TSS, Inc.

Total revenue was $35.1 million, down from $44 million in the second quarter of 2025. Systems Integration revenue increased 46% to $13.9 million, Facilities Management revenue increased 84% to $2.7 million, and Procurement revenue decreased 45% to $18.2 million from $33 million a year ago. Gross profit rose 11% to $8 million and gross margin improved 640 basis points to 22.8% from 16.4%. Net income was $1.4 million, or $0.05 per diluted share, versus $1.5 million, or $0.06 per diluted share, last year. Adjusted EBITDA increased 12% to $4.5 million. The company ended the quarter with $67.7 million in cash and cash equivalents and $16.1 million of total debt. For Q3, management expects Procurement revenue to return to its historical $30 million to $40 million range, and it reaffirmed full-year adjusted EBITDA toward the upper end of the $20 million to $22 million range.

Darryll Dewan framed the quarter as evidence that TSS is intentionally shifting toward higher-margin, more recurring business tied to AI and high-performance computing infrastructure. He said demand for Systems Integration remains strong, customer engagement is high, and the company expects the second half of 2026 to be stronger than the first. His tone was optimistic and operationally focused, emphasizing investments in power, cooling, and new platform readiness, including the roughly $17 million Vera Rubin-related buildout.

Daniel Chism focused on the mix shift and the financial impact of it, noting that Systems Integration reached 39% of revenue and that gross profit and adjusted EBITDA both grew despite lower total revenue. He highlighted gross profit of $8 million, gross margin of 22.8%, operating income of $1.6 million, and adjusted EBITDA of $4.5 million, while explaining that higher depreciation from the Georgetown facility and higher SG&A partly offset the margin benefits. He also pointed to a strong balance sheet with $67.7 million in cash, $16.1 million of debt, and leverage below 1x, which he said gives the company flexibility to keep investing.

Analysts focused on whether Systems Integration could accelerate beyond the recent roughly $14 million per quarter level and what was limiting growth. Management said the Vera Rubin-related $17 million investment is mainly for added power and cooling capacity, with benefits starting in Q3 and more in Q4, while also noting that supply chain constraints can be a gating factor. They also said AI rack demand was up quarter over quarter, mainstream revenue dipped in Q2, and network-rack demand is improving for Q3 and Q4; on the customer side, they said they could not discuss specific Dell volumes but described the outlook as very strong and said the company aims to exceed weekly minimum commitments when possible.