UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
March 31, 2015
Date of Report (Date of earliest event reported)
TSS, INC.
(Exact name of registrant as specified in
its charter)
Delaware |
001-33627 |
20-2027651 |
(State or other jurisdiction of
incorporation) |
(Commission File Number) |
(I.R.S. Employer
Identification No.) |
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110 E. Old Settlers Blvd. |
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Round Rock, Texas |
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786654 |
(Address of principal executive offices) |
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(Zip Code) |
(512) 310-1000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address, and former
fiscal year, if changed since last report.)
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. |
Results of Operations and Financial
Conditions
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On Tuesday, March 31, 2015, TSS, Inc. (the “Company”) issued a press release reporting certain preliminary financial results of the Company for the three and twelve months ended December 31, 2014. The Company also reported in the press release that it has filed a Notification of Late Filing on Form 12b-25 with respect to its Annual Report on Form 10-K for the year ended December 31, 2014, and expects to file the Annual Report on Form 10-K on or before April 15, 2015. A copy of the press release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The Company will conduct a conference call to discuss its financial results on Tuesday, March 31, 2015, at 4:30 p.m., Eastern Standard Time. A prepared script of the conference call is furnished as Exhibit 99.2 to this Current Report on Form 8-K.
The Company’s financial results contain non-GAAP financial measures. Pursuant to the requirements of Regulation G, the Company has provided reconciliations within the press release of the non-GAAP financial measures to the most directly comparable GAAP financial measures. Disclosure regarding definitions of these measures used by the Company and why the Company’s management believes the measures provide useful information to investors is also included in the press release.
The information in this Report, including Exhibits 99.1 and 99.2 attached hereto, is furnished pursuant to Item 2.02 of this Current Report on Form 8-K. Such information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Statements contained in this report contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In this context, forward-looking statements may address matters such as our expected future business and financial performance and often contain words such as “guidance,” “prospects,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “should,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Particular uncertainties that could adversely or positively affect the Company’s future results include: the Company’s 2014 results are unaudited results based on current expectations and are subject to quarter-end closing adjustments and the completion of the annual audit of the Company’s financial statements; the Company’s reliance on a significant portion of its revenues from a limited number of customers; risks relating to operating in a highly competitive industry; risks relating to rapid technological, structural, and competitive changes affecting the industries the Company serves; risks involved in properly managing complex projects; risks relating to the possible cancellation of customer contracts on short notice; risks relating to the Company’s ability to continue to implement its strategy, including having sufficient financial resources to carry out that strategy; risks relating to the Company’s ability to meet all of the terms and conditions of its debt obligations; uncertainty related to current economic conditions and the related impact on demand for the Company’s services; and other risks and uncertainties disclosed in the Company’s filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended December 31, 2013. These uncertainties may cause the Company’s actual future results to be materially different than those expressed in the Company’s forward-looking statements. The Company does not undertake to update its forward-looking statements.
Item 9.01. |
Financial Statements and Exhibits. |
| 99.1 | Press Release, dated as of March 31, 2015 |
| 99.2 | Prepared Script of March 31, 2015 conference call |
S I G N A T U R E S
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
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TSS, INC. |
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By: |
/s/ Anthony Angelini |
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Anthony Angelini |
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President and Chief Executive Officer |
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Date: March 31, 2015
Exhibit 99.1
![TSS, Inc. logo.](image_001.jpg)
TSS, INC. REPORTS PRELIMINARY FOURTH
QUARTER AND 2014 RESULTS
Round
Rock, TX – March 31 , 2015 – TSS, Inc. (Other OTC: TSSI), a
data center and mission critical facilities and technology services company, reported preliminary results for its fourth quarter
and fiscal year ended December 31, 2014. These are preliminary and unaudited results based on current
expectations and are subject to quarter and year-end closing adjustments; accordingly, actual results may differ.
Preliminary 2104 Financial Results:
The Company expects to report fourth quarter
revenue of approximately $8.4 million and fiscal 2014 revenues of approximately $28 million, non-GAAP adjusted EBITDA of approximately
$0.4 million for the fourth quarter and a non-GAAP adjusted EBITDA loss of $1.2 million for 2014. The Company expects to report
net income between $0 - 0.1 million for the fourth quarter and a net loss for 2014 of approximately $2.5 million.
“We were pleased to deliver higher
revenues and to achieve profitable results during the fourth quarter” said Anthony Angelini, President and Chief Executive
Officer of TSS. “We have been focused on operating our business profitability without compromising the service and value
that we deliver to our customers. Our gross profit margin doubled compared to the previous year driving a substantial improvement
in our results.”
Filing of Form 12b-25
The Company also
announced today that it has filed a Form 12b-25, Notification of Late Filing, with the Securities and Exchange Commission
providing the Company a 15 day extension to file its Annual Report on Form 10-K for the year ended December 31, 2014. The Company
must extend its filing date to provide additional time to complete the audit of its financial statements, which could not be accomplished
by the original filing date without incurring unreasonable effort and expense because the Company needs additional time to respond
to information requests from its independent registered public accounting firm. The Company expects to file its Annual Report on
Form 10-K within the fifteen day extension period provided by Rule 12b-25.
Cautionary Statement Regarding Forward Looking Statements
This statements made in this press release
under the caption “Preliminary 2014 Financial Results” with respect to expected future and preliminary financial results,
as well as other statements regarding expected future events or results, are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1998 Section 27A of the Securities Act of 1933, and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements are often characterized by the use of forward-looking terminology such
as "guidance," "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "should," "will" or other similar words, but are not the only way these statements are identified.
Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. The Company has
based these forward-looking statements on assumptions and assessments made by its management in light of their experience and their
perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.
Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated
in these forward-looking statements include, among other things: the Company’s 2014 results are unaudited results based on
current expectations and are subject to quarter-end closing adjustments and the completion of the Company’s annual audit;
the Company’s reliance on a significant portion of its revenue from a limited number of customers; risks relating to operating
in a highly competitive industry; risks relating to rapid technological, structural, and competitive changes affecting the industries
the Company serves; risks involved in properly managing complex projects; risks relating the possible cancellation of customer
contracts on short notice; risks relating our ability to continue to implement our strategy, including having sufficient financial
resources to carry out that strategy; risks relating to our ability to meet all of the terms and conditions of our debt obligations;
uncertainty related to current economic conditions and the related impact on demand for our services; and other risks and uncertainties
disclosed in the Company's filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the
fiscal year ended December 31, 2013. These uncertainties may cause the Company's actual future results to be materially different
than those expressed in the Company's forward-looking statements. Readers are urged to carefully review and consider the various
disclosures made in the Company’s SEC reports, which are designed to advise interested parties of the risks and factors that
may affect its business, financial condition, results of operations and prospects. Any forward-looking statements in this press
release are made as of the date hereof, and the Company undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise, except as required by law.
Non-GAAP Discussion
Disclosure
The
information discussed within this release includes financial results and projections that are in accordance with accounting principles
generally accepted in the United States of America (GAAP). In addition, certain non-GAAP financial measures have been provided
excluding certain charges, expenses and income. The non-GAAP measures should be read in conjunction with the corresponding GAAP
measures and should be considered in addition to, and not as an alternative or substitute for, the measures prepared in accordance
with GAAP. The non-GAAP financial measures are included in an effort to provide information that investors may deem relevant to
evaluate results from the company's core business operations and to compare the company's performance with prior periods. The non-GAAP
financial measures primarily identify and exclude certain discrete items, such as interest, taxation, depreciation, amortization
expenses and expenses associated with share-based compensation required under ASC 718. The company uses these non-GAAP financial
measures for evaluating comparable financial performance against prior periods.
Reconciliation of GAAP to Non-GAAP Net Income
(Loss)
In $’000 | |
Three-month period ended
December 31, | | |
Year Ended December 31 | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
GAAP net income (loss) Adjustments: | |
$ | 95 | | |
$ | (788 | ) | |
$ | (2,480 | ) | |
$ | (2,794 | ) |
Interest expense, net | |
| 67 | | |
| 70 | | |
| 277 | | |
| 197 | |
Depreciation and amortization | |
| 135 | | |
| 164 | | |
| 506 | | |
| 358 | |
Tax expense | |
| 21 | | |
| - | | |
| 21 | | |
| - | |
EBITDA
| |
| 318 | | |
| (554 | ) | |
| (1,676 | ) | |
| (2,239 | ) |
Stock-based compensation | |
| 125 | | |
| 109 | | |
| 474 | | |
| 402 | |
Provision for bad debts | |
| (10 | ) | |
| 6 | | |
| 14 | | |
| 23 | |
Adjusted EBITDA | |
$ | 433 | | |
$ | (439 | ) | |
$ | (1,188 | ) | |
$ | (1,814 | ) |
Quarterly Conference Call Details
The Company has scheduled a conference
call to discuss the fourth quarter and fiscal 2014 results for today at 4:30PM Eastern. To participate on the conference call,
please dial 1-888-862-6557 toll free from the U.S., or 630-691-2748, conference code 39347379#. Investors may also access a live
audio web cast of this conference call under the “events” tab on the investor relations section of the Company's website
at http://ir.totalsitesolutions.com/events.cfm.
An audio
replay of the conference call will be available approximately one hour after the conclusion of the call and will be made available
until Tuesday, April 14, 2015. The audio replay can be accessed by dialing 1-888-843-7419 locally or 630-652-3042 toll free then
enter conference ID number 39347379#. Additionally, a replay of the webcast will be available on the Company’s website approximately
two hours after the conclusion of the call and will remain available for 90 calendar days.
About TSS, Inc.
TSS is a trusted single source provider of mission-critical
planning, design, system integration, deployment, maintenance and evolution of data centers facilities and information infrastructure.
TSS specializes in customizable end to end solutions powered by industry experts and innovative services that include technology
consulting, engineering, design, construction, operations, facilities management, technology system installation and integration,
as well as maintenance for traditional and modular data centers. www.totalsitesolutions.com
or call 888-321-4877.
Company Contact:
TSS, Inc.
John Penver,
Chief Financial Officer
Phone: (512) 310-1000
Exhibit 99.2
TSS, Inc.
Q4 2014 Preliminary Earnings Script
Operator
Good afternoon ladies and gentlemen… [Operator Instructions].
I will now turn the call over to Brad.
[Introduction by Brad Cunningham]
Thank you Operator, and good afternoon everyone. Thank you for
joining us on TSS’s conference call to discuss our preliminary fourth quarter and fiscal year 2014 financial results. Joining
us this afternoon from the management of TSS is Anthony Angelini, President & Chief Executive Officer, and John Penver, Chief
Financial Officer.
Before we begin the call I would like to remind everyone to
take note of the cautionary language regarding forward-looking statements contained in the press release we issued today. That
same language applies to comments and statements made on today's conference call.
This call will contain time sensitive information as well as
forward-looking statements, which are only accurate as of today, March 31, 2015. TSS expressly disclaims any obligation to
update, amend, supplement or otherwise review any information or forward looking statements made on this conference call or replay
to reflect events or circumstances that may arise after the date indicated 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 SEC. In addition, we will be referring to Non-GAAP
financial measures. A reconciliation of the differences between these measures with the most directly comparable financial
measures calculated in accordance with GAAP is included in today’s press release.
I’ll now turn the call over to Anthony Angelini, Chief
Executive Officer of TSS
Anthony
[ANTHONY ANGELINI]
Thank you, Brad, and thank you to everyone for participating
in this call
Earlier today we released a press release announcing our preliminary
financial results for the fourth quarter and fiscal year 2014. A copy of that release is available on our website at www.totalsitesolutions.com.
As we have mentioned over the last six months, we have undertaken
a number of repositioning and cost realignment activities. We have further been able to lower our break-even point by substantially
improving our gross margins compared to the prior year. We have done this through focusing on our higher-margin systems integration,
facility management service offerings and embracing recurring higher margin construction projects within that aspect of our business.
Combining this gross margin improvement with decreased operating expenses has resulted in accelerating our path to profitability.
The incremental revenue in our fourth quarter of 2014 has resulted in us achieving positive normalized adjusted EBITDA and positive
net income during the fourth quarter. Operationally speaking and in light of the issues we faced in 2014, I am very pleased with
these results and our outlook for 2015. I will touch on that more later.
TSS, Inc.
Q4 2014 Preliminary Earnings Script
We also announced today that we have filed a Form 12b-25 with
the SEC to have an additional 15 days to file our Annual Report on Form 10-K. As a result, please note that all of the financial
information we discuss on this call today is preliminary. We have not yet finalized our 2014 audit, and so therefore there is a
risk that our final numbers could change from those presented today. We currently expect to be able to meet this new reporting
timeline.
John will now discuss the status of our audit and provide more
details of our operating results.
[JOHN PENVER]
Thank you, Anthony. Let me first comment on the status of our
audit. In late 2014 the Public Company Accounting Oversight Board, or the PCAOB, issued Staff Audit Practice Alert No. 12. This
update provides guidance to auditors about the audit procedures surrounding revenue. This has had a significant impact on smaller
companies that are not subject to an integrated audit that includes Sarbanes-Oxley Section 404 reporting. The result for such companies
is a significantly greater level of substantive testing of the company’s revenue. These additional procedures have increased
the time and effort required by us to complete our audit with the resources that we have available; therefore we have filed a Form
12b-25 allowing up to 15 days to complete the audit. I would like to emphasize that the additional time we need to complete this
process is not the result of anything unusual in the audit process beyond the sheer volume of work required to meet the new revenue
testing standards. When the audit is complete and our 10K is filed, we will file a new press release with complete financial tables.
Revenue:
Turning to our preliminary results, we expect our revenue for
the fourth quarter to be approximately $8.4 million. This compares to $6.2 million in the third quarter of 2014 and $13 million
in the fourth quarter of 2013. The fourth quarter of 2013 had $5M more of construction revenues in it compared to 2014. In Q4 of
2013 we were completing a large data center construction project which we did not have in the fourth quarter of 2014. This was
consistent with our guidance and with our strategic direction. Compared to the third quarter of 2014, we experienced sequential
increases in revenue across all five of our business units, with particularly strong increases in our facilities management and
our systems integration businesses.
TSS, Inc.
Q4 2014 Preliminary Earnings Script
For the fiscal year 2014, we expect our revenues to be approximately
$28 million. This is down $16.4 million or 37% from 2013, however the 2013 revenue included a large one-time battery sale for $5
million and approximately $11 million of revenue attributable to large data center construction projects. As we have previously
described, these projects were not recurring and therefore not expected to be repeated in 2014.
Although our revenue has decreased, our focus on higher margin
business has resulted in a mix shift that is more profitable and more repeatable. We continue to work to transition our business
in this direction while opportunistically looking for one-time projects to enhance our revenue and profitability. The result is
we expect our gross profit margin for the year to improve to 32% from 20% in 2013. Thus, despite the revenue decrease of $16.4
million, our gross profit was flat. We believe growing from this base of revenue can significantly enhance our path towards sustainable
profitability and growth.
Net Loss and Adjusted EBITDA:
We expect to report positive net income for the fourth quarter
of less than $0.1 million. This compares to a net loss of $366,000 in the third quarter of 2014 and a net loss of $784,000 in the
fourth quarter of 2013.
For the year we expect to report a net loss of approximately
$2.5 million, or $0.17 per share, compared to a net loss of $2.8 million for 2013, or $0.19 per share.
We expect that our Adjusted EBITDA, which excludes interest,
taxes, depreciation, amortization, and stock-based compensation, will be a profit of approximately $0.4 million for the fourth
quarter, compared to an Adjusted EBITDA loss of $0.5 million in the fourth quarter of 2013 on higher revenue. For the year we expect
that our adjusted EBITDA will be a loss of approximately $1.2 million, compared to a loss of $1.8 million in 2013.
Balance sheet:
Turning to our balance sheet, we closed the year with $1.4 million
of unrestricted cash on hand. As we have mentioned on previous calls, our liquidity position will fluctuate from time to time as
our large customers have wide ranging payment terms. We reduced our bank credit facility by $1.9 million to $1.2 million
during the fourth quarter as we entered into a vendor financing program with our largest customer that converted $3 million of
receivables into cash. We believe this financing arrangement enables us to improve our invoice-to-cash timing at a lower financing
cost.
TSS, Inc.
Q4 2014 Preliminary Earnings Script
Although our audit is not yet completed, we expect that our
auditors will include what is referred to as an “emphasis paragraph” in their audit report, drawing attention to certain
conditions concerning our overall liquidity position that raise substantial doubt about our ability to continue as a going concern.
We have enhanced our disclosures and discussions around this topic in our quarterly and annual filings previously filed with the
SEC to ensure that this risk is fairly presented to readers of our financial statements.
We recognize the PCAOB prescribed process the auditors are required
to follow to assess whether additional language about our ability to continue as a going concern is needed in the audit report.
Although we were profitable in the quarter, and generated positive cash flow from operations during 2014, we acknowledge that our
history of annual losses, combined with our negative working capital position at year-end, may cause uncertainty about our ability
to continue as a going concern, which contributed to the decision by our auditors to include an emphasis paragraph in their audit
report. We continue, however, to manage our liquidity closely and look to enhance our liquidity as we move through 2015. We have
previously outlined many of the actions we have taken to ensure that the company has the necessary resources to meet its obligations
as they fall due and we continue to believe that we have available options to ensure that we can continue to do so. An example
of this includes the additional funding of $945K that we completed in February of 2015. We are always evaluating the need for additional
capital and we evaluate those alternatives in the context of what best serves our shareholders. The availability of additional
capital, coupled with our ability to adjust operating costs, will enable us to ensure that we have sufficient liquidity.
We anticipate filing a press release simultaneous with the filing
of our Annual Report on Form 10-K, that will provide a detailed income statement and balance sheet for our fourth quarter and fiscal
2014 results.
With that, I will now hand the call over to Anthony for his
perspectives on our results, as well as some broader overviews on the market opportunities that we have in front of us.
Anthony
[ANTHONY ANGELINI]
Thank you, John
As I discussed in our last call in November, we have made a
lot of progress in transitioning our model to a higher margin mix of business that is more repeatable. We are laying a solid foundation
of services that resonate with the market and we believe our diverse suite of services are unmatched in our market segment. In
November, we guided toward positive Adjusted EBITDA in the fourth quarter on higher revenues over Q3 and we delivered on those
results. These are all positive trends and build on our efforts to deliver a compelling set of services to the data center market
that are foundationally important to our future.
TSS, Inc.
Q4 2014 Preliminary Earnings Script
The fourth quarter results represent the beginning of what we
believe will be an ongoing stream of quarters with adjusted EBITDA profitability. We feel we have the formula, and now are focused
on executing the model. We have the right offerings and right strategy. Now our job is to deliver on growing our revenue by expanding
our customer base and geographic reach.
We expect 2015 to be a profitable year as we have structured
our costs appropriately, have a significant amount of pipeline activity, expect positive business trends within some of our largest
customers and progress made on new logos with large future potential.
We expect Q1 to result in break-even to positive adjusted EBITDA
on revenues just under $7 million. It is important to note that the majority of our annual audit costs are realized in our first
fiscal quarter. Also, due to the harsh weather on the east coast this winter we did experience some timing delays on projects we
are executing for some customers.
As we look to the balance of 2015, we are optimistic based on
the strength of our pipeline and the deals that we have closed for the balance of the year. This include renewals of existing contracts
as well as new projects and customers. We expect to build on the base of business we have developed, new opportunities we see and
the benefits of the cost structure changes we have made. We believe this will all add up to our ability to achieve both growth
and profitability.
All areas of our service offerings are experiencing an improving
level of new opportunities. We have significant opportunities within all our market segments, enterprise, data center providers
and importantly our partners, such as Dell and others, who are bringing us an increasing amount of prospective opportunities. We
continue to work to develop new partners that can have a meaningful impact. Many of these relationships greatly expand our reach
to many new and large companies. We generally provide a “sell with” approach to larger opportunities where we meet
along with our partners with their customers and provide relevant subject matter expertise that rounds out the end-end solution.
In closing, I want to thank our customers, partners, shareholders
and most importantly our employees for their efforts in delivering the positive results in the fourth quarter of 2014. We are excited
about what TSS is building and our future prospects, and look forward to speaking to you again in the next several weeks with our
first quarter results. Thank you.
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