TSS Reports 900% Y/Y Earnings Surge in Q3, Bolsters AI Integration

Shares of TSS, Inc. TSSI have declined 28.3% since the company reported its earnings for the third quarter of 2024. Its shares compared unfavorably with the S&P 500 index’s decline of 1.1%. Over the past month, the TSSI stock has declined 4.3%, against the S&P 500 index's 1.7% growth.Key Performance MetricsFor the third quarter of 2024, TSS reported total revenues of $70.1 million, skyrocketing 689% from $8.9 million in the prior-year quarter. Procurement revenues saw the most dramatic year-over-year surge of 1,016% to $60.5 million, whereas systems integration and facilities management revenues grew 361% and 8%, respectively.The company’s net income soared 1,166% to $2.6 million from $209,000 in the prior-year period. Its third-quarter 2024 earnings per share on a diluted basis increased 900% to 10 cents from 1 cent in the prior-year quarter. This significant rise was driven by strong performances across all major revenue streams.TSS Inc. Price, Consensus and EPS Surprise  TSS Inc. price-consensus-eps-surprise-chart | TSS Inc. QuoteOther Key Business MetricsOperating income rose to $3.8 million in the third quarter of 2024 from $0.7 million in the last-year period, reflecting effective cost management and significant revenue growth.Selling, general and administrative (SG&A) expenses jumped 90% year over year to $3.9 million in the reported quarter. However, as a percentage of gross profit, SG&A expenses improved from 72% in the third quarter of 2023 to 49% this quarter, demonstrating operational leverage. Adjusted EBITDA skyrocketed 358% year over year to $4.3 million in the reported quarter, underscoring the company's ability to scale profitably.Gross profit soared 179% to $7.9 million in the third quarter of 2024 from $2.8 million in the prior-year quarter, driven by the increased scale of procurement activities and higher-margin integration services. The gross margin compressed to 11% in the third quarter of 2024 from 32% in the prior-year quarter due to the high proportion of lower-margin procurement revenues.Management CommentaryCEO Darryll Dewan highlighted the pivotal role of the company’s expansion into AI-enabled rack integration services. This business line contributed significantly to the quarter's performance, supported by signing a multi-year agreement with a major customer. Dewan emphasized that this agreement ensures a consistent revenue stream while enhancing the company’s capabilities to meet growing demand in the high-performance computing market.Factors Influencing Headline NumbersImpressive revenue growth was primarily driven by the exponential increase in procurement revenues, which alone exceeded the company’s 2023 total revenues. Additionally, the launch of AI-enabled server rack integration services in mid-2024 boosted systems integration revenues. However, the gross margin for the quarter contracted to 11% from 32% a year ago due to disproportionate growth of lower-margin procurement activities.Other DevelopmentsTSS uplisted to the Nasdaq Capital Market in November 2024, a move expected to improve shareholder visibility and liquidity. The company announced plans to relocate and expand its production facility to accommodate increased demand for AI-enabled technologies. The new facility, anticipated to be operational in early 2025, represents a $25-$30-million investment to enhance capacity and power capabilities.TSS’s third-quarter 2024 results underscore its pivot toward high-growth opportunities in AI and data center services. With a robust financial performance and clear expansion plans, the company appears well-positioned to capitalize on the industry trends.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report TSS Inc. (TSSI): Get Free ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks