Q2 2024 Earnings Summary
- TSS is on track to 10x their rack integration capacity, which indicates strong future growth potential.
- The company has received funding from an OEM partner for capacity expansion, reflecting confidence in TSS's capabilities and future prospects.
- TSS is proactively adapting to future technological shifts, such as direct liquid cooling, and is planning to expand their capabilities to meet anticipated customer demand, positioning themselves well in the evolving market.
- Management's unwillingness to disclose key revenue details: When asked about the percentage of total revenue coming from the relationship with Dell, the CEO responded, "We don't talk about that publicly." This lack of transparency may indicate an over-reliance on a single customer, potentially posing a risk if that relationship changes.
- Limited visibility into future revenue and contracts: In response to a question about revenue visibility for the coming quarters, the CEO stated, "I can't get into some of the details." Additionally, when asked about modeling capacity expansion goals, he said, "Don't make this too complicated. I'm trying." This suggests uncertainty in forecasting future earnings and growth.
- Confidentiality constraints limiting investor insight: The company is unable to discuss significant projects or end customers due to confidentiality agreements. For instance, when asked about working on Elon Musk's xAI data center, the CEO replied, "We can't do is talk about the end-user customer because it's very confidential to our relationship with our partner." This lack of disclosure may hinder investors' ability to fully assess the company's growth prospects.
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Margin Improvement and Scalability
Q: Will margins improve as you scale?
A: Management confirmed that margins will absolutely improve as they scale, highlighting that more efficiencies are expected in the rack integration and modular businesses as they grow. -
Capacity Expansion and Power Constraints
Q: Are you on track for 10x capacity expansion?
A: Management stated they are on track to achieve a 10x increase in rack capacity, but may need to move to another facility due to power limitations, especially as the demand shifts toward more direct liquid-cooled solutions. -
Relationship with Dell
Q: What percentage of revenue comes from Dell?
A: Management declined to disclose the percentage of revenue from Dell but emphasized their efforts to maximize business through their partnership as a Dell services partner. -
Financing from Partner
Q: Can you discuss financing received from your partner?
A: Management acknowledged receiving financing from a partner but stated that details are proprietary and cannot be disclosed, emphasizing respect for the confidential relationship. -
Revenue Visibility and Contract Duration
Q: What is the revenue visibility for coming quarters?
A: Management indicated they have better signals and information exchange with their partner than ever before, building a trusted relationship that provides visibility into future demand, though specific details were not provided. -
Hiring and Headcount Growth
Q: Have you doubled or tripled your headcount?
A: Management confirmed they have at least doubled their headcount to accommodate growth, highlighting their planning and efforts in building the team but did not provide exact numbers. -
Modular Business Lead Times
Q: What's the outlook for the modular business?
A: Management mentioned that lead times for modular components are long, ranging from 8 to 12 months, but they are working to build closer relationships with suppliers to improve lead times and aim to turn backlog into revenue in 2025 and beyond. -
Potential Work with Elon Musk's xAI Data Center
Q: Are you working on Elon Musk's xAI data center?
A: Management could not disclose any information about end-user customers due to confidentiality agreements with partners.