Q4 2023 TSS Inc Earnings Call
Participants
John Penver; Chief Financial Officer; TSS Inc
Darryll Dewan; President, Chief Executive Officer, Director; TSS Inc
Maj Soueidan; Analyst; GeoInvesting, LLC
Presentation
Operator
Thank you for standing by and welcome to the TSS fourth-quarter and fiscal 2023 earnings call. I would now like to welcome John K. Penver, Chief Financial Officer, to begin the call.
John, over to you.
John Penver
Thank you, Mandy, and good afternoon, everyone. Thank you for joining us 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'll provide more of a review of our fourth quarter and fiscal '23 results. And then I will turn the call back over to Darryll to discuss our strategy and direction.
Darryll?
Darryll Dewan
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 and 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 recorded $24.4 million in revenue in our fourth quarter, our highest quarter revenue ever, which helped drive our full-year 2023, the 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 $1.4 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 are 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 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 our investment in our IT infrastructure, we will continue to identify additional ways in which we can profitably help our customer. 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 increasing demand.
We have modeled plans to scale our data center rack integration business up to 10x, over our 10 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 growing from this growth beginning in the second half of this year, 2024.
So with that, let me turn it back over to John provides additional financial info. Appreciate you listening.
John Penver
Thanks, Darryll. As Darryll said, looking at fourth quarter, the results were very strong with year-over-year growth in revenue, gross profit, 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, containing our net loss into a small net profit for the year.
So 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 '22 was primarily from the $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 were up by $0.5 million or 31% from the prior quarter as we undertook several AI-related rack integration projects in this last quarter, including infield integration services for NI customers.
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. It 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. And 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 20 -- sorry, 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 '22.
Similar 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, a 23% increase in systems integration revenues compared to '22, and it was offset by a decline of $3.1 million or 31% in our facilities business compared to '22 due to a decline in the number of MDC deployments that we completed in '23 compared to '22.
The gross value of transactions processed in our procurement business was $123.2 million in 2023. This included a 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 recorded in 2022 and is comparable to the levels that we had back in 2021.
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. And this has helped offset the $3.7 million decrease in one-time deployment and 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 forecast we're getting from our customers. Our production schedule is still impacted by the availability of components needed in production, particularly regard to chipsets and GPUs and the service 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 22 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 has the margins on procurement are approximately one-third that 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. Gross profit on our integration and facilities businesses was 42% in the fourth quarter of 2023 and as 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 22 to a level of 3.3 for the year. Our gross profit margin was 20% compared to 29% in 2022. And again, this was because of the proportion of revenues that we earned from procurement activities in 23, where procurement revenues was 71% of our total revenues compared to 43% back in 2022. In dollar terms, our gross profit improved by 3 million in 23 to 11 million, up from 9 million in 2022.
Our selling, general and administrative expenses during the fourth quarter of 23 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, selling, general and administrative costs were 8.9 million, up $1.2 million from the 7.7 million we 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 costs 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 23 compared to an operating loss of 723,000 in the fourth quarter of 2022. So this was an improvement of $1.447 million compared to the fourth quarter of last year. For the year ended December 31st, 23, our operating profit of 1.75 million compared to an operating profit of 914,000 in 2022. So this was a 61% increase in operating profit compared to our 2022 results, we had a substantial increase in the level of interest expenses compared to the prior year. Nearly all of our interest expense relates to the procurement business were large transaction receivables of finance for a short period. The high volume of business transacted through the procurement of business is the main reason for the increase in interest expense. And so our interest expense in the fourth quarter was 498,000 compared to 410,000 a year before. And for the year, a total interest expense was almost 2 million was 1,971,000, and this was a million dollars 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 a share in the fourth quarter of 2022. This represents an improvement of 1,476,000 net income compared to the fourth quarter of 2022. And for the year ended December 31st, 2023, we had net income of 74,000 or $0 a share compared to a net loss of 73,000 or $0 a 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 compared to an adjusted EBITDA profit of 1,662,000 in 2022 and represents growth of 989,000 or 60% compared to 2022 that 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, primarily due to the timing of cash receipts and payments relating to our procurement transaction. So the volume of procurement activity was higher at the end of 23 compared to the end of 2022. At the end of 2022, we actually were able to be paid for multiple large procurement projects, but have yet to pay vendors for these same projects. And this resulted in an increase of approximately 14 million and our cash and our accounts payable the end of 2022. So during the first quarter of this year, we paid those vendors net 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
Yes, great, John. Thank you to all of the data of 20.3 and Mark my 14 months and a very exciting for the 1st year with TSS and in the industry who 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 that factory here in Round Rock and our company wide go-to-market selling capacity. We are proud of our financial results in increases in year-over-year revenue, net income and EBITDA.
But we're not we're not done. We're not completely where we want to 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 more recognized and relevance provider of integration services in the marketplace, resulting of opportunities and markets identified with our OEM partner. We have added new service offerings with multiple ways provide integration services to our customers, including our on-site Krak integration and our now 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, improve brand awareness of TSYS and a digital presence in the broader market are on top of our list and are important.
And so we recently completed a modernization of our website published a white paper on trends and data centers, expect more news and professional updates from TSS growth potential in 2020 for prolonged driven 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 businesses growing, but lead times remain long.
This is a pipeline to impact the next one to three 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 and an analyst forecasting that all the existing capacity will be consumed shortly is inevitable and incredible. However, the eye 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 that will be at its reliance on high power 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 out so much of our AI as an example, as customers in these early stages, further existing data centers may be repositioned, reorganized or moved to 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 there.
Thank you.
Question and Answer Session
Operator
(Operator Instructions)
Maj Soueidan
Maj Soueidan, GeoInvesting. Thank you.
Operator
Go ahead, sir.
Maj Soueidan
Hi, Darryll. Thanks for giving us an owners. Are you what's going on here with the company? I have some questions in. I think that you'd dig into this a little more. You dig into data centers and we can go now and now with AI, it can get we will kind of overwhelmingly where this is all taken into centers and how you might play a role and what's going on here?
I think it will be kind of cool to hear you talk about the different types of staff that are out there. You get the enterprise-level, you got me a modular, you have colocation, hyperscale. I was wondering if you could talk about what those are and if you have a kind of a potential growth map in all of them or only specific parts of that kind of on the market segments?
Darryll Dewan
Yes. Hey, Maj, good to hear your voice. Thanks. But and also a great question for Pierre on that. So let me see if I can break it down for you. And 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 we are in the middle of it. I can 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 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 building and extensions and just supply for the build-out of data center, extended data center to a co-lo to a hyperscale to some kind of hybrid approach. And and I see our potential in that market for the modular world being an alternative that to some of the things and the options I just mentioned because of time the market and the cost to deploy. So in spite of the fact that there are lead times we referred to in this call that are longer than we all would like to get power units that get containers built from 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 and in the future. And we're working with our OEM partner to do the design work and help facilitate the design work of a solution. And we're focusing in on that deployment piece where we actually go on site to deploy the modular data center and the sustaining maintenance over three to four or five years of that environment. So NAM, that's where our focus is right. And as I mentioned earlier, we're learning as we go in some of the areas where the customers are giving some feedback to us and asking for us to step up to do some things that 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 frac integration business, our systems integration business, our data center move business and get that off the ground. And we're really excited about the expansion potential of going on site to do racking and great stuff, fat doing work in colon and other facilities that we formerly didn't do before. So I think the growth is ahead of us to hopefully I answered your question.
Maj Soueidan
Well, but yes, so basically, if you have a is that understanding what clearly you have now customers that have to make these deltas in our decision quicker than Andrew before if they don't want to expand their own data center that they have when they have a choice and maybe go into what we're doing the modular potentially go into like a co-location situation, you're able to help them in either of those situations is what I'm hearing you're now.
Darryll Dewan
Right, I think so, yes, the answer is yes, we're definitely and 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 fan maintenance support, Tom, and the change in the gap between the deployment amount and the existing zone technology changed as people have moved things around and Tom and we need to continue to focus on building a backlog and demand for the future, which is our is really on top of our list. I think that'll play out over the next couple of three years just because of the lead times involved way that our revenue flows for doing sustaining maintenance deployment.
Maj Soueidan
And and what do you think the issue has been like with, um, you know, I think a lot more 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 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 previous why that wasn't happening with your sales pitch.
Darryll Dewan
But a couple of things. One is we have invested in a demand gen. If you will to nice phrase around sales capabilities. So we've got we've added a couple of folks that are in the selling cycles alongside our our OEM customers partners to help facilitate that we weren't doing that before. So we have a better line of sight on opportunities and we can manage that pipeline better.
And we are looking for ways to continue to grow the pipeline. And we've, as you may know, published a couple of white papers that we've published one white paper about data center trends, and we've got more coming around the pad the modular data center environment. So I'm excited about the fact that we're taking. We're taking more action in the selling and being more active in the modular world. And I believe that. And what we're seeing and from the white paper is that we're getting it direct interest from end users, which fortunately we did. If you think about how we've gone to market. In the past, we've aligned completely with Dave OEM partner. And now we're in a position where we can we can have a direct conversation and then lead into what the right solutions, including the existing OEM partner or others as the market demands. But hopefully that's answered your question.
John Penver
Yes, you're assessing.
Maj Soueidan
It seems like you mentally strengthen your relationship with the OEM customer was you've been there on what looked like, what's your road map and maybe you addressed it in your earlier comments. I missed the first few seconds of the call and I know you're obviously trying to do get because now side, maybe your OEM relationship and some of the services you're doing working more directly with customers maybe.
But what does it mean that other 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 a -- what kind of patent take to kind of implement that strategy that's part of the roadmap you have right now?
Darryll Dewan
Yes. Another good question. And you're speaking specifically the modular space or in general for our business?
Maj Soueidan
I think in general, yes.
Darryll Dewan
Okay. A couple of things. One is that we are we're excited about opening up conversations with what I call the channel field. There's a variety of folks out there that are scrambling trying to do a facial work for their customers, their channel partners, and they don't do it as well as we did point blank who we can facilitate doing that integration work for rack integration on a customer site. We haven't done any more from it recently as a broad market opportunity for us in the meantime, I think what we can do is leverage our experience. It's not an easy thing to do because when you think about the way all the equipment and componentry comes to our facility in Round Rock. It's it seems kind of easy, but it's complex to that cables and racks coming in 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 going to take what we've learned and doing that on site. And we've experienced on site that people who don't know what we know from our challenged, it's complicated and it takes oftentimes longer than a customer wants. So we're going to continue to focus on taking the expertise we have leveraging it here in Round Rock in our facility where we take it on site is to leverage what we know from our experience here. So the data center moves business is exciting, and we're now getting a lot more attention and 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 them. 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 deployments, sustaining business, the procurement business, our configuration and services business and the new data center move business. We don't want to bite off where we can chew. But this is very, very exciting for us. You know, we're we're digging into a little bit broader segment of the marketplace.
So in order for us and where we're heading is that demand for AI. increases, so does our potential growth? And I believe andi I think you know that from all indications, the AI. demands here for a while, and we're looking forward to fulfilling what we can.
Maj Soueidan
And I'll have one more question then I'll have a lot of them have them the time of the hearing come back a bit after some more questions.
Darryll Dewan
Okay.
Maj Soueidan
That's good to hear.
Yes.
Our next question comes from the line of Sean Marconi.
Could you please state your company name and go ahead, please.
Darryll Dewan
Yes, I'm a private investor, but hey, Daryl, nice to meet you. You touched on Asia, but gotten really a really impressive year over year numbers, Daryl, I'm really interested to understand how you came across the opportunity of becoming the CTO PFS. And, you know, I'm candidly, I think you've had a question on I was introduced to peer would reduce our Chairman before the opportunity arise. And they came up. And I was some 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 their former employer and judges, 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 an operator of CY. O & M, you know, I think maybe to answer your question, other tight and static about what we're doing. I say no, 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 if you have to grow capacity. And that's largely on the back of COD merit and the reserve and Senior VP of Operations is 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 in our people and execution and all the things that you want to do is I can visit, is it building a team and all and providing leadership and support. And I think come so far so good and we're never satisfied. I'm one of those guys. It's paranoid up. I'm driving my high beams on all time. We're looking for the full wild animals that are going to drive and jump out in front of your car and you invoice them. So take that same concept of what we do here and keep your hybrid done and looked 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 years to come and do all we can to grow this company and become more relevant in the market. And I think we're poised in a good spot in the integration of what we do, especially in the AI world and complex technologies is our strength and the team here is ready and capable of growing significantly. So that's all I had. That's how it all came about.
Great.
Daryl.
Maj Soueidan
Yes, I found it really intriguing, you know, on linked in your 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 are the Vice President of Global Sales and Field Marketing. And I just find that role to be really interesting that TSS is a small, high growing company. And you know, I just find this intriguing?
Darryll Dewan
Well, Sean?
Yes, thanks. It is. I'm sure many, many levels, although we've never talked before, maybe we'll get a chance to catch up on some stuff. But I'm a very <unk> blessed individual. I'm very grateful about all the things that come across my way. And I'm having an opportunity to lead a great team and to grow a business in this role. And candidly, I walked around you had one of those roles. We say, boy, if I was running the spaces, what I would do and we have and also we are agile, some format. You're back into the queue and I look forward to speaking with you soon, Darryl, and thanks for the call for your comments.
Thank you.
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
I listened March from June investing a barrel while the last question that long ago when home on your maintenance part of business, your service part of the business, which is recurring to somebody, I guess it can you give us some kind of some perspective into what that looks like over the next few years and where you want that to be? And it looks to be a significant part of the business. Are there any new kind of areas you want to focus on to maybe accelerate that revenue? Are there opportunities there to do that?
Darryll Dewan
Yes. That's a good question. My actually for GiG because this is your last question and I can take any more questions from your side to our maintenance business. And this is the result of the sustaining contracts we put together over the last number of years with a handful of customers for the modular Coral MDC. World and some of those customers and some of the technology is getting long in tooth and those customers us ourselves. And our we and partner are in conversations to either refresh the technology or to take it off-line, meaning it will be decommissioned, Pam 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 I think there's some we know the container, but the renewal dates are what the and technology is, how long it is, how long it's been deployed. And we're working with our partner to go do the things that you would do to either upgrade or decommission. And we're not sitting here, I'm fat, dumb and happy going all 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 backfilling with net new customers that can spread out new revenue recurring revenue over the next three to five years. That's our game plan manifesto.
I am actually talking about thanks for your questions and there are no further questions at this time.
I would now like to turn the call over to Daryl, the one for closing remarks.
Yes, thank you, everybody, for joining. Thank you for your support. I do appreciate the calls that I get from many of you. I'm offering suggestions and health and asking questions that come pick and clarify some of the things we talked about here the industry we're in right now where it's like I said earlier, with the intersection of the competing technology change and the growing demand for AI. And we're really excited about what we see coming down the pike in terms of technology and how we can help you on the integration side, 2023 was a great year next athlete. That's great region 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 and operating efficiencies to go meet that challenge to scale and provide new services. And while we're here and where we're heading is 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, doing everything we can to do more. And we're looking for new ways to find routes to market that expand beyond what we've got with our existing customer. So with that, I would say again, thank you. And we're pleased with what happened last year and 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 appreciate my attention.
This concludes today's call. You may now disconnect.
Please wait. The conference will begin shortly.
Yes, no, yes.
