TSS, Inc. Q1 FY2026 earnings call

• 2026 started strong with first quarter results reinforcing growth plan and momentum in systems integration business.
• Demand for AI infrastructure is at an all-time high.
• Reconsidering markets served with three primary offerings: systems integration, facilities management (including modular data center services), and procurement.
• Systems integration seeing rapid growth in higher margin offerings.
• Georgetown, Texas facility expanded capacity, with more rack integrations completed in 2026 than all of last year.
• Round Rock facility dedicated to warehousing AI rack material for largest OEM customer.
• Strengthened leadership team with Matt Wallace as Chief Strategy Officer and David Hull as Chief Technology Officer.

In the first quarter, total revenue was $55.3 million. Systems integration revenue increased 88% year-over-year to $14.1 million, representing 25% of total revenue. Procurement revenue was $40 million, down 56% year-over-year. Facilities management revenue was $1.3 million, in line with the prior year. Systems integration gross margins increased from 22.1% in Q1 2025 to 37.5% in Q1 2026. Procurement gross margin was 6.7%. Facilities management gross margin was 64.7%.

• Outlook for adjusted EBITDA in the range of 20 to 22 million for the full year, supported by multi-year agreement, revenue visibility, downside protection, expanding capacity/capabilities, and strengthened leadership team.
• Expect full year results to be at the high end of the previously set range.
• Systems integration continues to be primary driver of growth and margin expansion.

• Refer to company's periodic filings with the SEC for risks and uncertainties affecting future performance.

Q: Matt Colitri from Needham & Company asked about $17 million CapEx investment, timeline, capacity in Georgetown.

A: Not a new facility, related to Vera Rubin technology, anticipated completed in third quarter, excess capacity in Georgetown with potential to scale by reducing validation test time.

Q: Alex Furman from Lucid Capital Markets asked about integration demand exceeding outlook, component availability.

A: Guidance is conservative to avoid disappointment, key customer manages component supply chain.

Q: Mac First from Singular Research asked about federal tax increase.

A: Full valuation allowance on deferred tax asset removed in Q4 2025, now recording federal income tax in income statement.