Why Is TSS Stock Plunging Friday?
TSS, Inc. (NASDAQ:TSSI) stock fell Friday after reporting third-quarter results that showed steep year-over-year declines in revenue and earnings.
The stock fell as the company reported a 40% decline in revenue, a swing to a net loss, significantly lower procurement activity, and a substantial drop in adjusted EBITDA, overshadowing its strong year-to-date gains.
Earnings came in at a loss of 6 cents per share, down from earnings of 10 cents per share a year earlier, while revenue fell to $41.9 million from $70.1 million, representing a 40% decline.
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Segment Performance and Margin Pressure
Procurement revenue dropped 49% to $31.1 million, Systems Integration revenue rose 20% to $9.2 million, and Facilities Management revenue decreased 19% to $1.6 million.
Gross profit declined 41% to $4.6 million. TSS reported a net loss of $1.5 million versus net income of $2.6 million last year, and adjusted EBITDA fell 66% to $1.5 million.
“Our year-to-date revenue growth of 88% and adjusted EBITDA improvement of 59% underscore the strength and momentum of our business,” CEO Darryll Dewan said. He added that Systems Integration volume was “lower than expected due to unforeseen operational requirements,” and noted that new procedures are now driving “dramatically higher rack volumes” in the fourth quarter.
Dewan said costs reflected a full quarter of the company’s new factory ahead of anticipated revenue increases beginning in the fourth quarter.
Strong Year-to-Date Growth and Upgraded Outlook
Year-to-date revenue reached $184.8 million, up 88%. Procurement revenue increased 100% to $154.3 million. Systems Integration revenue rose 78% to $26.1 million, while Facilities Management revenue fell 32% to $4.4 million.
Gross profit grew 39% to $21.0 million. Net income totaled $3.0 million, down 27%, with diluted EPS of $0.11. Adjusted EBITDA rose 59% to $10.7 million.
The company ended the quarter with $70.7 million in cash and cash equivalents, up from $23.2 million at the end of the year.
Dewan said, “Two years of rapid growth, a focus on operational excellence and strong relationships with key partners have driven our performance year-to-date.” He added that Procurement should remain strong, though the government shutdown could affect order timing.
He expects stronger fourth-quarter results in Systems Integration and Facilities Management and a rebound in quarterly EBITDA. TSS raised its full-year adjusted EBITDA outlook to 50% to 75% growth over 2024 and expects that run rate to carry into 2026.
Price Action: TSSI shares were trading lower by 41.64% to $8.900 premarket at last check Friday.
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