TSS (TSSI) Q3 2026 earnings summary

Executive summary

• Q3 revenue rose 20% YoY to $50.1M; record Systems Integration revenue increased 75% to $16.1M, lifting gross profit 86% to $8.632M.

• Net income was $1.1M versus a $1.5M loss; Adjusted EBITDA rose 225% to $4.745M.

• Nine-month revenue declined 24% to $140.5M as lower Procurement revenue outweighed growth in Systems Integration and Facilities Management; net income rose to $4.9M from $3.0M.

Financial highlights

• Q3 operating income was $1.2M versus an operating loss of $1.8M; diluted EPS was $0.04 versus a loss of $0.06.

• Q3 gross margin expanded 610 bps YoY to 17.2%; gross profit was $8.632M versus $4.635M.

• Nine-month operating income was $5.0M versus $2.3M; diluted EPS was $0.16 versus $0.11, and Adjusted EBITDA rose 35% to $14.503M.

• Nine-month operating cash flow used $10.3M, investing used $14.3M, and financing used $5.2M; cash, cash equivalents and restricted cash totaled $55.8M.

Outlook and guidance

• FY2026 Adjusted EBITDA outlook was raised to $21M-$23M; further Q4 growth is expected from Systems Integration momentum and pipeline visibility.

• Elevated AI rack integration is expected for several quarters, with revenue anticipated to ramp faster than SG&A; incremental revenue from next-generation rack capacity is expected from Q4 2026.

• Q4 Systems Integration revenue is expected to exceed Q3, supported by higher AI and mainstream rack volumes and warehousing services.

• Q4 effective tax rate is expected at ~25.5%, implying a FY2026 rate of ~22%, subject to large discrete items.