TSS spent two years converting a lumpy procurement franchise into an AI rack factory for one domestic OEM, and the second-quarter print shows that mix shift working in the P&L even as the top line contracted. Systems integration contributed 39% of second-quarter revenue. That share was 22% a year earlier. Gross profit still rose because the company leaned into higher-margin integration and facilities work while the low-margin pass-through receded. The investment case is no longer about whether AI racks can fill a new Texas plant. It is about whether that higher-quality mix survives once procurement volume returns and whether one customer's calendar still writes the entire story.
Gross profit expanded even as consolidated revenue fell, which is the economic outcome management has been advertising since the Georgetown plant opened. The blended margin moved to 23% from 16%. Procurement remains the swing factor that still dominates the reported top line whenever the OEM places or withholds large hardware orders. Almost all of that activity, and all of the receivables, still sit with a single United States IT manufacturer. Remaining performance obligations are concentrated in that same relationship. Operating cash went out the door as deferred revenue and payables rolled off, so the cleaner earnings mix has not yet produced cleaner cash conversion.
Adjusted EBITDA rose to $4 million in the quarter. Management held the full-year outlook toward the upper end of a $20 million to $22 million range. The next several months resolve whether Georgetown utilization and the Vera Rubin power-and-cooling buildout convert that mix into a stronger second half, or whether one customer's order calendar keeps the franchise looking like a volatile procurement vehicle wearing an AI label.