Core Viewpoint - TSS, Inc. (TSSI) has experienced significant stock price appreciation and robust financial performance driven by increasing demand for AI infrastructure, with a notable 523% revenue growth in Q1 2025 compared to the previous year [1][2]. Financial Performance - For Q1 2025, TSS reported revenues of $99 million, a 523% increase from $15.9 million in Q1 2024, and net income rose to $3 million from $15,000 [2]. - Diluted earnings per share reached 12 cents, up from breakeven, and adjusted EBITDA increased over tenfold to $5.2 million from $475,000 [2]. Segment Performance - Procurement services generated $90.2 million in revenues, a 676% increase from $11.6 million in Q1 2024, accounting for 77% of total procurement revenues for 2024 [3]. - Systems Integration revenues surged 253% to $7.5 million, with gross margins improving to 32% when excluding non-cash rent costs [4]. - Facilities Management revenues declined 40% year over year to $1.3 million, but the company sees potential for recovery in this segment [5]. Management Insights - CEO Darryll Dewan described the quarter as "extraordinary" and a pivotal moment for the company, emphasizing strong execution in AI infrastructure [6]. - CFO Daniel Chism noted the low consolidated gross margin of 9.3% was due to the procurement mix, with expectations for improvement in future quarters as production ramps up [7]. Growth Drivers - Revenue growth was primarily driven by increased AI investments from enterprise clients and infrastructure spending from OEM partners [8]. - The complexity of AI rack integration, including demands for direct liquid cooling and power testing, is enhancing TSS's value proposition as a strategic integrator [9]. Future Guidance - TSS expects first-half 2025 revenues to surpass those of the second half of 2024 and anticipates adjusted EBITDA for 2025 to be at least 50% higher than in 2024 [10][11]. Operational Developments - In May 2025, TSS commenced production at a new 213,000-square-foot facility in Georgetown, TX, designed for high-volume AI rack integration [12]. - The company invested $14.9 million in the quarter as part of a planned $25-$30 million capital build-out, expecting profitability within a two-year payback period [13]. Strategic Positioning - TSS's Q1 results reflect its transformation into a key infrastructure enabler for the AI era, with aggressive capacity expansion and long-term contracts supporting sustained growth despite some margin pressures [14].

Core Viewpoint - The analysis of TSS, Inc. (NASDAQ: TSSI) indicates a bullish sentiment towards the company, with a previous Hold rating reflecting a cautious optimism based on market study and long-term value projection [1]. Company Analysis - The analyst has been closely observing TSS, Inc. and its growth trajectory, emphasizing the importance of understanding how companies deliver value to stakeholders over time [1]. - The analyst's background in capital markets and content creation for a software company supports a comprehensive understanding of investment opportunities within the industry [1].

Financial Data and Key Metrics Changes - Total revenue grew by 523% year over year to $99 million, up from $15.9 million in Q1 2024, driven by significant growth in procurement and systems integration services [19][27] - Diluted earnings per share increased to $0.12, a substantial improvement from just above breakeven a year ago [28] - Net income for Q1 2025 was $3 million, compared to $15,000 in Q1 2024 [27] - Cash flow from operations for the first three months of 2025 was $20.6 million, up from $2.6 million in the same period last year [29] Business Line Data and Key Metrics Changes - Procurement services revenue surged by over 600% to more than $90 million, reflecting strong demand for AI infrastructure investments [8][19] - Systems integration revenue increased by more than 250% to $7.5 million, driven by demand for AI-enabled infrastructure [9][20] - Facilities management revenue declined by 40% to $1.3 million, representing a smaller portion of total revenue [10][20] Market Data and Key Metrics Changes - The gross value of all procurement transactions increased by 431% year over year to $106 million [22] - Procurement gross margins improved from 4.6% in the prior year quarter to 6.6% in the current quarter when viewed on a non-GAAP basis [22][23] - The company anticipates robust growth in modular data centers as medium and large enterprises increasingly adopt them as cost-effective solutions for AI technologies [21] Company Strategy and Development Direction - The company is focused on capturing a significant share of the rapidly growing AI infrastructure market, with plans to scale operations and enhance service offerings [6][11] - A new facility in Georgetown, Texas, is expected to support increased production capacity and is designed specifically for AI rack integration [12][15] - The company is investing between $25 million and $30 million in the new facility, with an anticipated payback period of approximately two years [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued strong performance in 2025, expecting total revenue in the first half to exceed that of the second half of 2024 [35] - The company is closely monitoring the impact of tariffs on IT hardware costs and supply chain dynamics, which may affect order processing times [33] - The order pipeline from OEM customers remains robust, with expectations for sustained demand in AI infrastructure [34][85] Other Important Information - The company is actively optimizing its facilities management segment to focus on high-growth opportunities [20] - Management highlighted the importance of maintaining strong relationships with key partners to navigate market uncertainties [34] Q&A Session Summary Question: How did the company manage to perform well during the transition to a new facility? - Management acknowledged the team's commitment and focus, emphasizing the complexity of the transition and the successful execution of operational commitments [38][39] Question: Concerns about integration services being obviated by advancements from companies like NVIDIA and Dell? - Management reassured that the complexity of AI integration is increasing, and the company is well-positioned to add value in this area [42][46] Question: What is the outlook for the facilities management segment? - Management remains optimistic about the segment's potential, noting a transition towards alternative computing solutions for AI [78][80] Question: What visibility does the company have regarding demand from AI clients? - Management indicated good visibility into demand, with a fluctuating but generally positive outlook for the rack integration business [109]

Financial Data and Key Metrics Changes - Total revenue grew by 523% year over year to $99 million, up from $15.9 million in Q1 2024 [19][20] - Diluted earnings per share increased to $0.12, a significant improvement from breakeven a year ago [29] - Net income for Q1 2025 was $3 million, compared to $15,000 in Q1 2024 [28] - Consolidated gross margin was 9.3%, down from 17.1% in the prior year quarter [24] Business Line Data and Key Metrics Changes - Procurement services revenue surged by 676% to $90.2 million, representing 77% of total procurement revenues for all of 2024 [22] - Systems integration revenue increased by 253% to $7.5 million, driven by AI-enabled rack integration [20][21] - Facilities management revenue declined by 40% to $1.3 million, representing just over 1% of total revenue [10][21] Market Data and Key Metrics Changes - The demand for AI infrastructure is rapidly growing, with significant capital flowing into high-performance compute environments [17] - The modular data center market is evolving, with expectations for increased adoption of modular solutions for AI [12] Company Strategy and Development Direction - The company is focused on scaling operations to capture a significant share of the AI infrastructure market [6] - A new facility in Georgetown, Texas, is being built to support increased demand for AI rack integration, with a planned investment of $25 million to $30 million [17][30] - The company anticipates a payback period of approximately two years for the new facility, indicating a strong return on investment [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about sustained high growth in AI infrastructure as customers ramp up investments [9][36] - The company is closely monitoring the impact of tariffs on IT hardware costs and supply chain dynamics [33] - Management expects total revenue in the first half of 2025 to exceed that of the second half of 2024, reflecting strong customer demand [36] Other Important Information - Cash flow from operations for Q1 2025 was $20.6 million, significantly higher than $2.6 million in Q1 2024 [30] - The company is actively optimizing its facilities management segment to focus on high-growth opportunities [21] Q&A Session Summary Question: How is the company managing the transition to the new facility? - Management acknowledged the complexity of the transition but emphasized successful execution and commitment from the team [39][40] Question: How does the company view competition from NVIDIA and Dell in integration services? - Management believes that the increasing complexity of AI integration will maintain the need for their services, despite advancements from competitors [41][42] Question: What is the outlook for facilities management revenue? - Management remains optimistic about the facilities management segment, which is transitioning to support AI applications [75][76] Question: What visibility does the company have on demand from AI clients? - Management indicated good visibility on demand, with a fluctuating but generally positive outlook for the rack integration business [108]

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%93FINANCIAL%20INFORMATION) This section details the company's unaudited consolidated financial statements, including balance sheets, income statements, cash flows, and related notes on accounting policies, segment performance, debt, and internal controls [Item 1. Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents TSS, Inc.'s unaudited consolidated financial statements as of March 31, 2025, highlighting significant revenue and net income growth driven by AI rack integration services - **Consolidated Balance Sheet Highlights (in thousands)** | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $27,339 | $23,222 | | Total current assets | $61,082 | $58,197 | | Property and equipment, net | $23,276 | $8,591 | | **Total assets** | **$113,539** | **$96,568** | | Total current liabilities | $72,205 | $56,919 | | **Total liabilities** | **$104,148** | **$89,430** | | **Total stockholders' equity** | **$9,391** | **$7,138** | - **Consolidated Statement of Operations Highlights (in thousands, except per-share amounts)** | Account | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | **Total revenues** | **$98,959** | **$15,892** | | Gross profit | $9,210 | $2,714 | | Income from operations | $4,113 | $253 | | **Net income** | **$2,979** | **$15** | | Earnings per common share – Basic | $0.13 | $0.00 | | Earnings per common share – Diluted | $0.12 | $0.00 | - **Consolidated Statement of Cash Flows Highlights (in thousands)** | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $20,637 | $2,646 | | Net cash used in investing activities | ($14,873) | ($39) | | Net cash used in financing activities | ($1,647) | ($55) | | **Net increase in cash** | **$4,117** | **$2,552** | [Note 1 – Significant Accounting Policies](index=5&type=section&id=Note%201%20%E2%80%93%20Significant%20Accounting%20Policies) The company enhanced its data center services to include AI-enabled server rack integration, with a single OEM customer accounting for nearly all revenue and receivables - The company's services have been enhanced to include the integration of **Artificial Intelligence (AI) enabled data center server racks**[23](index=23&type=chunk) - A single US-based IT OEM customer accounted for **100% of revenues** for the three months ended March 31, 2025, and **99% of trade accounts receivable** at March 31, 2025[48](index=48&type=chunk) - The company sold approximately **$121.1 million in receivables** under a non-recourse factoring agreement in Q1 2025, resulting in **$1.5 million in financing fees**[51](index=51&type=chunk) [Note 2 – Supplemental Balance Sheet Information](index=11&type=section&id=Note%202%20%E2%80%93%20Supplemental%20Balance%20Sheet%20Information) This note details key balance sheet accounts, showing a significant increase in Property and Equipment, net, driven by construction in process for a new facility, and growth in inventories - **Property and Equipment (in thousands)** | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Construction in Process | $21,526 | $6,701 | | Total Gross P&E | $27,168 | $12,295 | | **Property and equipment, net** | **$23,276** | **$8,591** | - **Inventories, net (in thousands)** | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Procurement inventories | $19,845 | $17,493 | | **Inventories, net** | **$20,396** | **$17,673** | [Note 3 - Long-Term Debt](index=13&type=section&id=Note%203%20-%20Long-Term%20Debt) The company secured a **$20.0 million** term loan in December 2024 to fund improvements at its new Georgetown, Texas facility, with **$8.7 million** outstanding as of March 31, 2025 - On December 31, 2024, the company entered a new Credit Agreement for a **$20.0 million term loan facility** to fund the build-out of its new headquarters and production facility in Georgetown, Texas[79](index=79&type=chunk) - Upon closing, the company borrowed **$8.7 million**, with no additional draw-downs made in the quarter ended March 31, 2025[79](index=79&type=chunk) - The remaining available funds for construction at March 31, 2025, were **$11.3 million**, which were fully drawn down in May 2025[82](index=82&type=chunk)[99](index=99&type=chunk) [Note 6 - Segment Reporting](index=15&type=section&id=Note%206%20-%20Segment%20Reporting) The company reorganized into three segments: Procurement, Systems Integration, and Facilities Management, with Procurement being the largest contributor to Q1 2025 revenue and pre-tax income - Effective Q4 2024, the company reorganized into three reportable segments: **Procurement, Systems Integration, and Facilities Management**[90](index=90&type=chunk)[91](index=91&type=chunk) - **Segment Performance for Three Months Ended March 31, 2025 (in thousands)** | Segment | Total Revenue | Gross Profit | Pre-tax Income | | :--- | :--- | :--- | :--- | | Procurement | $90,177 | $7,028 | $5,662 | | Systems Integration | $7,484 | $1,651 | $259 | | Facilities Management | $1,298 | $531 | $366 | | **Total Segments** | **$98,959** | **$9,210** | **$6,287** | - **Segment Total Assets (in thousands)** | Segment | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Procurement | $24,845 | $19,319 | | Systems Integration | $33,707 | $25,855 | | Facilities Management | $739 | $932 | | **Total Segments** | **$59,291** | **$46,106** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025's significant operational and financial developments, including strategic focus on AI-enabled rack integration, substantial revenue growth, and strong liquidity [Overview](index=18&type=section&id=Overview) The company is expanding its AI-enabled server rack integration services through a multi-year customer agreement and a **$25-$30 million** investment in a new facility, funded by a **$20 million** construction loan and landlord contribution - The company signed a multi-year agreement with its largest customer to provide systems integration services for **AI-enabled computer racks** at an expected minimum monthly volume[107](index=107&type=chunk) - To support this agreement, the company is moving to a new facility and anticipates capital expenditures of approximately **$25 million to $30 million** for improvements[107](index=107&type=chunk) - Funding for the new facility includes a **$20 million construction loan** from Susser Bank, a **$6.8 million contribution** from the landlord, and cash on hand[107](index=107&type=chunk) [Results of Operations](index=19&type=section&id=Results%20of%20Operations) Total revenues surged **523%** to **$99.0 million** in Q1 2025, driven by **676%** growth in Procurement and **253%** in Systems Integration, leading to a net income of **$3.0 million** - **Revenue by Segment (in millions)** | Segment | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Procurement | $90.2 | $11.6 | +676% | | Systems Integration | $7.5 | $2.1 | +253% | | Facilities Management | $1.3 | $2.1 | -40% | | **Total** | **$99.0** | **$15.9** | **+523%** | - The gross value of all procurement transactions increased **431% to $106.0 million**, with the segment's contribution to pre-tax income increasing **807% to $5.7 million**[121](index=121&type=chunk) - Systems Integration gross profit increased **173% to $1.7 million**, and excluding non-cash rent, the segment's gross margin would have improved from **28% to 32%**[123](index=123&type=chunk) - Net income for Q1 2025 was **$3.0 million ($0.12 per diluted share)**, a significant improvement from **$15,000 ($0.00 per diluted share)** in Q1 2024[130](index=130&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains robust liquidity with cash increasing to **$27.3 million**, supported by **$20.6 million** in operating cash flow and the utilization of a receivables factoring program - **Cash Flow Summary (in millions)** | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cash from Operations | $20.6 | $2.6 | | Cash from Investing | ($14.9) | ($0.04) | | Cash from Financing | ($1.6) | ($0.06) | - Investing activities consisted of **$14.9 million in capital expenditures**, primarily for the build-out of the new leased integration facility[137](index=137&type=chunk) - Subsequent to quarter-end, on May 5, 2025, the company borrowed the remaining **$11.3 million** available on its construction loan, bringing total borrowed funds to **$20.0 million**[132](index=132&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company has indicated that this section is not applicable - The company states that this item is **'Not applicable'**[143](index=143&type=chunk) [Item 4. Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of March 31, 2025, due to a material weakness in internal control over financial reporting, with remediation efforts ongoing - Management concluded that disclosure controls and procedures were **ineffective** as of March 31, 2025[146](index=146&type=chunk) - The ineffectiveness is due to a **material weakness** identified during the 2024 audit, relating to the ineffective design of certain management review controls[147](index=147&type=chunk) - Remediation efforts have begun in Q1 2025, including enhancing controls and engaging external experts, but the process is **ongoing**[148](index=148&type=chunk)[151](index=151&type=chunk) [PART II – OTHER INFORMATION](index=25&type=section&id=PART%20II%E2%80%93OTHER%20INFORMATION) This section covers other required disclosures, including unregistered sales of equity securities and a list of exhibits filed with the Form 10-Q [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=25&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2025, the company repurchased **124,205 shares** at an average price of **$13.32** per share, primarily from employees for tax withholding obligations - **Share Repurchases in Q1 2025** | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2025 | 58,241 | $14.63 | | Feb 2025 | 63,658 | $12.30 | | Mar 2025 | 2,306 | $8.25 | | **Total** | **124,205** | **$13.32** | - All share purchases were from associates to satisfy tax withholding requirements and were **not open market trades**, with no publicly announced share buyback program[152](index=152&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL financial data files - Filed exhibits include **CEO and CFO certifications** under Sarbanes-Oxley Sections 302 and 906[153](index=153&type=chunk)[154](index=154&type=chunk) - The filing includes **Inline XBRL documents** for interactive data[155](index=155&type=chunk) [Signatures](index=28&type=section&id=SIGNATURES) This section confirms the official signing and submission of the Form 10-Q by the company's Chief Financial Officer - The report was duly signed on **May 15, 2025**, by **Daniel M. Chism**, the Chief Financial Officer of TSS, Inc[159](index=159&type=chunk)

[Executive Summary & Business Outlook](index=1&type=section&id=Executive%20Summary%20%26%20Business%20Outlook) [First Quarter 2025 Performance Overview](index=1&type=section&id=First%20Quarter%202025%20Performance%20Overview) TSS, Inc. reported a strong start to 2025 with exponential increases in both top and bottom lines for the first quarter, driven by robust growth in its Procurement and Systems Integration segments, including incremental contribution from AI rack integration services - Revenue was up **523% in Q1 2025**[1](index=1&type=chunk)[3](index=3&type=chunk) - Diluted earnings per share (EPS) increased to **$0.12** from just over breakeven in the prior year quarter[1](index=1&type=chunk)[3](index=3&type=chunk) - Adjusted EBITDA increased **more than tenfold** compared to the year-ago quarter[3](index=3&type=chunk) [CEO Commentary & Strategic Outlook](index=1&type=section&id=CEO%20Commentary%20%26%20Strategic%20Outlook) CEO Darryll Dewan highlighted robust growth in Procurement and Systems Integration, including AI rack integration, and expressed confidence in continued core business growth and acceleration in AI services. The company's new facility, which began production in May and is expected to be fully operational by June, will significantly expand data center rack integration capacity, positioning TSS to capitalize on industry growth - Robust growth in Procurement and Systems Integration segments, with incremental contribution from AI rack integration services, drove **exponential increases in top and bottom lines**[3](index=3&type=chunk) - The new facility began production on May 7 and is on track to be fully operational across all capabilities in June, enabling **several times the current data center rack integration capacity**[3](index=3&type=chunk) - Focus on innovation and operational excellence positions the company to deliver sustained value to customers and shareholders, with excitement for opportunities in Systems Integration and Procurement[3](index=3&type=chunk) [2025 Outlook & New Facility Impact](index=1&type=section&id=2025%20Outlook%20%26%20New%20Facility%20Impact) TSS is highly optimistic about its growth prospects for 2025 and beyond, expecting production volumes from the new facility to ramp throughout 2025 and into 2026. The company projects total revenue in the first half of 2025 to exceed the second half of 2024, and full-year 2025 Adjusted EBITDA to be at least 50% higher than 2024. The new facility is considered a strong differentiator in the demanding AI computing environment - Expect production volumes from the new facility to grow in the second quarter and continue to ramp throughout the remainder of 2025 and into 2026[4](index=4&type=chunk) - Total revenue in the first half of 2025 is expected to **exceed total revenue in the second half of 2024**[4](index=4&type=chunk) - Full year 2025 Adjusted EBITDA is expected to be **at least 50% higher than 2024**[4](index=4&type=chunk) - The new facility is a strong differentiator in the demanding and rapidly advancing AI computing environment, equipped with **significant power resources**[5](index=5&type=chunk) [Financial Highlights](index=1&type=section&id=Financial%20Highlights) [First Quarter 2025 Key Financial Metrics](index=1&type=section&id=First%20Quarter%202025%20Key%20Financial%20Metrics) TSS, Inc. reported significant financial growth in Q1 2025 compared to Q1 2024, with total revenues increasing by 523% to $99.0 million, primarily driven by Procurement and Systems Integration. Gross profit surged by 239%, net income by over 19,000%, and diluted EPS rose to $0.12. Adjusted EBITDA also saw a substantial increase First Quarter 2025 Key Financial Metrics (YoY Comparison) | Metric | Q1 2025 | Q1 2024 | Change (%) | | :-------------------------- | :---------- | :---------- | :--------- | | Revenues | $99.0 million | - | 523% | | Procurement revenues | $90.2 million | - | 676% | | Systems Integration revenues | $7.5 million | - | 253% | | Facilities Management revenues | $1.3 million | - | -40% | | Gross profit | $9.2 million | - | 239% | | Net income | $3.0 million | $15,000 | >19,000% | | Diluted EPS | $0.12 | $0.00 | N/A | | Adjusted EBITDA | $5.2 million | $475,000 | >1000% | [Company Information](index=2&type=section&id=Company%20Information) [About TSS, Inc.](index=2&type=section&id=About%20TSS%2C%20Inc.) TSS, Inc. is a data center services company specializing in simplifying the complex integration and deployment of high-performance computing infrastructure and software. The company provides custom, high-volume solutions that empower data centers and catalyze digital transformation for generative AI and other leading-edge technologies, managing and deploying billions of dollars in technology annually - TSS specializes in simplifying the complex integration and deployment of high-performance computing infrastructure and software, ensuring **efficient technology utilization** for end users[10](index=10&type=chunk) - The company builds, integrates, and deploys custom, high-volume solutions that empower data centers and catalyze digital transformation for **generative AI and other leading-edge technologies**[10](index=10&type=chunk) - TSS manages and deploys **billions of dollars in technology each year** as trusted partners of the world's leading data center technology providers[10](index=10&type=chunk) [About Non-GAAP Financial Measures](index=2&type=section&id=About%20Non-GAAP%20Financial%20Measures) TSS defines Adjusted EBITDA as net income (loss) before net interest expense, income taxes, depreciation and amortization, impairment loss on goodwill and other intangibles, stock-based compensation, and certain extraordinary items. This supplemental measure is used to compare operating results consistently across reporting periods by excluding disproportionate impacts and is a factor in evaluating management performance for incentive compensation. It is not a substitute for GAAP measures and is reconciled to the nearest GAAP measure - Adjusted EBITDA is a non-GAAP measure defined as net income (loss) before net interest expense, income taxes, depreciation and amortization, impairment loss on goodwill and other intangibles, stock-based compensation, and certain extraordinary items[8](index=8&type=chunk) - It is presented to help compare operating results across reporting periods on a consistent basis by excluding items that may have a **disproportionately positive or negative impact**[8](index=8&type=chunk) - Adjusted EBITDA is used as a factor in evaluating the performance of certain management personnel when determining **incentive compensation**[8](index=8&type=chunk) [Forward-Looking Statements](index=2&type=section&id=Forward%20Looking%20Statements) This section contains forward-looking statements regarding future events, plans, and prospects, which are inherently uncertain. Key uncertainties include resource availability, reliance on a limited customer base, competitive industry risks, supply chain challenges, labor market changes, IT system implementation, procurement business development, rapid technological changes, project management, contract cancellations, and strategy implementation. Actual results may differ materially from these statements, and the company does not undertake to update them - Forward-looking statements address future events, plans, and prospects, often containing words such as 'guidance,' 'expects,' 'anticipates,' and 'will,' and are **inherently uncertain**[11](index=11&type=chunk) - Particular uncertainties that could adversely or positively affect future results include resource funding, reliance on a limited customer base, competitive industry risks, supply chain challenges, and risks related to **technological changes**[11](index=11&type=chunk) - Actual future results may be materially different than those expressed in forward-looking statements, and the company does not undertake to update them[11](index=11&type=chunk) [Quarterly Conference Call & Contacts](index=1&type=section&id=Quarterly%20Conference%20Call%20Details) TSS, Inc. conducted a conference call on May 15, 2025, at 5 p.m. Eastern time to discuss its first quarter results. Details for participation via dial-in and a live audio webcast (with replay available until May 15, 2026) were provided. Contact information for investor relations and the company's CFO was also included - A conference call was held on May 15, 2025, at 5 p.m. Eastern time, with **dial-in and webcast options** available for participants[7](index=7&type=chunk) - A live audio webcast of the conference call and replay are accessible until **May 15, 2026**[7](index=7&type=chunk) - Contact information for investor relations (Hayden IR) and TSS, Inc.'s CFO (Danny Chism) is provided for inquiries[12](index=12&type=chunk) [Consolidated Financial Statements](index=3&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2025, TSS, Inc.'s total assets increased to $113.5 million from $96.6 million at December 31, 2024, primarily driven by increases in cash and cash equivalents, inventories, and property and equipment. Total liabilities also rose to $104.1 million from $89.4 million, mainly due to higher accounts payable and accrued expenses. Stockholders' equity increased to $9.4 million from $7.1 million Consolidated Balance Sheet Highlights (March 31, 2025 vs. December 31, 2024) | Metric | March 31, 2025 (Unaudited, in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------------------- | :--------------------------------------- | :------------------------------- | :-------------------- | | Total assets | $113,539 | $96,568 | +$16,971 | | Cash and cash equivalents | $27,339 | $23,222 | +$4,117 | | Inventories, net | $20,396 | $17,673 | +$2,723 | | Property and equipment, net | $23,276 | $8,591 | +$14,685 | | Total liabilities | $104,148 | $89,430 | +$14,718 | | Accounts payable and accrued expenses | $66,214 | $53,340 | +$12,874 | | Total stockholders' equity | $9,391 | $7,138 | +$2,253 | [Unaudited Condensed Consolidated Statements of Operations](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2025, total revenues significantly increased to $99.0 million from $15.9 million in Q1 2024, primarily driven by Procurement and System Integration. Gross profit rose to $9.2 million from $2.7 million. Net income saw a substantial increase to $3.0 million from $15 thousand, resulting in diluted EPS of $0.12 compared to $0.00 in the prior year Condensed Consolidated Statements of Operations Highlights (Three Months Ended March 31) | Metric | 2025 (in thousands, except EPS) | 2024 (in thousands, except EPS) | Change (in thousands, except EPS) | | :-------------------------- | :------------------------------ | :------------------------------ | :-------------------------------- | | Total revenues | $98,959 | $15,892 | +$83,067 | | Procurement revenues | $90,177 | $11,623 | +$78,554 | | Facilities management revenues | $1,298 | $2,146 | -$848 | | System integration revenues | $7,484 | $2,123 | +$5,361 | | Gross profit | $9,210 | $2,714 | +$6,496 | | Income from operations | $4,113 | $253 | +$3,860 | | Net income | $2,979 | $15 | +$2,964 | | Diluted EPS | $0.12 | $0.00 | +$0.12 | [Adjusted EBITDA Reconciliation](index=4&type=section&id=Adjusted%20EBITDA%20Reconciliation) For Q1 2025, Adjusted EBITDA was $5.2 million, a significant increase from $0.5 million in Q1 2024. This non-GAAP measure is reconciled from net income by adding back interest expense (net), depreciation and amortization, income tax provision, and stock-based compensation, reflecting the company's improved operational performance Adjusted EBITDA Reconciliation (Three Months Ended March 31) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | | :-------------------------- | :------------------ | :------------------ | :-------------------- | | Net income | $2,979 | $15 | +$2,964 | | Interest expense, net | $1,085 | $228 | +$857 | | Depreciation and amortization | $210 | $72 | +$138 | | Income tax provision | $49 | $10 | +$39 | | EBITDA | $4,323 | $325 | +$3,998 | | Stock based compensation | $921 | $150 | +$771 | | Adjusted EBITDA | $5,244 | $475 | +$4,769 |

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-33627 TSS, INC. FORM 10-K (Mark One) (Exact name of registrant as specified in its charter) Delaware 20-2027651 (State or other jurisdiction (I.R.S. Empl ...

Financial Performance - TSS reported a record revenue of $148.1 million for FY 2024, representing a 172% increase compared to FY 2023[4] - The company achieved earnings per share (EPS) of $0.24, up from breakeven in 2023[3] - Adjusted EBITDA for FY 2024 was $10.2 million, reflecting a 283% increase from the previous year[4] - Fourth quarter revenue reached $50.0 million, a 105% increase year-over-year, with procurement revenues up 95% to $40.5 million[5] - TSS's gross profit for FY 2024 was $22.4 million, up 103% due to growth across all service lines[4] - The company ended FY 2024 with a net income of $6.0 million, compared to $74,000 in 2023[4] Strategic Developments - TSS signed a multi-year agreement with its largest customer, enhancing its role in AI rack integration[3] - The company expects significant EBITDA growth in 2025, driven by contributions from a new facility expected to be operational by June 2025[6] Revenue Composition - Procurement services accounted for nearly 80% of revenues in 2024, characterized by higher revenue variability and lower margins[6] Asset Growth - TSS's total assets increased to $94.3 million in December 2024, up from $25.6 million in December 2023[17]

Revenue Growth - Total revenues increased 689% to $70.1 million in Q3 2024 from $8.9 million in Q3 2023, with procurement revenues up $55.0 million (1,016%) and systems integration revenues up $5.9 million (361%) [84]. - Total revenues for the nine-month period ended September 30, 2024, reached $98.2 million, a 227% increase from $30.0 million in the prior year [102]. - Procurement revenues surged by 334%, increasing from $17.7 million to $77.0 million for the nine-month period [105]. - Recognized revenue for procurement deals increased from $17.7 million to $77.0 million, a growth of 335% year-over-year [106]. - The gross value of all procurement transactions increased by 94% from $40.9 million to $79.6 million in Q3 2024 [90]. - Gross value of revenues including netting rose 33% from $90.5 million to $120.6 million year-to-date [106]. Profitability and Income - Consolidated net income improved to $4.1 million in the current year-to-date period from a loss of $0.3 million in the prior year-to-date period [101]. - Operating income increased by 431%, from $0.7 million in Q3 2023 to $3.8 million in Q3 2024 [97]. - Operating income increased by 461% from $1.0 million to $5.7 million year-to-date [111]. - Net income for the current period was $4.1 million, compared to a net loss of $0.3 million in the prior year [113]. - Cash provided by operating activities surged to $36.9 million from $8.6 million year-over-year [120]. Expenses and Margins - SG&A expenses as a percentage of gross profit improved from 72% to 49% year-over-year, despite a 90% increase in dollar terms [96]. - SG&A expenses increased by $2.5 million (39%) primarily due to higher headcount and compensation costs [110]. - Consolidated gross margin decreased from 26% to 15% due to a higher proportion of lower-margin procurement deals [107]. - Gross margin based on recognized value of transactions decreased from 19.8% in the prior year to 6.9% in the current year [105]. Capital Expenditures and Investments - Capital expenditures of approximately $25 million to $30 million are anticipated for improvements to the new facility to support increased production capabilities for AI-enabled racks [77]. - The company plans to invest approximately $25 million to $30 million in a new facility to support AI-enabled computer racks [115]. Customer Agreements and Services - A multi-year agreement was signed with the largest customer to provide systems integration services for AI-enabled computer racks, ensuring consistent revenue to cover fixed and variable costs [77]. - Maintenance and integration services traditionally earn higher margins, with maintenance contracts typically renewing annually, providing revenue predictability [82]. - The company has focused on smaller scaled jobs connected with addition/move/retrofit activities to achieve better margins and more predictable earnings [82]. Supply Chain and Market Conditions - Supply chain issues may impact non-AI rack integration services, causing delays in revenue recognition [86]. - The company expects procurement revenues to remain elevated for the next three to six months but does not anticipate maintaining the same high levels long-term [88].

Financial Performance - Third quarter revenue reached $70.1 million, an increase of 689% year-over-year[2] - Net income surged 1,166% to $2.6 million, with diluted EPS rising to $0.10 from $0.01[6] - Procurement revenues alone were $60.5 million, up 1,016% compared to the same quarter last year[6] - Year-to-date total revenues for 2024 reached $98 million, more than three times the amount from the same period last year[5] - Gross profit for the third quarter was $7.9 million, up 179%, driven by higher margin services[6] - Adjusted EBITDA for the third quarter was $4.3 million, an increase of 358%[6] - Net income for Q3 2024 reached $2,646 million, a significant increase from $209 million in Q3 2023[20] - EBITDA for Q3 2024 was $4,002 million, compared to $787 million in Q3 2023, reflecting strong operational performance[20] - Adjusted EBITDA for the nine months ended September 2024 was $6,748 million, up from $1,726 million in the same period of 2023[20] - The company reported an increase in adjusted EBITDA margin, indicating improved profitability metrics[20] - For the nine months ended September 2024, net income was $4,063 million, a recovery from a loss of $262 million in the same period of 2023[20] Operational Developments - The company signed a multi-year agreement with a major customer for AI rack integration, enhancing future earnings visibility[4] - The company plans to relocate to a larger facility in early 2025 to meet increasing demand for AI-enabled technologies[4] - TSS, Inc. uplisted to the Nasdaq Capital Market, enhancing market presence and visibility[4] - The company expects revenue and profit trajectories to remain strong through the first half of 2025[5] Cost and Expense Management - Interest expense, net, increased to $1,128 million in Q3 2024 from $482 million in Q3 2023, indicating higher borrowing costs[20] - Depreciation and amortization expenses rose to $208 million in Q3 2024, compared to $72 million in Q3 2023, suggesting increased asset utilization[20] - Stock-based compensation for Q3 2024 was $299 million, up from $153 million in Q3 2023, reflecting changes in compensation strategy[20] - Income tax expense for Q3 2024 was $20 million, slightly down from $24 million in Q3 2023, indicating effective tax management[20] Future Outlook - Future outlook remains positive with expectations of continued revenue growth and operational efficiency improvements[20]