Q4 2024 TSS Inc Earnings Call
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Speaker Change: Greetings. Welcome to the TSS Inc. Fourth Quarter 2024 Financial Results Conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the former presentation.
Speaker Change: If anyone should acquire operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference as being recorded. I will now turn the conference over to your host, James Carbonara, with Hayden I.R. James, you may begin.
James Carbonaro: Thank you operator and good afternoon everyone. Thank you for joining us for TSS this conference call discuss the company's fourth quarter and full year 2024 financial results. Joining me today on this call are Darrell Duane, President and CEO of TSS and Danny Chisholm, the company's CFO .
James Carbonaro: As we begin the call, I would like to remind everyone to take note of the cautionary language regarding fold-looking statements contained in the press release we issued today.
James Carbonaro: That same language applies to comments and statements made on today's conference call. This call will contain time-sensitive information as well as 401 statements which are accurate only as of today, March 27, 2025.
James Carbonaro: TSS expressly disclaims any obligations to update, amend, supplement, or otherwise review any information or forward-looking statements made on this conference call or replayed to reflect events or circumstances that may change or arise after the date indicated except this otherwise required by the applicable law.
James Carbonaro: For a list of the risks and uncertainties that may affect the company's future performance.
Please refer to the company's periodic filings with the SEC.
James Carbonaro: In addition, we will be referring to non-GAAP financial measures, a reconciliation of the differences between these measures and the most directly comparable financial measures calculated in accordance with USGAP is included in today's press release.
With that, Darryl, I'll turn it over to you.
Speaker Change: James, thank you very much. Good afternoon, everyone. Thank you for joining us today in our fourth quarter and full year 24-2024 earnings conference call.
2024 was an exceptional year for TSS by all accounts.
Speaker Change: The soaring demand for AI RAC integration and procurement services propel our business to new heights.
Speaker Change: We delivered outstanding financial results driven by strong operational execution and our unwavering commitment to customer service.
Speaker Change: Our strong performance demonstrates that we are successfully executing our business strategy, delivering growth in revenue, earnings and cash flow, while scaling our business and operations and positioning for continued success.
Speaker Change: For the full year, we delivered organic revenue growth of 172%, an incredible accomplishment that highlights a growing demand for our offerings, the strength of our customer relationships, and the attractiveness of the market in which we can operate.
Speaker Change: We grew deluded earnings for share from just better than break even in 2023 to 24 cents, a staggering increase and generated positive cash flow from operations aboard in $15 million.
Speaker Change: These results underscore the effectiveness of our strategic initiatives and a dedication of our team. Notably, growth was broad-based, spanning all of our service offerings. So let's break down a performance by segment.
Speaker Change: Procurement Services. This is where we source third-party hardware software and services.
Speaker Change: We delivered robust growth of 205% for total revenue of 117.5 million.
Last year we achieved 36.5 million last year being 2023.
Speaker Change: As expected, we experienced some quarter-quarter fluctuations throughout the year. However, the overall trajectory of the business is positive, and we are very optimistic about where it's heading in 2025.
Speaker Change: Facilities Management primarily referred to as our Modular Data Center or MDC
Performed well, growing 13%
which was in line with our expectations.
Speaker Change: As a reminder, this business represents a small portion of our overall business, approximately 5% of our total revenue in 2024, and importantly is a fairly predictable revenue stream with gross margins, generally exceeding 50% of revenue.
Speaker Change: Dubin accelerating adoption of AI-enabled technology we expect demand for MDCs to be an important driver of revenue growth in 2025 and beyond.
Speaker Change: Our integration services business, including AI RACS, saw tremendous surge fueled by increasing demand for AI enabled infrastructure.
Revenue grew by 157% to $22.6 million in 2024.
Speaker Change: I will comment further in a few moments but I think most people recognize we are in early stages of AI infrastructure buildout and as a result we share SI business growing rapidly as AI demand is fulfilled in coming quarters and years.
Speaker Change: A significant milestone in 2024 was the signing of a multi-year agreement with our largest customer.
Speaker Change: Further solidifying our role as a strategic partner in their technology roadmap.
Speaker Change: This agreement enhances revenue visibility, mitigates operational risk for each of us, and supports our investment in capacity and capabilities that is needed, thereby greatly strengthening our long-term growth outlook.
Speaker Change: Our new facility. Our building was originally intended to have four five megawatts of electricity. We will now begin with six megawatts. The pace of development has made it so that we have gone back to the city planners and we will get 15 megawatts in early summer and a commitment to get to over 40.
Speaker Change: Oh watch over time.
Speaker Change: I'll request by the way was granted.
Speaker Change: <unk> are recognizing the power division is a key part of their intention to attract business.
Speaker Change: But you can imagine the impact of this type of change in the design of the facility and this occurred in this space.
Speaker Change: There are two other building is in its final stages of its fit out cooler.
Speaker Change: Cooling is in a similar situation.
Speaker Change: When we began the fit out of our facility was anticipated, we would integrate or mix of chill, there and directly good cool technology. However, the adoption of emerging chip families. So quickly as resulted in an accelerated shift to direct liquid cool this impacts everything from our chiller capacity.
Speaker Change: Two the diameter of the pipes coming into the facility and distributing water within the facility and again. This rethinking has all occurred in weeks.
Speaker Change: <unk> power and cooling or other numerous changes required to accommodate rapidly evolving requirements from forklifts capacity to the grading of ramps leading into the loading bays.
Speaker Change: Fortunately, we're in a competitive position with our Labor force, our current head count and skill levels are very strong and we are fortunate to operate in a robust, Texas human resource market the.
Speaker Change: The combination of our human capital with our strong partner relationships.
Speaker Change: <unk> great optimism, we're developing a facility built the Stan built to stand the test of time and adaptable in a rapidly moving environment.
Speaker Change: In addition to the challenges of increasing rack requirements. There are numerous open questions out of racks will be deployed in data centers.
Speaker Change: Concepts being considered.
Include prefabricated solutions, ranging from small focused units with multiple racks to a larger year incorporated power and cooling elements.
Speaker Change: We're engaging and all these discussions with customers industry insiders and technology experts to ensure our future.
Speaker Change: We were selected by OEM partners, because of our flexibility and commitment to quality and our ability to support the roadmaps in this demanding environment. Our facility will begin initial production in April we will support programs on various levels of technology at that time, we should reach full production capacity.
Speaker Change: In June our plans for the facility to include investment of approximately $25 million to $30 million for these improvements a small portion of which will be funded by tenant improvements provided by our landlord.
Speaker Change: The financial impact of the investments in our facility will evolve over time.
Speaker Change: Pricing for rack integration services will evolve as Rex complexity and value increase as new deployment methods gained traction in the market.
Speaker Change: We considered the long term profit impact and so our ROI from the investment prior to embarking on at.
Speaker Change: The structure of our relationship with our largest OEM supports our investment by reducing risk.
Speaker Change: As volumes grow we can envision extremely high returns on invested capital into the facility, perhaps as high as a two year payback.
Speaker Change: We ended the year with a strong momentum.
Speaker Change: Delivering Q4 revenue of $50 million.
Speaker Change: 105% increase year over year.
Diluted earnings per share for the quarter reached eight says, reflecting a 300% year over year growth.
Speaker Change: These results underscore the scalability of our business and a growing demand for our services.
Speaker Change: The AI infrastructure market continues to evolve rapidly.
Speaker Change: If companies raising significant capital to deploy AI, driven compute environments, while hyperscale data centers and cloud technology companies have been early adopters of broader market will soon include medium and large enterprises building high performance compute environments for AI applications deployment.
Speaker Change: Large language models and trading.
Speaker Change: We are actively collaborating with our key customers and partners understand how hyper dense AI compute will be implemented across the vast majority of data center sites. This will be a key area of focus in the quarters ahead, and we look forward to providing further updates.
Speaker Change: So with that let me now turn the call over to Dennis who will discuss our numbers in a bit more detail Danny thanks.
Speaker Change: Thanks, Darryl Hey, it was another great quarter and full year for TSS, Let's first take a look at the financial results for the fourth quarter.
Speaker Change: Consolidated revenue more than doubled in the fourth quarter of 2000 $24 million to $50 million up from $24 $4 million in the fourth quarter of 2023.
Speaker Change: The increase was driven by year over year growth across all of our product lines, including growth of 264% and our higher margin systems integration business, which includes the AI racks that Daryl was just speaking about.
Speaker Change: Total revenue from systems integration increased from $2 $2 million in the fourth quarter of 2023 to $7 $9 million in the current quarter.
Speaker Change: This growth was driven primarily by an increase in AI enabled rack integration, which began late in the second quarter.
Speaker Change: Demand for this business remains robust and our multi year customer agreement that we signed in the third quarter provides stability by reducing the impact of demand and supply chain volatility.
Speaker Change: Revenue from facilities management totaled $1 $6 million up 11% from $1 $5 million in the same quarter last year.
Speaker Change: There's generally high visibility into this revenue stream, we continue to anticipate more robust growth in this segment over the next 12 to 18 months as medium and large enterprise clients consider using modular data centers as a cost efficient way to harness the power of AI technology.
Speaker Change: Revenue from procurement services totaled $45 million up 95% compared to $28 million in the year ago quarter.
Speaker Change: As a reminder, this represents a mix of gross and net deals whose revenue recognition methods vary based on contractual terms and whether we modify the product in some way or just act as an agent and the transaction.
Speaker Change: The total gross contract value of all deals and procurement was $48 $5 million in the quarter up 49% on the same basis year over year.
Speaker Change: As we continue to scale and grow the mix of our revenues and the mix of gross versus net procurement deals will likely drive quarter to quarter fluctuations in our blended gross margins.
Speaker Change: The consolidated gross margin, including all lines of business was 14, 4% this quarter up 100 basis points from 13, 4% in Q4 2023.
Speaker Change: This improvement is primarily due to growth and margin expansion in our systems integration business.
Speaker Change: Procurement revenues may remain at elevated levels for the next one to three quarters in comparison to historical trend.
Speaker Change: Each of our procurement business is ultimately related to federal government buying which can contribute to seasonality in these revenues.
Speaker Change: SG&A expenses improved to 59% of gross profit in the fourth quarter of 2024 down from 76% in the same quarter last year.
Speaker Change: On a dollar basis SG&A expenses increased to $4 2 million in the fourth quarter of 2024 up from $2 $5 million in the year ago quarter.
Speaker Change: Our SG&A has increased as we've added.
Speaker Change: And invested in people capacity and processes.
Speaker Change: The current quarter SG&A expenses include some nonrecurring severance expenses and one month of rent at the new facility. In addition to rent on our existing facility.
Speaker Change: Operating profit and margin in the fourth quarter of 2024 was $2 eight.
Speaker Change: $8 million and 38% of gross profit, respectively up from $724000 and 22% in the prior year quarter.
Speaker Change: Calculated as a percentage of recorded total revenue rather than gross profits.
Speaker Change: Our operating income margin was five 5% in the current quarter compared to 3% in the prior year quarter.
Speaker Change: During the quarter, we had net interest expense of $533000. This was comprised of $721000 of interest expense tied to factoring the receivables from our largest customer partially offset by $188000 of interest income earned from cash on hand.
Speaker Change: This compares to net interest of $374000. In Q4 2023 comprised of 498000 hours of interest expense, partially offset by $124000 of interest income on bank deposits.
Speaker Change: As a result of these and other smaller changes net income for the fourth quarter of 2024 was $1 $9 million more than five times the $335000 of net income in Q4 2023.
Diluted earnings per share was eight <unk> in the quarter up from <unk> in the prior year quarter.
Speaker Change: Adjusted EBITDA, which excludes interest taxes, depreciation amortization and stock based compensation was $3 4 million up from $923000 in the prior year quarter.
Speaker Change: Turning to the results for the full year.
Speaker Change: For 2024, total revenues were up 172% to $148 $1 million compared to $54 $4 million in the year ago quarter.
Speaker Change: As seen in the quarter. This growth came from all three of our business segments.
Speaker Change: Gross profit for 2024 more than doubled to 2020, excuse me $22 $4 million.
Speaker Change: And our SG&A costs improved to 59% of gross profit down from 81% in 2023 for.
Speaker Change: For the full year, our net income improved to $6 million compared to $74000 in the prior year and diluted EPS improved from a bit over zero in 2023 to 24 cents in 2024.
Speaker Change: Adjusted EBITDA for the full year was $10 $2 million.
Speaker Change: Up 283% from $2 $7 million in 2023.
Speaker Change: It's starting to take a quick look at the balance sheet.
Speaker Change: As of December 31, 2024, we had cash and cash equivalents and short term deposits totaling $23 2 million.
Speaker Change: In conjunction with our ongoing build out of the new facility.
Speaker Change: As well as the elevated level of procurement activity ongoing at year end, you'll see a fairly sizable increase in accounts payable with a corresponding spike in inventory as we received goods prior to year end that'll be used in fulfilling those procurement contracts in the first quarter of 2025.
Speaker Change: In conjunction with our plans to relocate our headquarters and expand our factory to support expected the Iraq integration growth, we entered a new credit agreement with our existing bank Susser bank for $20 million term loan with an option for an additional $5 million with bank approval.
Speaker Change: The new agreement, which has a floating rate currently at one month's over plus 300 basis points combined with cash on hand provides us with all the capital we need to fund our portion of the Buildout.
Speaker Change: I'd like to thank the city of Georgetown, where our new factories located for being great to work with and seeking ways to assist us beyond just finding creative solutions to our power needs that Darryl mentioned.
Speaker Change: We really appreciate the city's ongoing support.
Speaker Change: For 2024, and we generated cash flow from operations of $15 3 million, which compares quite favorably to cash used in operations of $8 $3 million in 2023 and increased cash overall by $11 4 million.
Speaker Change: Net working capital, which nets out temporary fluctuations due to timing of payments to vendors and receipts from our customers increased from $893000 at the beginning of 2024 to $1 $3 million at the end of 2023 I'm sorry at the end of 2023.
Speaker Change: All in all it was another great quarter and a great year financially. In fact this was a record year for the company in revenues net income EPS and adjusted EBITDA.
Speaker Change: With that I'll hand, the call back over to you.
Speaker Change: Great. Thank you very much looking at the year ahead in 2025 will be marked by the completion of the fit out of our new facility in orders flowing through it.
Speaker Change: Based on our current visibility we expect revenue for the first quarter of 2025 to be higher than the fourth quarter of 'twenty four.
Speaker Change: Largely due to another quarter of very robust procurement services revenues. We also expect our ASI business, our integration business in Q1 to exceed Q4.
Speaker Change: Looking past Q1, we expect the total revenue in the first half of 2025 to exceed our total revenues in the second half of 2024.
Speaker Change: And we.
Speaker Change: We expect 2025, adjusted EBITDA to be at least <unk>.
Speaker Change: 50% higher than in 2024.
Speaker Change: We remind everyone in earnings calls that orders for AI infrastructure may be large it may result in quarter to quarter fluctuations.
Speaker Change: We see orders in process with our OEM partners that reflect anticipated AI driven growth opportunity and we believe those orders will have a positive impact on us for the year.
Speaker Change: Our income statement and balance sheet will evolve as our investment in the new facility progresses, we anticipate some near term impacts on GAAP net income.
Speaker Change: From an increased facility costs depreciation and interest expense related to the new facility, particularly as we carry two facilities for some time before either sub leasing our existing facility or securing additional contracts to put us in this current facility. However, we remain confident.
Speaker Change: And the strength of our overall business model.
Speaker Change: Our ability to generate strong cash flows remains a cornerstone kona cornerstone of our strategy and we believe non-GAAP adjusted EBITDA as a key measure of the strength.
Speaker Change: I am proud of our team's ability to execute on our operational commitments and our vision and our high level of collaboration planning a team work with our customers.
Speaker Change: Our focus on the customer and those relationships allows us to innovate.
Speaker Change: You need to build trust and execute in ways that have laid the foundation for long term success for TSS, our customers and our investors.
Speaker Change: We remain very focused on execution, we're very excited to be in it and integration services leader and this intersection of advanced computing and AI, So with that I'll open up the line to Q&A.
Speaker Change: Thank you at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question queue you.
Speaker Change: You May press Star two if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, please press star one on your phone at this time, if you wish to ask a question.
Speaker Change: Please hold while we poll for questions.
Speaker Change: Once again that will be star one on your phone at this time, if you wish to ask a question.
Speaker Change: We did have a couple of questions come in the first question is coming from Marsh Susan from Geo investing.
Speaker Change: Your line is live.
Speaker Change: Daryl.
Speaker Change: Quick question on.
Speaker Change: Facilities management I think you said you expect to see some growth in 2025.
Speaker Change: From that.
Speaker Change: That division I was wondering if you could maybe expand on where you see that coming from and I mean do you see it accelerating a little bit in terms of where it was last year for example.
Speaker Change: That is it that is a high margin part of the business.
Speaker Change: Hey, Mark good to hear from you.
Mark: We do believe there is opportunity for the M D C business.
Mark: We are working with a variety of opportunities that.
Mark: That we think will turn into business for us.
Mark: <unk>.
Mark: The larger container the reason for some of the.
Mark: The length of the sales cycle is largely because of technology changes.
Mark: <unk> from air direct liquid and requiring a different design point for the actual container, but we're pretty pretty excited that we're going to see some business growth there.
Mark: We're also very excited about some of the conversations we're having about.
Mark: Different design points on the modular unit.
Mark: And.
Mark: I'd like to go a little bit more detail, but I don't think it would be appropriate, but I think where we can we can provide an AI solution.
Mark: To an enterprise to deploy a certain amount of power cheaper better faster than their alternative.
Mark: And that alternatives could be a colo could be a hyper scaler could be expanding their own existing data center space all of those options have a plus.
Mark: Plus and minus to it but we're trying to get to a point where in our modular business. We can make it easier to make a cheaper better faster decisions to deploy modular.
Mark: And we're working with.
Mark: Our partners in that respect and we're looking for other partnerships.
We continue to have conversations about how do we how do we shorten that sales cycle to get containers faster and the component tree faster. That's the long pole in the tenant getting the equipment faster to make it a little bit easier to make a decision on modular versus something else.
Mark: And did you.
Speaker Change: In terms of your kind of your revenue expectations.
Speaker Change: Are you baking that into your expectations or would that be additive to what you kind of expressed here today.
Speaker Change: No I mean, we.
Speaker Change: So as you may know a good percentage of our <unk> business. Our facilities management business is recurring revenue and is projected enhancements to some service agreements that we have that drives some growth year over year, we've been fairly conservative with that growth.
Speaker Change: <unk> because of the unknowns on the lead time of the products and a new sale. However.
Speaker Change: If we can get some deals done soon.
Speaker Change: And sooner than later, which we're trying to get done.
Speaker Change: In other words close.
Speaker Change: That has an impact on our revenue towards the end of this year.
Speaker Change: You'd be surprised with a couple of million dollars does to the overall model.
Speaker Change: And that's what we're pushing for and frankly, that's how we're compensating our people based on that stretch.
Speaker Change: And a stretch is not that significant.
Speaker Change: But it is meaningful to us overall.
Speaker Change: Yes.
Speaker Change: Great and then can you and can you again remind us put in perspective.
Speaker Change: The margins in that business compared to the other parts of the business.
Speaker Change: But normally what you say 55, we say in the range of 55%.
Speaker Change: Q4 was a little of an outlier.
Speaker Change: I have challenged Danny I thought he was using the crayon versus the peso.
Speaker Change: But we had we had better margins in Q4 than we did ordinarily, but 55% for the year.
Speaker Change: Okay, and Thats certainly higher than this year.
Speaker Change: The other piece of the business in terms of margins right.
Speaker Change: Yes, it is and actually for the full year. It was just under 62% in that business up from 57% last year.
Speaker Change: Okay great.
Speaker Change: Thanks, guys.
Speaker Change: Yes.
Speaker Change: Thank you. The next question is coming from Kris Tuttle from Blue Caterpillar.
Speaker Change: Chris Your line is live.
Speaker Change: Okay, Hey, thanks, a lot.
Speaker Change: Just had a couple of things I was curious.
Speaker Change: What do you think you might be able to do with the existing facility when.
Speaker Change: When you guys are moved over into full production on the new one.
Speaker Change: Okay.
Speaker Change: Chris Good to hear from you we've got a couple of options one we could sublease it.
Speaker Change: A few years ago, when we renewed the lease we in this market we have very favorable rates. So we could actually.
Speaker Change: Sublease, it and make money.
Speaker Change: Not a lot, but we can make some money. We also have some initiatives underway that he can expand a portion of our business.
Speaker Change: We have that I really wish I could go into a bit more detail, but I can't but theres a theres a interesting conversation underway that would allow us to take advantage of the extra space with an existing port part of our business and the integration space.
Speaker Change: In this existing facility.
Speaker Change:
Speaker Change: Okay, and Thats really our focus right at the moment.
We've done some things to enhance the current facility with our key customer.
Speaker Change: To take advantage of the.
Power that we have and.
Speaker Change: Some <unk>.
Speaker Change: New technology, that's coming for Iraq integration.
Speaker Change: We can span both facilities for a short period of time, but effectively our backstop if you will.
Speaker Change: Is that sublet it.
Speaker Change: And Danny is built into the model.
Speaker Change: That we have is very conservative.
Speaker Change: Up until the later part of the year that we have to make this decision. So we have some time to either build out with some.
Speaker Change: Functionality or to sublease it yeah, and then the EBITDA production that projection that Daryl shared I've assumed that we don't sublease anything until January of next year. So I think that's relatively conservative.
Speaker Change: Okay. Thank you and then just I was curious you guys have already done a tremendous job at.
Speaker Change: Shortening the turnaround time in the cycle time on the rack integration business I'm. Just curious do you think you've got more room to improve there or are you you've already got got it down to a lean and mean and are there any implications on what.
Speaker Change: What you could do in the new facility in terms of.
Speaker Change: The speed with which you can perform integrations.
Speaker Change: The way I'd answer that Chris is if you've ever met Todd Merit, you'd know that he's he's never really satisfied.
Speaker Change: He is working really hard to make it even better than it did I mean, we were in weeks before now we're in hours.
Speaker Change: Two days so there is some room.
Speaker Change: And as we work with our key customer.
Speaker Change: On technology enhancements.
Speaker Change: We're looking for ways to optimize and get more throughput and speed and on one concept around.
Speaker Change:
Speaker Change: Liquid he's got an interesting idea that.
Speaker Change: It can make it even faster to get it deployed so.
Speaker Change: There is room, but now we're really we're going from a couple of days to hours and the biggest benefits behind us, but there's always room to improve.
Speaker Change: I got it I got it well that's all I've got right now really appreciate you taking my questions and.
Speaker Change: I have to add looking at those numbers for last year.
Speaker Change: It's a tremendous achievement so keep up the great work.
Speaker Change: Thanks, Buddy appreciate it appreciate it christenberry harder.
Speaker Change: Thank you and once again the star one if you wish to ask a question today. The next question is coming from carbon Hearts carbon is a private investor Your line is live.
Speaker Change: Okay.
Speaker Change: Hey, Kevin.
Kevin: Yeah I was just a follow up question about the analyst coverage.
Kevin: I know with the great quarters did you pay it back.
Kevin: Back to back I was wondering if there's been any dis.
Kevin: Discussion about having increased analyst coverage.
Kevin: Sure.
Kevin: Increased wood analyst coverage.
Kevin: I'll take that yeah I appreciate the question.
Kevin: Yes, we've had a number of conversations with sell side analysts over time to try to establish some coverage.
Kevin: As I'm sure you can imagine whenever we filed our shelf registration statement, we got a whole lot of calls from investment bankers I think a lot of them were disappointed when we reiterated the same thing that we announced publicly that hey, we have no plans to issue anything under that currently.
Kevin: But that's certainly generated a few conversations from analysts reaching out to us I think some of them I would say we've had some good productive conversations with several.
Kevin: That I think may ultimately lead to some of them picking up coverage, but obviously, if you're familiar with that market. They don't charge for that coverage and if they do it's always suspect coverage.
Kevin: So they they need to see some path to making some money some day, meaning issuing debt issuing equity, helping us do M&A activity.
Kevin: Something along those lines, so good productive conversations, but nothing nothing ready to be announced today.
Kevin: And the next question is coming from Brad Stevenson from breakout investors Brad Your line is live.
Kevin: Yeah.
Kevin: Perhaps Stevenson your line is live. Please go ahead with your question.
Stevenson: Hello, Thank you.
Speaker Change: Danny I'll provide some coverage for you that I won't charge you anything that was.
Speaker Change: [laughter], that's called value pricing Brad.
Speaker Change: [laughter], Hey, I always I always wanted to come back to it you know just kind of take your temperature on visibility so.
Speaker Change: The comments about what Youre seeing in 2025 2026, how much further out as your actual visibility on orders at this point than it was the last time, we talked.
Speaker Change: Brad I worry about it too we all do we've got pretty good visibility to improve improves over time, we've got great line of communication with our key customer.
Speaker Change: There is a level of excitement.
Speaker Change: About the pipeline and the opportunity and the ability to deliver if you if you listen to Mr. Jensen speech at his conference couple of weeks ago, and you read some of the articles in the press coming from the leaders in our community.
Speaker Change: There's no doubt that people are excited about the infrastructure play in delivering technology as soon as they can get it.
Speaker Change: We've got visibility 90, 120 days out.
Speaker Change: We're having conversations about get ready for something is going to happen.
Speaker Change: Sooner than later.
Speaker Change: I'd like to go into little bit more detail, we had a meeting last night, we being Todd and myself with our key.
Speaker Change: Key executive linkage at.
Speaker Change: Partners in our in our customer relationship <unk>.
Speaker Change: Excitement level that.
Speaker Change: Hard to translate by talking to a sales guy is going to say my pipeline is huge.
Speaker Change: Let's convert that pipeline into revenue and that's what we're working on collectively so that we can deliver sooner than anybody else.
Speaker Change: Visibility is good the agreement that we struck gives us some comfort in knowing there's a minimum volume that protects us on our investment.
Speaker Change: But thats not the we could sit back put our feet up that's not good enough that's not where we're at.
Speaker Change: We're doing as much as we can to impact.
Speaker Change: <unk>.
Speaker Change: The delivery.
Speaker Change: We have a bigger impact on on revenue on a modular business.
Speaker Change: Which we're working on and we've made some investments to make that happen sooner and on the integration business.
Speaker Change: We're as good as we can get right at the moment.
Speaker Change: It's a positive positive situations.
Speaker Change: Yeah, I would add that to narrow as kind of a where we've typically got kind of a 90 to 120 day view. There are also times, where even with that view, we may get a one week or two week notice on some that they get a last minute order or if somebody wants to accelerated that.
Speaker Change: There is incremental revenue, sometimes that we weren't necessarily counting on.
Speaker Change: Okay.
Speaker Change: On the new facility are there any is there any.
Speaker Change: Any interesting design changes from which the way the current facility.
Speaker Change: Operates that debt.
Speaker Change: Do you think will be beneficial to you either with power consumption and lower the speed at which you can turn out work.
Speaker Change: Yes, the answer is yes, yes, yes, one sugar capacity.
Speaker Change: <unk> power.
Speaker Change: Three square footage.
Speaker Change: For the design layout of a factory within a factory.
Speaker Change: Which allows us to do our validation.
Speaker Change: In a unique way that we just couldnt do here.
Speaker Change: The floor space and the Doc bays, if you will.
Speaker Change: Our design is that it gives us better capacity and throughput for modular construction.
Speaker Change:
Speaker Change: Todd gets a bigger office, which is a good thing.
Speaker Change: Not by much.
Speaker Change: He is going to go and sit down rather stand up there at all.
Speaker Change: All seriousness.
Speaker Change: We're doubling the square footage.
Speaker Change: And we've got.
Speaker Change: The better flow, but I think there's some unique things that we're doing with respect to.
Speaker Change: Yeah.
Speaker Change: Cooling.
Speaker Change: The seed to use and how we embrace Cpus, we have multi vendor technology in so we're pretty agnostic.
Speaker Change: And the teams come up with some unique ways to take advantage of the.
Speaker Change: <unk> station capability and testing.
Speaker Change: And frankly, it's one of those situations. We are seeing is believing I'd invite you to come on down and you'll see for yourself. So anytime you get an open environment.
Speaker Change: I'd add that validation I've learned from our Chief operating officer, Todd as well.
Speaker Change: You need different power setups for different configurations of racks. So we have validation stations that can accommodate a variety of those different builds.
Speaker Change: We also I think are increasing our validation stations by about four times, what we've got today.
Speaker Change: Maybe a little bit more but.
Speaker Change: Pretty significant increase in the number of validation stations to increase the ability with room to continue to expand out if we needed to.
Speaker Change: I think there's something else too when I talk about children's I'm talking about direct liquid capability and testing we have 150 tons. We're at capacity, we are going to 650.
Speaker Change: That's a big jump.
Speaker Change: The technology is changing so much if we don't do that we are done we have to do it and we're doing it.
Speaker Change:
Speaker Change: And I believe we're going to.
Well I, probably shouldn't Davis, but we're.
Speaker Change: We're more than doubling our direct liquid.
Speaker Change: Cooling lines of validation lines.
Speaker Change: I don't want to give you a specific number.
Speaker Change: But it is substantially bigger than it was.
Speaker Change: If that helps any four times.
Speaker Change: I said doubling on being conservative.
Speaker Change: I'm getting a signal that it's more than that.
Speaker Change: And visit will show you around.
Speaker Change: Okay.
Speaker Change: Well I can't imagine that Todd spend a lot of time sitting in that office.
Speaker Change: Joe just for meeting him I'll be surprised about that but I appreciate the Q&A. Thank you.
Speaker Change: Yeah, you bet. Thank you.
Speaker Change: Thank you and we have a follow up coming from matched Susan from Geo investing mash. Your line is live.
Susan: Yeah, just one quick question I meant to ask earlier in the fourth quarter.
Speaker Change: Were there any one time type costs that were incurred in the quarter.
Susan: Related maybe to any.
Susan: Maybe.
Susan: Moving kind of costs and facility or any other color.
Susan: Cost.
Susan: Severance costs things like that at all.
Susan: Yeah, not so much on move in cost most of those costs are being capitalized there was there's a little bit of that thats not capitalized level there was.
Susan: <unk>.
Susan: Some what I consider one time costs for severance.
Susan: It's included in SG&A.
Susan: I'd, rather not put a specific number on that just for confidentiality purposes, but it was six figures.
Susan: Okay cool.
Susan: It related primarily to the elimination of an executive position.
Susan: Okay. Okay. So.
Susan: Alright, that's that's fine.
Susan: There was there were there.
Susan: So they adjusted EPS would have been a little higher had not had it not been for that basically correct yep.
Susan: Right and.
Susan: Net income as well.
Susan: Yep Yep Yep correct.
Susan: Thank you.
Susan: You bet.
Speaker Change: Thank you there are no other questions at this time I would now like to hand, the call back to <unk> for closing remarks.
Susan: Okay everybody.
Speaker Change: These are very exciting times for us all we're in a unique space in the marketplace.
Speaker Change: And it's been one heck of a year and we're very optimistic about the future.
Speaker Change: Past year, we saw.
Speaker Change: A tightening of our relationship with our key strategic partner and a multi year agreement.
Speaker Change: We obtained ISO certification in our facility.
Speaker Change: We have the new facility.
Speaker Change: Bank.
Speaker Change: Alone to get us to that facility and to round it out with the higher and better technology.
Speaker Change: We up listed on NASDAQ, which was a very exciting.
Speaker Change: Experience.
Speaker Change: Have a great leadership team, we've added new talent to the team including Danny.
Speaker Change: Our CFO, we continue to focus on our execution.
Speaker Change: And the high level of customer set we've got a very committed team I'd like to think that in term of baseball. Since today I think is opening day that we're in.
Speaker Change: Early innings.
Speaker Change: The transition to the new facility into our future growth. We're excited to be in this game to use a sports analogy.
Speaker Change: I believe AI is.
Speaker Change: An interesting opportunity for all of US It will transform how we think.
Speaker Change: And we're in the middle of it providing the solutions for the infrastructure build out.
Speaker Change: And we believe that alone unleashed the potential.
Speaker Change: For human advancements like possibly never before in technology.
Speaker Change: As investors. We appreciate your participation today following the company and we're very focused and we will continue to be focused on execution and delivering results. So thank you very much everybody for your time.
Speaker Change: Have a great day.
Speaker Change: Thank you. This does conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.