TSS, Inc. — Third Quarter 2026 Earnings Summary

Financial Performance

• Total revenue for Q3 2026 was $50.1 million, a 20% increase year-over-year compared to Q3 2025.
• Gross profit for Q3 2026 was $8.6 million, up 86% year-over-year.
• Pre-tax income for Q3 2026 was $1.5 million, an improvement of $2.9 million compared to a loss of $1.4 million in Q3 2025.
• Net income for Q3 2026 was $1.1 million, with diluted EPS of $0.04, compared to a net loss of $1.5 million and diluted EPS of ($0.06) in Q3 2025.
• Adjusted EBITDA for Q3 2026 was $4.7 million, up 225% year-over-year.
• Year-to-date (nine months ended Sept 30, 2026) revenue was $140.5 million, down 24% year-over-year.
• Year-to-date gross profit was $25.4 million, up 21% year-over-year.
• Year-to-date pre-tax income was $6.0 million, up 91% year-over-year.
• Year-to-date net income was $4.9 million with diluted EPS of $0.16, compared to $3.0 million and $0.11 in the prior year period.
• Year-to-date Adjusted EBITDA was $14.5 million, up 35% year-over-year.
• Cash and cash equivalents were $53.965 million as of September 30, 2026, down from $85.510 million as of December 31, 2025.
• Total liabilities were $78.281 million as of September 30, 2026, down from $108.300 million as of December 31, 2025.
• Total stockholders' equity was $82.476 million as of September 30, 2026, up from $76.635 million as of December 31, 2025.
• Deferred revenues were $2.486 million ($2.138 million current, $348,000 non-current) as of September 30, 2026, compared to $13.928 million (all current) as of December 31, 2025.
• Long-term debt was $15.098 million ($4.239 million current, $10.859 million non-current) as of September 30, 2026, down from $18.014 million ($4.010 million current, $14.004 million non-current) as of December 31, 2025.

Guidance and Future Outlook

• The company anticipates further growth in the fourth quarter of 2026.
• The company raised its 2026 Adjusted EBITDA outlook to a range of $21 million to $23 million.
• The company stated it is building on Q3 Systems Integration growth and current pipeline visibility.

Business Segments and Product Lines

• Systems Integration revenue reached a record $16.1 million in Q3 2026, up 75% year-over-year, representing 32% of total revenue.
• Procurement revenue was $32.4 million in Q3 2026, up 4% year-over-year; year-to-date it was $90.6 million, down 41% compared to record levels in 2025.
• Facilities Management revenue was $1.1 million in Q3 2026, down 30% year-over-year; year-to-date it was $5.1 million, up 17%.
• Operating lease income was $0.4 million in Q3 2026.
• The company completed the build-out for next-generation AI technology readiness shortly after the quarter ended.
• The company secured a seven-year lease for approximately 380,000 square feet of additional warehouse space in Georgetown, Texas.

Market and Competitive Landscape

• The company attributes record Systems Integration revenue to continued growth in demand for AI and high-performance computing infrastructure.
• The company is positioning itself as an integrator of AI and high-performance computing infrastructure.
• The company manages and deploys billions of dollars in technology annually for data center technology providers.

Risks and Challenges

• Risks include potential insufficient resources to fund the business, requiring debt or equity issuance.
• Risks include reliance on a limited number of customers and the need to diversify the customer base.
• Risks include operating in a highly competitive industry and supply chain challenges.
• Risks include changes in labor market conditions and the implementation of a new enterprise resource IT system.
• Risks include the ability to effectively utilize expanded warehouse and integration facilities and related lease obligations.
• Risks include rapid technological, structural, and competitive changes affecting the industries served.
• Risks include managing complex projects and the possible cancellation of customer contracts on short notice.

Management Commentary and Tone

• CEO Darryll Dewan stated that record Systems Integration revenue reflects the company's strategic focus on AI and high-performance computing infrastructure.
• Dewan noted the company is experiencing benefits of scaling integration capabilities, executing complex deployments, and expanding its role in the AI market.
• Dewan highlighted the new Georgetown lease as a milestone to support growing customer volumes and address supply chain challenges.
• Management expressed confidence that investments in next-generation platform readiness and development of Procurement and Facilities Management capabilities position the company for profitable growth in 2027 and beyond.

Other Key Points

• The company removed the valuation allowance on the deferred tax asset in the fourth quarter of 2025, impacting the current period's tax provision.
• Depreciation allocated to Cost of Goods Sold was $3.0 million for the nine months ended September 30, 2026, compared to $1.6 million in the prior year period.
• The company will hold a conference call at 5 p.m. Eastern time on November 5, 2026, with a live audio webcast available.
• Adjusted EBITDA is a non-GAAP measure defined as net income before interest, taxes, depreciation, amortization, impairment, stock-based compensation, and losses on asset disposal.
• The company cannot provide a reconciliation of forward-looking Adjusted EBITDA to GAAP net income without unreasonable efforts due to uncontrollable items like stock-based compensation and interest rate fluctuations.