgetown, TX integration facility, which will expand power availability to 15 MW and more than double operating space [5] Management Commentary - Management indicated that the third-quarter shortfall was due to execution challenges rather than weakening demand, citing "unforeseen operational requirements" at the new Georgetown facility [6] - CEO Darryll Dewan noted that corrective measures have already led to "dramatically higher rack volumes" expected in the fourth quarter [6] - The company anticipates strong demand from hyperscalers and enterprise customers investing in AI infrastructure, although procurement activity was temporarily disrupted by a U.S. government shutdown [6] Factors Influencing Q3 Results - The most significant drag on third-quarter performance was procurement variability, which can fluctuate based on deal timing and revenue recognition methods [7] - Lower procurement volume reduced scale efficiencies that typically benefit margins [7] Margin Compression - Within Systems Integration, margins compressed sharply to 13% from 45% a year ago due to the allocation of new facility-related depreciation to the cost of goods sold [8] - Power costs at the expanded site also impacted profitability, with TSS incurring over $900,000 in electrical costs in the third quarter, recovering only about 20% of these costs from customers [8] Guidance - Despite the third-quarter miss, TSSI reaffirmed a bullish near-term outlook, expecting full-year 2025 adjusted EBITDA growth of 50% to 75% over 2024 [9] - For 2026, the company initiated guidance for 40% to 50% organic EBITDA growth, supported by increased visibility into customer demand and the ramp-up of the Georgetown facility [9] Other Developments - TSSI appointed Vivek Mohindra, a technology industry veteran, to its board of directors, viewing his addition as a significant step in accelerating strategic expansion across AI, edge computing, and modular data-center offerings [10]

Core Insights - The article discusses the investment potential of TSSI, highlighting its strong market position and growth prospects [1] Company Analysis - TSSI has demonstrated a beneficial long position in its shares, indicating confidence in its future performance [1] - The company is involved in various sectors, which may provide diversification benefits and reduce risk exposure [1] Industry Context - The broader market conditions are favorable for companies like TSSI, which are positioned to capitalize on emerging trends [1] - The investment landscape is characterized by volatility, making thorough analysis essential for identifying opportunities [1]

Core Insights - The article emphasizes the investment philosophy focused on small cap companies, highlighting the importance of identifying mispriced securities through understanding financial drivers and utilizing DCF model valuation [1]. Group 1 - The investment strategy is not confined to traditional categories such as value, dividend, or growth investing, but rather considers all prospects of a stock to assess risk-to-reward [1].

Company Performance - OneConstruction Group Limited (NASDAQ:ONEG) experienced a stock price decline of 57.16%, dropping to $4.39 from a year-high of $13.5, with a revenue decrease of 16.2% to $53.2 million from $63.5 million [2][8] - Nuvve Holding Corp. (NASDAQ:NVVE) saw a 43.46% drop in stock price to $0.26, prompting the company to initiate a strategic financing initiative to strengthen its equity position [3][8] - TSS, Inc. (NASDAQ:TSSI) faced a 43.08% decline in stock price to $8.68, despite enhancing its AI and high-performance computing strategy by appointing a new board member with extensive experience [4][8] - Republic Power Group Limited (NASDAQ:RPGL) witnessed a 42.96% decline in stock price to $0.84, raising investor concerns about its market position, although it successfully closed an initial public offering of 2,120,000 Class A ordinary shares at $4.00 each [5][8] - Davis Commodities Limited (NASDAQ:DTCK) saw its stock price fall by 41.59% to $0.64, reflecting market reactions to global trade dynamics, while exploring a new vertical in the specialty food ingredients market projected to reach approximately $97.3 billion by 2025 [6][8] Market Sentiment - The significant price movements of these companies underscore the volatility and risks inherent in the stock market, influenced by company-specific developments, sectoral trends, and broader economic factors [7]

Core Insights - Premarket trading is showing notable activity with significant price movements indicating potential opportunities for traders before the market opens [1] Premarket Gainers - Cidara Therapeutics, Inc. (CDTX) is up 91% at $203.18 - Binah Capital Group, Inc. (BCG) is up 45% at $2.07 - Invivyd, Inc. (IVVD) is up 42% at $2.52 - Omeros Corporation (OMER) is up 15% at $7.25 - The Oncology Institute, Inc. (TOI) is up 12% at $3.47 - AlphaVest Acquisition Corp (ATMV) is up 11% at $7.99 - ARB IOT Group Limited (ARBB) is up 7% at $7.31 - Hyperion DeFi, Inc. (HYPD) is up 6% at $5.27 - TruGolf Holdings, Inc. (TRUG) is up 6% at $2.02 - Boqii Holding Limited (BQ) is up 5% at $2.24 [3] Premarket Losers - TSS, Inc. (TSSI) is down 40% at $9.12 - StubHub Holdings, Inc. (STUB) is down 20% at $15.02 - ESS Tech, Inc. (GWH) is down 20% at $3.38 - Red Cat Holdings, Inc. (RCAT) is down 17% at $6.38 - WhiteFiber, Inc. (WYFI) is down 15% at $16.81 - New Era Energy & Digital, Inc. (NUAI) is down 13% at $3.66 - NET Power Inc. (NPWR) is down 11% at $2.62 - Korro Bio, Inc. (KRRO) is down 9% at $5.90 - Anavex Life Sciences Corp. (AVXL) is down 8% at $5.20 - Interactive Strength Inc. (TRNR) is down 5% at $2.47 [4]

Group 1: RLX Technology Inc - RLX Technology Inc reported quarterly earnings of 3 cents per share on sales of $158.600 million [1] - Shares of RLX Technology rose 6% to $2.47 in pre-market trading following the earnings report [1] Group 2: Other Stocks in Pre-Market Trading - Cidara Therapeutics, Inc. surged 92% to $203.50 after a Schedule 13D Amendment revealed beneficial ownership of 3.37 million shares [4] - Binah Capital Group, Inc. gained 52.2% to $2.17 after posting stronger-than-expected third-quarter results [4] - Expion360 Inc. rose 42.4% to $1.81 following its third-quarter results [4] - Aspire Biopharma Holdings, Inc. surged 31.2% to $0.1380 in pre-market trading [4] - Invivyd, Inc. gained 28.8% to $2.28 after reporting better-than-expected third-quarter financial results [4] - Milestone Scientific Inc. surged 26.3% to $0.4801 after reporting better-than-expected third-quarter sales [4] - Lazydays Holdings, Inc. gained 23.3% to $1.85 after a previous surge [4] - Omeros Corp gained 12.5% to $7.08 following a narrower-than-expected quarterly loss [4] - Nouveau Monde Graphite Inc rose 10% to $3.25 after a decline the previous day [4] Group 3: Declining Stocks in Pre-Market Trading - TSS Inc tumbled 40.2% to $9.10 after reporting a year-over-year decrease in third-quarter results [4] - enVVeno Medical Corp declined 35.8% to $0.42 after an unfavorable FDA appeal decision [4] - Nuvve Holding Corp fell 29.3% to $0.34 after announcing third-quarter results [4] - ESS Tech Inc shares dipped 24.2% to $3.22 after reporting weak quarterly sales [4] - Direct Digital Holdings Inc fell 18.8% to $0.23 after a significant gain the previous day [4] - StubHub Holdings Inc fell 18.8% to $15.28 after worse-than-expected third-quarter EPS results [4] - Mangoceuticals Inc dipped 17.7% to $0.98 after a decline the previous day [4] - Red Cat Holdings Inc dipped 15.1% to $6.57 after worse-than-expected financial results and a lowered FY25 sales guidance [4] - WhiteFiber Inc fell 13.4% to $17.21 after reporting worse-than-expected financial results [4] - Sobr Safe Inc fell 12.4% to $2.21 after a decline the previous day [4]

Financial Data and Key Metrics Changes - For the first nine months of 2025, total revenues increased by 88% to just under $185 million compared to $98 million in the same period last year [25] - Adjusted EBITDA for the full year 2025 is expected to grow by 50%-75% compared to 2024 [14][33] - The company reported a net loss of $1.5 million for Q3 2025, compared to a net income of $2.6 million in the same quarter last year [25] Business Line Data and Key Metrics Changes - Revenue from procurement services totaled $31.1 million in Q3 2025, down from $60.5 million in the year-ago quarter, while year-to-date revenues from procurement services have more than doubled [16][25] - Systems integration revenue increased by 20% to $9.2 million in Q3 2025, driven by the integration of AI-enabled racks [17] - Facilities management revenue declined by 19% year over year to $1.6 million, but is expected to see a year-over-year increase in Q4 [10][17] Market Data and Key Metrics Changes - The AI data center market is expanding rapidly, with significant investments expected in AI infrastructure [11][12] - The company is well-positioned to capitalize on the first wave of AI-driven investment, indicating a strong demand for high-performance computing and hybrid systems [11][12] Company Strategy and Development Direction - The company is actively exploring strategic acquisitions, new partnerships, and portfolio expansion, particularly in AI and edge computing [14][33] - Investments in facilities and expertise are ongoing to meet the growing demand for high-density compute and efficient cooling solutions [12][13] - The company aims to capture a meaningful share of the rapidly growing AI infrastructure market [15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting strong underlying demand and a growing pipeline [30] - The company expects a strong rebound in adjusted EBITDA in Q4, reflecting higher rack volumes in systems integration [14][33] - Management acknowledged challenges in Q3 but emphasized improvements in operational processes and communication [46][47] Other Important Information - The company raised capital through a secondary offering, strengthening its balance sheet and providing additional funds for strategic investments [13][27] - A new board member, Vivek Mahindra, was appointed, expected to enhance the company's strategic direction and customer base [31] Q&A Session Summary Question: Insights on end markets and enterprise demand - Management noted an uptick in enterprise activity and demand for complex CSP solutions, indicating a shift in customer needs [36][37] Question: Client base and public announcements - The company has multiple clients but does not disclose them publicly, focusing on operational execution instead [39][40] Question: Future capital raises - Currently, there are no plans for additional capital raises, with management emphasizing a focus on strategic growth without diluting investor value [39] Question: Mixed vendor rack integration - Management indicated that while mixed vendor integration is a small part of the business, it is handled confidentially to maintain customer relationships [42][43] Question: Operational requirements affecting rack volumes - Management acknowledged that power availability and ERP integration issues impacted Q3 volumes but expressed confidence in resolving these challenges [45][46] Question: Guidance for 2026 - Management provided initial guidance of 40%-50% organic growth for 2026, citing improved visibility across business segments [49][50]