TSS - Q4 2023

Transcript

Operator (participant)

Thank you for standing by, and welcome to the TSS fourth quarter and fiscal 2023 earnings call. I would now like to welcome John Penver, Chief Financial Officer, to begin the call. John, over to you.

John Penver (CFO)

Thank you, Mandeep. Good afternoon, everyone. Thank you for joining us on TSS's conference call to discuss our fourth quarter and our fiscal 2023 financial results. I'm John Penver, the Chief Financial Officer of TSS, and joining me today on the call is Darryll Dewan, the President and Chief Executive Officer of TSS. As we begin the call, I would like to remind everyone to take note of the cautionary language regarding forward-looking statements that's contained in the press release we issued today. That same language applies to comments and statements made on this conference call. This call will contain time-sensitive information as well as forward-looking statements, which are accurate as of today, March 28, 2024.

TSS expressly disclaims any obligations to update, amend, supplement, or otherwise review any information or forward-looking statements made on this conference call or the replay to reflect events or circumstances that may arise after today's date, except as otherwise required by applicable law. For a list of the risks and uncertainties which may affect future performance, please refer to the company's periodic filings with the Securities and Exchange Commission. In addition, we will be referring to non-GAAP financial measures, and a reconciliation of the differences between those measures with the most directly comparable financial measures calculated in accordance with GAAP, is included in today's press release. Darryll will kick off today's call with an overview, and then I will provide more of a review of our fourth quarter and fiscal 2023 results, and then I will turn the call back over to Darryll to discuss our strategy and direction. Darryll?

Darryll Dewan (CEO)

Hey, great. Thanks, John. Earlier today, we released a press release announcing our financial results for the fourth quarter and for the full year of 2023. A copy of that release will be made available on our website at www.tssiusa.com. On behalf of the entire TSS team, I'm very pleased to report that we achieved very strong financial results in Q4 and fiscal year that contributed to a strong 2023 as well. As I forecasted in our last earnings call, we anticipated a strong fourth quarter in revenues, operating income, net income, and EBITDA, and we delivered. We achieved our plan and recorded $24.4 million in revenue in our fourth quarter, our highest quarter revenue ever, which helped drive our full year 2023 revenues to $54.4 million.

This was a 78% increase compared to our 2022 revenues of $30.6 million. This increase in revenue drove year-over-year improvements in our gross profits, which were up 68% compared to the fourth quarter of 2022, and one point four million increase in our operating profits compared to the fourth quarter of 2022, as well as a $1.5 million improvement in our net income compared to the fourth quarter of 2022. For the year, we increased our operating profits by 91% compared to 2022, and we increased our adjusted EBITDA by 60% compared to 2022. We achieved these strong results while making operational and go-to-market strategic investments in the business throughout the year.

Our results convince me that we are taking the right steps to enable TSS to aggressively scale and serve the growing demand for our configuration services business. We have introduced several new services since our last call, including in-field rack integration and cabling services, where, based on customer requirements, we can build and integrate racks and systems on-site at customer locations. We're excited about this growth opportunity as it will leverage our in-house expertise and extend to a more broad market for delivering that quality service on-site at a customer facility. We also introduced a formalized data center move service to enable enterprise customers to outsource the management of data center facility, relocation, or consolidation. We can arrange the physical movement of sophisticated IT equipment from one location to another using our specialized project management personnel.

As we listen to the challenges of our customers have been optimizing their investment in our IT infrastructure, we will continue to identify additional ways in which we can profitably help our customers. We are witnessing an increase in demand for generative AI-based computing technology from a variety of technology providers, and we are prepared to scale our capacity to meet an increase in this demand. We have modeled plans to scale our data center rack integration business up to 10x (ten times, that is) over our 2023 rack integration results, and we're positioned to implement them in 60 days. We expect to benefit from this growth beginning in the second half of this year, 2024. So with that, let me turn it back over to John to provide additional financial info. I appreciate you listening.

John Penver (CFO)

Thanks, Darryll. As Darryll said, looking at our fourth quarter, the results were very strong, with year-over-year growth in revenue, gross profits, operating and net income compared to the fourth quarter of 2022. Our Q4 revenue of $24.4 million is the highest quarterly revenue we've ever recorded and was driven by strong growth in our procurement services business... We also saw improved performance in our system integration business as well. For the financial year, we increased annual revenues to $54.4 million, improving gross and operating profits and EBITDA, and turning our net loss into a small net profit for the year. Let me go into some of the details. Our revenue for the fourth quarter of 2023 was $24.4 million.

This represented growth of $13.5 million, or 123%, compared to revenue of $10.9 million in the fourth quarter of 2022. This was also up substantially from the $8.9 million of revenue we had in the third quarter of 2023. The growth compared to the fourth quarter of 2022 was primarily from a $13.2 million increase in our procurement business compared to 2022, and small increases in both our facilities and our system integration businesses compared to the fourth quarter of 2022. We are changing how we describe our procurement service business to make the results more clear for investors, given the revenue volatility that we experience.

The total contract value we process in this segment every quarter may be relatively consistent, but our GAAP revenue is heavily impacted by the revenue recognition methodology. It should be noted, while our revenue and cost of sales are impacted by accounting methods, our profit is not. Because we have limited discretion in selecting accounting methods, we will focus for reporting purposes on the total contract value each quarter in procurement services. So the gross value of all the procurement transactions we processed during the fourth quarter of 2023 was $32.6 million, compared to $33.8 million in the fourth quarter of 2022. Our recorded revenue increased from $7.6 million in 2022 to $20.8 million in the fourth quarter of 2023.

Our systems integration revenue of $2.2 million in the fourth quarter of 2023 was up by $500,000, or 31%, from the prior quarter, as we undertook several AI-related rack integration projects in this last quarter, including in-field integration services for an AI customer. The systems integration revenues were up 3% compared to the fourth quarter of 2022 by way of comparison. Our facilities business recorded $1.5 million in revenue during the fourth quarter of 2023. This was up $240,000, or 20%, compared to the fourth quarter of 2022, but was down by 19%, or $340,000, compared to the third quarter of 2023. This business is materially impacted by the timing and number of modular data centers that we implement or deploy.

2023 has been characterized by low levels of new MDC deployments and lower levels of refresh activity. Building backlog and increasing sales of new MDC units is a sales priority for the company in 2024. For the year ended December 31, 2023, our revenues were $54.4 million. This was $23.8 million, or 78%, higher than the $30.6 million in revenue we had in fiscal 2022.

Similarly to our fourth quarter results, the majority of this increase in 2023 was attributable to a $25.3 million, or 191%, increase in procurement revenues compared to 2022, a $1.6 million, or 23%, increase in systems integration revenues compared to 2022, and was offset by a decline of $3.1 million, or 31%, in our facilities business compared to 2022, due to a decline in the number of MDC deployments that we completed in 2023 compared to 2022. The gross value of transactions processed in our procurement business was $123.2 million in 2023. This included 188 transactions processed. In 2022, we processed $72.8 million in transactions, which was 98 transactions.

We recorded full year revenues of $38.5 million in 2023, compared to revenue of $13.2 million in 2022. Our systems integration revenues were $8.8 million in 2023, increasing by $1.6 million, or 23%, from the $7.2 million that we had in 2022. The majority of this increase was due to improved pricing and due to an increase in demand during the fourth quarter of the year. Our facilities business recorded revenues of $7.1 million in 2023. This was down 31%, or $3.1 million, from the $10.2 million that we'd recorded in 2022, and is comparable to the levels that we'd had back in 2021.

Our recurring, our recurring revenues from maintenance contracts have increased by 24% since 2022, due to a higher number of modular data centers under annual maintenance contracts. This has helped offset the $3.7 million decrease in one-time deployment project revenue, as the number of new deployments has fallen compared to 2022. We anticipate that our level of system integration services, particularly rack integration, will continue to improve in 2024, driven by an increase in AI-based systems and hyperscale computing centers based on forecasts we're getting from our customers. Our production schedule is still impacted by the availability of components needed in production, particularly with regard to chipsets and GPUs and the servers for AI applications, as well as fiber optic cables for these projects.

Our gross profit margin of 13% during the fourth quarter of 2023 was down from 18% in the fourth quarter of 2022, and down from 32% in the third quarter of 2023. Our gross profit margin is directly influenced by several factors, including the percentage of our total revenue that comes from procurement services, and there's an inverse relationship such that an increase in the percentage of our total revenue coming from procurement services will cause a decrease in our overall gross profit margin, as the margins on procurement are approximately 1/3 that as the margins from our integration and facilities businesses. So in the fourth quarter, our procurement revenues were 85% of our total revenue, compared to being 70% of our total revenue in the fourth quarter of 2022.

The gross profit on our integration and facilities businesses was 42% in the fourth quarter of 2023, and this compared to 16% in the fourth quarter of 2022, when we had much higher operating costs in our integration business. As reported earlier, our team is focused on increasing our integration and facilities business in 2024, and we expect margins to improve in 2024. Overall, in dollar terms, our actual gross profit increased by 68% or $1.3 million compared to the fourth quarter of 2022 to a level of $3.3 million. For the year, our gross profit margin was 20%, compared to 29% in 2022.

Again, this was because of the proportion of revenues that we earned from procurement activities in 2023, where procurement revenues were 71% of our total revenues, compared to 43% back in 2022. In dollar terms, our gross profit improved by $2 million in 2023 to $11 million, up from $9 million in 2022. Our selling, general, and administrative expenses during the fourth quarter of 2023 were $2.5 million. This was down $57,000 or 2% from the $2.5 million we had in the fourth quarter of 2022. On a year-to-date basis, our selling general and administrative costs were $8.9 million, up $1.2 million from the $7.7 million we'd had in 2022.

These increases were primarily in higher headcount costs, including higher variable compensation costs as our revenue increased. There was also approximately $1 million in cost and investments made by us during 2023, as we've expanded our sales and leadership teams during the last year to help strategically position the company for future growth. After consideration of all the above, we recorded an operating income of $724,000 in the fourth quarter of 2023, compared to an operating loss of $723,000 in the fourth quarter of 2022. So this was an improvement of 1.447 million dollars compared to the fourth quarter of last year.

For the year ended December 31, 2023, our operating profit of $1,750,000, compared to an operating profit of $914,000 in 2022. This was a 61% increase in operating profit compared to our 2022 results. We had a substantial increase in our level of interest expenses compared to the prior year. Nearly all of our interest expense relates to the procurement business, where large transaction receivables are financed for a short period. The higher volume of business transacted through the procurement business is the main reason for the increase in interest expense. Our interest expense in the fourth quarter was $498,000, compared to $410,000 a year before. For the year, our total interest expense was almost $2 million.

It was $1,971,000, and this was $1 million higher than what we had the year before. After interest and tax costs, we had a net income of $335,000, or $0.02 per share in the fourth quarter of 2023. This compared to a net loss of $1,141,000, or $0.05 per share in the fourth quarter of 2022. This represents an improvement of $1,476,000 in net income compared to the fourth quarter of 2022. For the year ended December 31, 2023, we had net income of $74,000 or $0.00 per share. This compared to a net loss of $73,000 or $0.00 per share in 2022.

Our adjusted EBITDA, which excludes interest, taxes, depreciation, amortization, and stock-based compensation, was a profit of $923,000 in the fourth quarter of 2023, compared to an adjusted EBITDA profit of $90,000 in the fourth quarter of 2022. For the year, our adjusted EBITDA was a profit of $2,651,000. This compared to an adjusted EBITDA profit of $1,662,000 in 2022 and represents growth of $989,000 or 60% compared to 2022. Now, turning to the balance sheet, our overall balance sheet position remains healthy. The timing of events around the procurement transactions has had a material impact on the balance sheet.

The changes in our cash and the increases in receivables, inventory, payables, and deferred revenue since the prior year are primarily due to the timing of cash receipts and payments relating to procurement transactions. So the volume of procurement activity was higher at the end of 2023 compared to the end of 2022. At the end of 2022, we actually were able to be paid for multiple large procurement projects but had yet to pay vendors for these same projects. And this resulted in an increase of approximately $14 million in our cash and our accounts payable at the end of 2022. So during the first quarter of this year, we paid those vendors, and our cash and accounts receivable, accounts payable balances decreased by the same amount.

The increase in inventory and receivables in 2023 compared to last year is really attributable to the timing of in-progress procurement projects. With that, I will hand the call back to Darryll for some comments on the fourth quarter and how we see the business evolving in 2024. Thanks, Darryll.

Darryll Dewan (CEO)

Yeah, great, John. Thank you. The end of 2023 marked my 14 months and a very exciting first year with TSS... and in the industry. It really was a transformational year for the company. We set the table for growth by investing in the efficiency and scalability of our integration services business, as we sometimes refer to as the factory here in Round Rock, and our company-wide go-to-market selling capacity. We are proud of our financial results and increases in year-over-year revenue, net income, and EBITDA, but we're not, we're not done. We're not completely where we wanna be yet. I'd like to say amongst our team, our job number one is execution. We will continue to focus our attention on meeting our financial goals and becoming a more recognized and relevant provider of integration services in the marketplace.

Resulting from opportunities in markets identified with our OEM partner, we have added new service offerings with multiple ways to provide integration services to our customers, including our on-site rack integration and our new data center moves solution. We're very proud of our existing OEM relationship, and we're working very hard to grow this relationship and business. Improved brand awareness of TSS and a digital presence in the broader market are on top of our list and are important. So we recently completed a modernization of our website. We published a white paper on trends in data centers. Expect more news and informational updates from TSS. Growth potential in 2024 will be driven by high demand, mostly impacting our rack integration business. Our goal will be to see the beginnings of revenue contribution from the data center move offering in its first full year.

The pipeline of MDC business is growing, but lead times remain long. This is a pipeline to impact the next 1-3 years. The data center world is scrambling to keep up with the adoption of advanced technology, and we still believe our modular data center business is uniquely positioned for growth. The data center market is entering a fascinating phase. The continued growth of the hyperscale data center market is staggering. Despite all the investments over the years, analysts forecasting that all the existing capacity will be consumed shortly is inevitable and incredible. However, the AI push is demonstrating that the complexity of implementing new technologies is far-reaching. AI infrastructure will likely be different than much of the existing infrastructure. Not will be, it is. The reliance on high-powered GPUs will impact rack design, power, and cooling solutions.

Our systems integration business is so well positioned, as we are not the cheapest, but we are the fastest and the most flexible to support customer solutions. Our so much of our AI, as an example, is custom in these early stages. Further, existing data centers may be repositioned, reorganized, or moved, so our service offering will continue to grow based on the needs of these key customers. We fully expect to accelerate growth in 2024 and beyond to meet the intense demands of this market. So let me hand this call back to the operator, so we may take any questions you may have. Thank you, everybody, for your support. We all appreciate your attention on this call and your continued support of the company. Thank you.

Operator (participant)

The floor is now open for your questions. To ask a question at this time, simply press the star followed by the number one on your telephone keypad. We'll now take a moment to compile our roster. Okay, so it does appear we did receive a question. If you could please state your name, and your company, please.

Maj Soueidan (President and Co-Founder)

Hi, hi, this is Maj Soueidan from GeoInvesting.

Operator (participant)

Thank you. Go ahead, sir.

Maj Soueidan (President and Co-Founder)

Hey. Hey, Darryll. Thanks for giving us a nice overview of what's been going on here with the company. I have some questions. You know, I think that, you know, as you dig into this, your company a little more, and you dig into data centers and everything going on right now with AI, it can get a little kind of overwhelming, like, where this is all taking data centers and how you might, you know, play a role in what's going on here. I think it'd be kind of cool to hear you talk about the different types, you know, of data centers that are out there. You know, you got the enterprise level, you got your modular, you have, you know, colocation, you have hyperscale.

I was wondering if you could talk about what those all are and, you know, if you have a kind of a potential growth map, you know, into all of them or only specifics or, or parts of that kind of, the market segments?

Darryll Dewan (CEO)

Yeah. Hey, Maj, good to hear your voice. Thanks, bud. And also, great question, or put plural on that. So let me see if I can break it down for you. I believe the company is uniquely positioned, and we sit in the intersection of high-powered computing, high-performance computing, and AI. The integration capacity that we have is ahead of us. I think, you know, we are in the middle of it. I can tell you that there's some very exciting things going on regarding our rack integration business, and it relates to advanced technology, especially around direct liquid cooling and the new AI computers. The...

To answer your question a little bit further on the data centers, we are in conversation with folks who are evaluating their alternatives, and I would say that in general, it's a time to market and a time to value equation to either expand an existing data center, which, as you can imagine, takes time locally, through, you know, building and extensions and just supply for, you know, to build out a data center, extend a data center to a colo, to a hyperscale, to some kind of hybrid approach. And I see our potential in that market for the modular world being an alternative that to some of the things, the options I just mentioned, because of time to market and the cost to deploy.

So, in spite of the fact that there are lead times we've referred to in this call that are longer than we all would like, to get power units, to get containers built, the ultimate result is usually a cheaper, better, faster alternative than building out a data center, and that's where we think the opportunity is, in the future. And we're working with our OEM partner, to, you know, do the design work and help facilitate the design work of a solution. And we're focusing in on the deployment piece, where we actually go on site to deploy the modular data center and the sustaining maintenance over 3 to 4 or 5 years of that environment. So-

Maj Soueidan (President and Co-Founder)

Mm-hmm.

Darryll Dewan (CEO)

That's where our focus is right now. And as I mentioned earlier, we're, you know, we're learning as we go in some of the areas where customers are giving some feedback to us and asking for us to step up and do some things we didn't do before. So we'll continue to evaluate ways to go expand our service offering. But I think for 2024, you'll see a focus and a result in our rack integration business, our systems integration business, our data center move business, and get that off the ground. We're really excited about the expansion potential of going on site to do rack integration, doing work in colos and other facilities that we formerly didn't do before. So, I think the growth is ahead of us. Hopefully, that answers your question a little bit.

Maj Soueidan (President and Co-Founder)

Yeah. So basically, you know, if you have, just to understand things a little more clearly, if you have now customers that have to make these data, you know, center decisions quicker than they had to before, if they don't want to expand their own data center, but when they have a choice of maybe going to, like, doing a modular, potentially going to, like, a colocation situation, you're able to help them in either of those situations, is what I'm hearing you now, right?

Darryll Dewan (CEO)

Yes, the answer is yes. We're definitely experienced, and we've got, I think we've deployed over 500 containers over the years, and we've got a little under 200 under existing maintenance support. And the change in the gap between the deployment amount and the existing is, you know, technology changes. People have moved things around and,

Maj Soueidan (President and Co-Founder)

Mm-hmm.

Darryll Dewan (CEO)

and we need to continue to focus on building a backlog and demand for the future, which is really on top of our list. And I think that'll play out over the next couple of three years, just because of the lead times involved in the way that our revenue flows for doing sustaining maintenance and deployment.

Maj Soueidan (President and Co-Founder)

Mm-hmm. Now, what do you think the issue has been like with, you know, I think a lot of your integration work now has been with just, I guess, the traditional enterprise data centers. Now that, you know, now that you're there for as long as you've been there at the company now, and you've had a fresh look of eyes, what do you think is different now in terms of your ability to convince customers to go modular, where maybe previously that wasn't happening with your sales pitch?

Darryll Dewan (CEO)

A couple of things. One is we have invested in a demand gen, if you will. It's a nice phrase around the sales capabilities. So we've got—we've added a couple of folks that are in the selling cycles alongside our, our OEM customer partner-

Maj Soueidan (President and Co-Founder)

Mm-hmm

Darryll Dewan (CEO)

to help facilitate that. We weren't doing that before. So we have a better line of sight on opportunities, and we can manage the pipeline better. And, you know, we are looking for ways to continue to grow the pipeline. We've, as you may know, published a couple of white papers, or we published one white paper about data center trends, and we've got more coming around the, you know, the modular data center environment. So I'm excited about the fact that we're taking, you know, we're taking more action in the selling and being more active in the modular world. And, I believe that what we're seeing from the white paper is that we're getting a direct interest from end users, which formerly we didn't.

If you think about how we've gone to market in the past, we've aligned completely with an OEM partner, and now we're in a position where we can have direct conversation and then lead into what the right solution is, including the existing OEM partner, or others, as you know, the market demands. But hopefully, that's answered your question.

Maj Soueidan (President and Co-Founder)

Yeah, sure. So it seems like you've basically strengthened your relationship maybe with your OEM customer since you've been there. Like, what's your roadmap? Maybe you addressed it in the earlier comments. I missed the first few seconds of the call. And I know you're obviously trying to get business now outside maybe your OEM relationship and some of these services you're doing by working more directly with customers maybe. But what is? Are there other OEM relationships that you could go after that you haven't gone after in the past? And what does that look like? And is that, what kind of path do you need to take to kind of implement that strategy, if that's part of the roadmap you have right now?

Darryll Dewan (CEO)

Yeah, another good question. Are you speaking specifically in the modular space or in general for our business?

Maj Soueidan (President and Co-Founder)

I think in general, yeah.

Darryll Dewan (CEO)

Okay. A couple things. One is, we are, we're excited about opening up conversations with what I call the channel. You know, there's a variety of folks out there that are scrambling, trying to do integration work for their customers, their channel partners, and they don't do it as well as we do, point blank.

Maj Soueidan (President and Co-Founder)

Mm-hmm.

Darryll Dewan (CEO)

We can facilitate doing that integration work for rack integration on a customer site. We haven't done that before, up until recently. That's a broad market opportunity for us.

Maj Soueidan (President and Co-Founder)

Okay.

Darryll Dewan (CEO)

And I think what we can do is leverage our experience. It's not an easy thing to do, because when you think about the, you know, the way all the equipment and componentry comes to our facility in Round Rock, it seems kind of easy, but it's complex. You've got cables and racks coming, and servers and technology and storage. And if you get into the security space where we're in now, in cyber, you have cyber sensors. And putting that all together and doing it in a way that is with quality and speed and very cost effectively is what we do well. And we're gonna take what we've learned in doing that on site. We've experienced on site that people who don't know what we know are challenged.

It's, it's complicated, and it takes oftentimes longer than a customer wants. So we're gonna continue to focus on taking the expertise we have, leveraging it here in Round Rock, in our facility, but where we take it on site is to leverage what we know from our experience here. So the data center moves business is exciting. We're now getting a lot more attention. We're bidding on many more opportunities than we did a month ago. And I'm excited about that business catching on. The procurement business that John referred to is continuing. We're excited about that.

And I would say that overall, as a business, we have lines of business that give us multiple routes to market that we can leverage in the marketplace, namely the rack integration business, the modular data center deployment and sustaining business, the procurement business, our configuration and services business, and the new data center move business. You know, we don't want to bite off more than we can chew, but this is very, very exciting for us. You know, we're digging into a little bit broader segment of the marketplace. So in order for us, where we're heading, as the demand for AI increases, so does our potential growth. And I believe, and I think you know that from all indications, the AI demand is here for a while, and we're looking forward to fulfilling what we can.

Maj Soueidan (President and Co-Founder)

Okay. And I'll have one more question, but I'll let... I'll pause on the time over here and come back if there's after some more questions.

Darryll Dewan (CEO)

Okay, cool.

Maj Soueidan (President and Co-Founder)

Yeah. Thank you.

Darryll Dewan (CEO)

Good to talk to you.

Maj Soueidan (President and Co-Founder)

Yeah. Yeah.

Operator (participant)

Our next question comes from the line of Sean Marconi. Could you please state your company name and go ahead, please?

Speaker 4

Yeah, I'm a private investor. Hey, Darryll. Nice to meet you.

Darryll Dewan (CEO)

You too, Sean. How you doing, bud?

Speaker 4

Good. Really, really impressive, year-over-year numbers. Hey, Darryll, I'm, I'm really interested to understand how you came across the opportunity of becoming the CEO at TSS.

Darryll Dewan (CEO)

You know, candidly, and thank you for the question. I was introduced to Peter Woodward, who's our chairman, before the opportunity arose and came up, and we were talking about a board seat, and at that point in time, I was unable to do it because of the restrictions on the current employer or the former employer. And, just, you know, I call it serendipitously, we reconnected after I made a decision to move from my former employer onward, and we focused in on the board seat, and it turned into an opportunity to be in an operating role as a CEO. And, you know, I think maybe the answer to your question, I am ecstatic about what we're doing.

I think, you know, a lot of the things that we've done in the last year, plus to reset our foundation, to prepare for growth, get our quote-unquote, "factory ready to grow capacity," and that's largely on the back of Todd Marrott, who's our Senior VP of Operations. He's a very experienced operating guy. And we've revamped the company. We've had to rebuild the team. We've implemented new programs and focusing on our people and execution and all the things that you wanna do is, like, you know, is it, is it building a team and and providing leadership and support? And I think, so far so good. You know, we're never satisfied. You know, I'm, I'm one of those guys that's paranoid. I'm, I'm driving with my high beams on all the time.

We're looking for, you know, the wild animals at night, gonna drive and jump out in front of your car, and you avoid them. So take that same concept to what we do here. You know, keep your high beams on and look downstream. I'm pleased that we've got good friends in the business that have been very successful, that are offering their help. And I'm all ears to, you know, do what we can to grow this company and become more relevant in the market. And I think we're poised in a good spot. You know, the integration of what we do, especially in the AI world, in complex technologies is our strength. And the team here is ready and capable of growing significantly. So, that's, you know, that's how it all came about.

Speaker 4

Great, Darryll. Yeah, I just found it really intriguing. You know, on LinkedIn, you're with Dell for just under a decade, and, you know, that's a, that's a long time to be with a company. And you were the vice president of global sales and field marketing, and I just find that role to be really interesting, that TSS is a small, you know, high growing company and, you know, I just find this intriguing.

Darryll Dewan (CEO)

Well, Sean-

Speaker 4

So-

Darryll Dewan (CEO)

Yeah, thanks. It is... I'm you know on many many levels although we've never talked before you know maybe we'll get a chat to catch up on some stuff but I'm a very blessed individual. I'm very grateful about all the things that have come across my way and having an opportunity to to lead a great team and to grow a business in this role. And you know candidly I walk around... You ever had one of those roles where you say: "Boy, if I was running this place, this is what I would do?" Welcome to the club.

Speaker 4

Absolutely.

Darryll Dewan (CEO)

Here we are.

Speaker 4

That's awesome. Well, I'm gonna jump back into the queue, and I look forward to speaking with you soon, Darryll.

Darryll Dewan (CEO)

All right, man. Thanks for the call and your comments.

Speaker 4

Thank you.

Operator (participant)

As a reminder, the floor is now open for your questions. If you'd like to ask a question, please press star followed by the number one on your telephone keypad. Okay, it does appear we do have a question. If you could please state your name and your company name, and please go ahead, please.

Maj Soueidan (President and Co-Founder)

This is Maj from GeoInvesting. Hey, Darryll, one last question, then I'll let you go. But on your maintenance part of the business, your service part of the business, which is recurring to some degree, I guess, can you give us some kind of perspective into what that looks like over the next, you know, few years and where you want it to be and what you want to be a significant part of the business? Any new kind of areas you wanna focus on to maybe accelerate that revenue? Are there opportunities there to do that?

Darryll Dewan (CEO)

Yeah, that's a good question, Maj. You're digging into details. This is your last question. I'm not going to take any more questions from you.

Maj Soueidan (President and Co-Founder)

Okay.

Darryll Dewan (CEO)

All right.

Maj Soueidan (President and Co-Founder)

Fine.

Darryll Dewan (CEO)

Our maintenance business is a result of the sustaining contracts we put together over the last number of years with a handful of customers for the modular world, MDC world. Some of those customers and some of the technology is getting long in the tooth, and those customers, us, ourselves, and our OEM partner, are in conversations to either refresh the technology or to take it offline, meaning it'll be decommissioned. And our job, my job, and the team's job is to do quality work and be creative in how long we can extend those agreements, and also to backfill them with new agreements. So it's different.

I think there's, we know to the container, what the renewal dates are, what the technology is, how long it is, how long it's been deployed, and we're working with our partner to go do the things you would do to either upgrade or decommission. We're not sitting here, fat, dumb, and happy, going: "Oh, this is going to continue without a lot of work." The best we can do is make sure we provide the kind of support and service we provide to those customers, and also backfill them with net new customers that can spread out new revenue, recurring revenue, over the next three to five years. That's our game plan.

Maj Soueidan (President and Co-Founder)

Mm-hmm. All right. Thanks, Darryll.

Darryll Dewan (CEO)

All right, Maj. Good talking to you, bud. Thanks for your questions.

Operator (participant)

There are no further questions at this time. I would now like to turn the call over to Darryll Dewan for closing remarks.

Darryll Dewan (CEO)

Yeah, thank you, everybody, for joining. Thank you for your support. I do appreciate the calls that I get from many of you, offering suggestions and help and asking questions that that can clarify some of the things we talked about here. You know, the industry we're in right now, we're, like I said earlier, we're at the intersection of the competing technology change and the growing demand for AI. And we're, we're really excited about what we see coming down the pike in terms of technology and how we can help on the integration side. 2023 was a great year. As an ex-athlete, that's great. What are you doing for me now? So our focus has shifted to 2024 and beyond, and we know that we've got an execution focus and a challenge ahead of us.

And we're investing in operating efficiencies to go meet that challenge, to scale and to provide new services. While we're here, and where we're heading is the demand, as the demand for AI increases, so does our potential for growth. We've spent a lot of time making sure that we're good with our existing OEM customer. As I mentioned earlier, we want to do more with that customer and doing everything we can to do more. We're looking for new ways to find routes to market that expand beyond what we've got with our existing customer. With that, I would say again, thank you. We're pleased with what happened last year. We've got a lot of work to do to grow on top of that this year, which we are planning to do.

So if anybody has any other questions, feel free to reach out to me. Otherwise, I think we're good for today, and I appreciate everybody's attention.

Operator (participant)

This concludes today's call. You may now disconnect.