
Executive Summary & Business Outlook First Quarter 2025 Performance Overview 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 202513 - Diluted earnings per share (EPS) increased to $0.12 from just over breakeven in the prior year quarter13 - Adjusted EBITDA increased more than tenfold compared to the year-ago quarter3 CEO Commentary & Strategic Outlook 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 lines3 - 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 capacity3 - 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 Procurement3 2025 Outlook & New Facility Impact 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 20264 - Total revenue in the first half of 2025 is expected to exceed total revenue in the second half of 20244 - Full year 2025 Adjusted EBITDA is expected to be at least 50% higher than 20244 - The new facility is a strong differentiator in the demanding and rapidly advancing AI computing environment, equipped with significant power resources5 Financial Highlights First Quarter 2025 Key Financial Metrics 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 About TSS, Inc. 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 users10 - 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 technologies10 - TSS manages and deploys billions of dollars in technology each year as trusted partners of the world's leading data center technology providers10 About Non-GAAP Financial Measures 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 items8 - 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 impact8 - Adjusted EBITDA is used as a factor in evaluating the performance of certain management personnel when determining incentive compensation8 Forward-Looking Statements 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 uncertain11 - 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 changes11 - Actual future results may be materially different than those expressed in forward-looking statements, and the company does not undertake to update them11 Quarterly Conference Call & Contacts 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 participants7 - A live audio webcast of the conference call and replay are accessible until May 15, 20267 - Contact information for investor relations (Hayden IR) and TSS, Inc.'s CFO (Danny Chism) is provided for inquiries12 Consolidated Financial Statements Consolidated Balance Sheets 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 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 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 |