Total Site Solutions (NASDAQ: TSSI) Unknown Datacentre provider growing at an incredible rate
Unknown & Undervalued with a 120% CAGR over the last 3 years & $14B backlog runway of AI racks waiting to be deployed
Ticker: TSSI
Price: $27.17 USD
Shares outstanding: $25.02M
Market Cap: $712.5M
Contents:
Summary of Business Model
Growth Potential
Management Quality
Risks
Valuation
Conclusion
Summary of Business Model
Total Site Solutions or TSS, Inc. (NASDAQ: TSSI) is a U.S.-based provider of AI infrastructure, providing end-to-end technology services for data centre technology providers through their offerings. TSS essentially supplies AI racking, as we know AI is exploding at the moment & the services TSS supplies is becoming increasingly in more demand. Dell is by far their largest customer making up over 90% of the Sales. Headquartered in Round Rock, Texas, the company was founded in 2004 and went public in 2010, the company currently has over 200+ employees.
TSS has three offerings they provide to clients currently, it’s important to understand each of them.
Procurement
TSS offers a procurement service on behalf of their clients. This involves TSS procuring 3rd party hardware to be outfitted by TSS & used in Modular Data centres (MDA’s) which are prefabricated with power, cooling, and IT infrastructure allowing them to be deployed quickly & efficiently making the process simple for clients. In 2024, TSS procured $169M of product while their procurement service overall was responsible for 79% of Revenue & 35% of Gross Profit. TSS’s November 2024 10-Q we can see there are low margins of 4% for their Procurement service, which I would like to see increase in the future.
Systems Integration
This segment involves integrating information technology equipment for original equipment manufacturer vendors and customers, particularly within data centre environments. Essentially, procurement is TSS obtaining the hardware for the AI data centres, while the systems integration offering is TSS connecting both hardware & software all together with their technicians on-site to get it all working nicely together. TSS view this as a growth runway with higher margins of Revenue. This is seen in their Gross Profit for 2024, with it making up 43% of total Gross Profit while only being 15% of total Revenue.
Facilities Management
This is mainly TSS’s after deployment care, focusing on primarily maintenance of MDCs with contracts generally being one-year long after initial setup. Part of this offering is recurring revenue if the client needs the TSS project manager & engineers to stay on longer for support. This offering provides great Gross Profit margins of 50%+ & TSS expects high growth as more companies continue to shift to AI.
Growth Potential
TSSs YoY Growth recently has been excellent, Revenue grew 172% in 2024 & 522% in Q1 FY25, with a 120% CAGR from 2022-24. Net Income also grew to $6M in 2024 up from $0.1M in 2023, showing strong signs of profitability growth. The Global AI server market is expected to reach $150B by 2027 according to the giant EMS provider Foxconn, while cloud services, another area that TSS operates in is expected to reach $723B in 2025, a 21.5% increase in spending from 2024, with forecasts saying that 90% of organizations will adopt hybrid cloud through 2027. Cloud giants like Amazon Web Services, Google, and Microsoft Azure continuously seek advanced server solutions that lay out a growth runway that is ripe for TSS & management seems to be managing the recent growth explosion well for now.
Looking at TSS’s largest customer Dell who make up 90% + of their business. Dell’s last set of results stated that their AI order backlog at the end of Q1 was 300% up on the backlog at the end of Q4, which is a $10B increase meaning there’s a $14B backlog of AI racks waiting to be deployed. In May, Apple announced that they are ordering $1B worth of servers from Dell & SMCI, TSS will reap the tailwinds from this contract. Microsoft who is already one of their customers announced early in 2025 that their aiming to invest $80B in AI-enabled Data Centres. The point I’m making is that the AI boom is well & truly happening, with AI rack integration in its infancy & TSSs high-quality offerings, there is a chance over the next few years they could start to grow a moat for themselves if they can attract & retain some of the big names venturing into AI.
In May TSS moved into a new warehouse which management stated was needed to continue the rapid growth occurring. The new warehouse has more then double the space of the previous location with 213K square feet, while also having increased power supply to help with increasing demand for AI enabled technologies & testing. Its clear management want to push growth forward with this location expansion.
CEO Daryll Dewan had this to say about future growth in a May press release recently:
“We are highly optimistic about our growth prospects for 2025 and beyond. Just last week, we began initial production at our new facility. We expect production volumes will grow in the second quarter and continue to ramp throughout the remainder of 2025 and into 2026. Based on our current visibility, and within the ever-changing geopolitical environment, we continue to expect total revenue in the first half of 2025 to exceed total revenue in the second half of 2024. For the full year 2025, we continue to expect Adjusted EBITDA to be at least 50% higher than 2024.”
TSS currently pays out no dividends, so all Capital is currently going back into growing the company.
Management Quality
In 2022 TSS had a change of leadership with Darryll Dewan taking over as President & CEO, replacing Anthony Angelini the prior CEO of 11 years. I believe this change is a major reason of their turn around in recent years. Prior to his role at TSS, Darryll was Vice President of Global Sales and Field Marketing for Dell Technologies, which as we now know are TSSs largest customer so there’s no doubt this was a huge reason for NSS winning the “Best Deployment Partner” award from Dell. Dewarn has over 30+ years of experience leading various managed service organizations supporting the IT industry.
Danny Chism joined as CFO in 2024 & has 33+ years of experience in financial sectors. Prior to joining TSS, Mr. Chism served in CFO positions at Goodwill Industries of Central Texas, EZCORP, Inc. (NASDAQ EZPW), Cash Solutions Centers, and Gatsby Investments. Prior to EZCORP, he was in the audit department of Ernst and Young.
Todd Marrott is the COO who also joined in 2022. Todd from 2019 until 2022 he was the Vice President – Operations for Applied Technical Services, a privately held full turnkey electronics manufacturer.
Looking at the numbers since the new management team joined, albeit they have been helped by huge tailwinds from the AI boom. The Diluted EPS has gone from -0.07 in 2021 to 0.36 currently, with Net income going from $0.1M in 2022 to $8.9M currently. Perhaps the most impressive is that TSS has had a 120% CAGR from 2022-2024 as mentioned earlier. It’s clear to see that the new management is steering the ship in the right direction, hopefully this can continue.
Looking at insider ownership, as of 30/04/2025, Peter H Woodward who is the Chairman of the Board owns 10.46% equity while his microcap fund MWH Capital Management owns another 10.46%, CEO Darryl Dewan owns 2.92%, CFO Daniel Chism owns 1.55% & Glen Ikeda owns 5.93%. Overall Management owns 18.94%, something I would like to see a little higher.
Risks
Need to Diversify Customer Base
Let’s start with the biggest risk. That’s Dell making up over 90%+ of the company’s customer base. Now it’s clear when the new CEO Darryll joined, he went to work on improving the company’s relationship with Dell which as stated above seems to have worked given the “Best Deployment Partner” award TSS received. For now, it seems the relationship is strong between the two.
TSS has stated that they want to attract Marquee End Customers, in their latest Quarterly report they state they perform work for Microsoft, Bank of America & Walmart. If they can grow these relationships paired with the increasing AI data centre demand, then they may be able to diversify their customer base & not rely on Dell as heavily for Sales.
Fast evolving technology
It’s worth stating that datacentre technology is evolving at an incredible pace currently. Semi Analys states:
“Of the key datacenter systems, Cooling is arguably the area that is evolving at the fastest pace, presents the steepest learning curve and carries the execution risk for datacenter operators. With large-scale projects commonly requiring billions in capital expenditure, the stakes are extremely high. Rapid advancement in datacenter requirements also amplifies the risk of developing assets that could become obsolete quickly.”
It's clear that TSS must continue to innovate on their systems to stay ahead of the competition, as many data centre companies will be fighting for market capitalization over the coming years. This also leads into my next point, TSS’s competition.
Competition
Now this one is quite different to other sectors, as many data centre companies actually work together on projects thanks to the complexity of implementing new data centres. Super Micro (SMCI) is the largest player in the market currently, however TSS is known to work with SMCI regularly. SMCI has been up & down recently which could open up market cap for TSS to acquire. The chart below shows the Revenue Growth rate of both companies side by side, as you can see both of them have been enjoying tremendous growth in the last couple of years.
Valuation
With a healthy-looking Balance Sheet showing a Net Cash position of $9.4M. TSS is currently sitting at an 81x P/E which at first glance looks quite high. Last year Sales were at $150M and are currently sitting at $231M FY25, in Q1 Revenue grew by 522% with a Net Income of $3M. Let’s assume they can reach $300M in Sales by the end of this year and then grow 100% next year & 50% in 2027, that’s $900M in Revenue by 2027.
As seen above the company is growing extremely quickly, reaching a 3x Sales multiple in 2027 isn’t out of the question. If we assume they can reach a 5% margin on Net Income (it was 4% in FY24) on $900M Sales, that’s $45M of Earnings by 2027. I think it’s fair to say over the next 5 years AI will outperform many industries regarding growth, so I believe it’s fair to get a premium multiple. Considering all of this, I see TSS are undervalued currently.
Conclusion
To conclude my thoughts. I believe TSS makes for a compelling case given its recent growth aligning with new management taking over in 2022, I believe the company is still relatively unknown with little investor coverage, making it a sound entry point. It’s operating in the AI data centre industry which is only going to grow in the coming years as more enterprises look to implement AI. TSS needs to keep a strong relationship with Dell while also looking to bring in new clients, they must also ensure they stay on top of technological advancements to continue to offer highly sought after solutions.
Thank you for reading my Article about TSS Inc.
Stuart G