TSS (TSSI) investor relations material

Executive summary

• Q1 2026 revenue was $55.3 million, a 44% decrease year-over-year due to lower procurement volumes, but offset by an 88% surge in systems integration driven by robust AI demand and amended customer agreements.

• Net income was $2.3 million, or $0.08 per diluted share, down from $3.0 million, or $0.12 per share, in Q1 2025, reflecting higher SG&A expenses, increased tax expense, and more shares outstanding.

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

• Adjusted EBITDA was $5.3 million, up 1% year-over-year, benefiting from a favorable revenue mix.

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

Financial highlights

• Procurement revenue fell 56% year-over-year to $40.0 million, while systems integration rose 88% to $14.1 million and facilities management was $1.3 million, down 1% year-over-year.

• Operating income was $2.3 million, down from $2.6 million in Q1 2025.

• Gross profit was $8.8 million, down 4% year-over-year, with depreciation allocated to COGS.

• Cash and cash equivalents at quarter-end were $66.0 million, with $1.8 million held as restricted cash.

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

Outlook and guidance

• Full-year 2026 Adjusted EBITDA guidance is $20–$22 million, expected at the high end of the range.

• Multiyear agreements provide revenue visibility and downside protection.

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

• Expect continued growth in systems integration, especially from AI rack integration and new warehousing/logistics services starting Q2 2026.

• Anticipate $17 million in capital expenditures to enhance integration facilities, with cost recovery through increased integration fees.