- Total revenue grew 20% YoY to $50.1 million, driven by a 75% increase in systems integration revenue to $16.1 million
- Adjusted EBITDA surged 225% YoY to $4.7 million, with full-year guidance raised to $21-$23 million
- Blended gross margin expanded 610 bps to 17.2% as higher-margin systems integration accounted for 32% of total revenue
- Facilities management revenue declined 30% YoY to $1.1 million due to project timing, though new deployments are expected in Q4
- Company leased 380,000 sq ft of warehouse space in Georgetown, Texas, to support AI infrastructure supply chain needs
*this image is generated using AI for illustrative purposes only.
TSS Inc reported third-quarter fiscal year 2026 revenue of $50.1 million, a 20% increase year-over-year. The growth was primarily driven by a 75% surge in systems integration revenue, which significantly boosted overall profitability.
Adjusted EBITDA for the quarter rose 225% to $4.7 million, reflecting improved operational leverage and a favorable shift in business mix toward higher-margin services. The company also raised its full-year adjusted EBITDA outlook to a range of $21 million to $23 million.
Segment Performance Highlights
The company’s performance was characterized by strong momentum in its higher-margin segments, offsetting declines in facilities management. Systems integration, now a key growth driver, reached record levels due to increased demand for AI and high-performance computing infrastructure.
Systems integration revenue grew 75% to $16.1 million, representing 32% of total revenues compared to 22% in the prior-year period. This segment benefited from higher volumes of both AI-focused direct-liquid-cooled racks and mainstream air-cooled racks. Procurement revenue returned to its historical range of $20 million to $40 million, growing 4% to $32.4 million. Facilities management revenue declined 30% to $1.1 million, attributed to timing differences in project work and maintenance agreements.
What the Numbers Show
The divergence between revenue growth and margin expansion highlights a structural improvement in profitability. While total revenue grew 20%, gross profit increased 86% to $8.6 million. This disproportionate rise indicates that the shift in revenue mix toward systems integration, which carries a 35.4% gross margin compared to 7% for procurement, is the primary driver of earnings power. The blended gross margin expanded by 610 basis points to 17.2%, demonstrating that volume growth in high-margin segments is outweighing the dilutive effect of lower-margin procurement activities.
Strategic Investments and Outlook
TSS Inc announced a seven-year lease for approximately 380,000 square feet of warehouse space in Georgetown, Texas, to support growing customer volumes and complex supply chain requirements. The expansion, less than a mile from its existing integration facility, will be utilized in phases starting October 2026. Additionally, the company invested approximately $14 million of a planned $17 million to $18 million in infrastructure readiness for next-generation platforms, including Nvidia’s Vera Rubin architecture.
Management expects systems integration revenue to continue growing into the fourth quarter and beyond, supported by robust pipeline visibility. The raised full-year adjusted EBITDA guidance reflects confidence in sustained demand for AI infrastructure and the incremental contribution from warehousing services and new modular data center deployments.
How will the phased utilization of the new 380,000 square foot Georgetown facility impact TSS Inc's operating cost structure and EBITDA margins in fiscal 2027?
What specific competitive risks does TSS Inc face if major hyperscalers begin vertically integrating their AI infrastructure assembly, potentially bypassing third-party integrators?
Given the 30% decline in facilities management, is this segment being strategically deprioritized to focus capital on high-margin systems integration, or is it expected to recover with broader economic activity?