TSS (TSSI) Q1 2026 earnings summary

Executive summary

• Q1 2026 revenue was $55.3M, down 44% year-over-year due to a 56% drop in procurement, but systems integration revenue surged 88% to $14.1M, driven by AI infrastructure demand and amended customer agreements.

• Net income was $2.3M, or $0.08 per diluted share, down from $3.0M or $0.12 YoY, reflecting higher SG&A and tax expenses.

• Gross margin improved to 15.9% from 9.3% YoY, with notable expansion in systems integration and facilities management.

• Adjusted EBITDA grew 1% to $5.3M, benefiting from a favorable sales mix and higher-margin business.

• Leadership team expanded with new Chief Strategy Officer and Chief Technology Officer to support scaling and growth initiatives.

Financial highlights

• Procurement revenue: $40M, down 56% YoY; Systems Integration: $14.1M, up 88% YoY; Facilities Management: $1.3M, down 1% YoY.

• Gross margin: 15.9% (up from 9.3% YoY), driven by higher Systems Integration mix.

• Operating income: $2.3M, down from $2.6M YoY.

• Cash and cash equivalents at quarter-end: $66.0M–$67.8M, with $1.8M held as restricted cash.

• Deferred revenues decreased by $11.5M from December 31, 2025, due to project completions.

Outlook and guidance

• Full-year Adjusted EBITDA guidance: $20M–$22M, expected at the high end.

• Multiyear agreement provides revenue visibility and downside protection.

• Effective tax rate expected at 22.7% for the full year.

• $17M CapEx investment planned to enhance integration facilities, with cost recovery expected through increased fees.

• Strategies in place to expand services and address a wider market in 2026.