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]

Market Overview - U.S. stock markets faced a significant downturn on November 13, 2025, marking one of the worst trading days since April, driven by concerns over high valuations of AI-related stocks and skepticism regarding the Federal Reserve's interest rate cuts [1][10] - Major indexes closed sharply lower, with the Nasdaq Composite dropping 2.3%, the S&P 500 falling 1.7%, and the Dow Jones Industrial Average shedding approximately 797 points, or 1.7% [2][10] Sector Performance - The negative sentiment was largely due to a rotation out of high-flying technology and AI stocks, as investors questioned the sustainability of their rapid gains, leading to a shift towards more defensive market areas [3] - Treasury yields increased, adding pressure to stock valuations, particularly for growth-oriented companies [3] Company-Specific News - Nvidia (NVDA) was a major drag on the market, with shares falling between 3.6% and 4.2%, as investor scrutiny over its valuation increased [5] - Tesla (TSLA) shares declined nearly 7% due to a steep year-over-year sales decline in China, highlighting competition and demand challenges [5] - The Walt Disney Co. (DIS) saw its shares tumble between 7.8% and 8.9% after missing quarterly sales forecasts, despite exceeding profit expectations [5] - Alphabet (GOOGL) experienced a notable drop of 2.3% amid the broader tech sell-off [5] - Cisco Systems (CSCO) rose 4.5% after boosting its full-year profit and revenue forecasts, driven by strong demand for networking equipment [5] - Sealed Air (SEE) shares soared between 16% and 19.6% following reports of a potential take-private deal [5] - Verizon Communications (VZ) shares rose 0.7% on plans to cut approximately 15,000 jobs for cost optimization [5] - Other AI-related stocks faced declines, including Super Micro Computer (SMCI) down 7.4%, Palantir Technologies (PLTR) down between 6.5% and 6.7%, and Broadcom (AVGO) down between 4.3% and 5.65% [5] - Companies in the cryptocurrency space also saw declines, with Robinhood Markets (HOOD) dropping nearly 9%, Interactive Brokers (IBKR) losing 7.8%, and Coinbase Global (COIN) sinking 6.9% [5] Economic Data and Federal Reserve Outlook - The market is awaiting crucial economic data, including the Consumer Price Index (CPI) and employment reports for October, which are expected to be delayed due to the recent end of the federal government shutdown [4][6] - The Federal Reserve's stance on interest rates remains a dominant theme, with skepticism about another rate cut in December, as the probability of a 25-basis-point cut decreased from 70% to approximately 53% [7] Upcoming Events - Nvidia's upcoming earnings report is highly anticipated, as it could serve as a significant test for the prevailing optimism surrounding AI technology [8]

Revenue Performance - Year-to-date revenue reached $184.8 million, reflecting an 88% increase compared to the previous year[1] - Third quarter revenues totaled $41.9 million, down 40% year-over-year, with procurement revenues at $31.1 million, down 49%[3] - Procurement revenues for the year-to-date were $154.3 million, up 100% from the previous year[3] - Gross profit for the year-to-date was $21.0 million, representing a 39% increase year-over-year[3] Profitability Metrics - Adjusted EBITDA for the year-to-date was $10.7 million, up 59% compared to the same period in 2024[3] - The company reported a net loss of $1.5 million in Q3 2025, compared to a net income of $2.6 million in Q3 2024[3] - The company expects a strong rebound in quarterly EBITDA in Q4 2025, with updated full-year Adjusted EBITDA growth guidance of 50% to 75% compared to 2024[5] Revenue Segmentation - Systems Integration revenues increased by 20% to $9.2 million in Q3 2025, while Facilities Management revenues decreased by 19% to $1.6 million[3] Asset Management - Total current assets increased to $100.3 million as of September 30, 2025, compared to $58.2 million at the end of 2024[13] Operational Improvements - The company has implemented new procedures to increase rack volumes in Q4 2025 after lower-than-expected integration volumes in Q3[2]