TSS, Inc.
For the period ended Mar 31, 2026. Filed May 7, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 7, 2026
TSSI$6.70+12.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-13.
0001654954-25-012989
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-07.
0001654954-26-004534
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 85 previous paragraphs and 74 current paragraphs.
27 unchanged; 26 reworded; 21 added; 24 removed; 8 previous and 0 current paragraphs rearranged.
Tables are not compared: 8 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (21)
Current report
In April 2026, we signed an agreement with our largest customer to use our idle Round Rock, Texas facility to provide warehousing, fulfillment and transportation services, primarily for inventory parts that are integral to the AI rack integration services we provide to that same customer. The agreement calls for us to provide such services, including transportation of parts from that facility to our Georgetown, Texas integration facility as needed, beginning May 1, 2026. The term of the agreement runs through the expiration of our lease at that facility on March 31, 2029, and includes the potential of extensions beyond that date if both parties agree. The agreement calls for both fixed and variable revenues which we expect to contribute to the Company’s overall income beginning in the second quarter of 2026.
Current report
Non-GAAP Revenue, Gross Profit and Gross Margins
Current report
In prior years, our depreciation related to equipment and other fixed assets used in revenue-generating activities was minimal. Following the significant capital investments recently made in our new Georgetown, Texas integration facility, we began in 2025 reporting as a component of cost of revenues the depreciation related to revenue-generating activities. That depreciation classified as cost of revenue amounted to $0.9 million in the three-month period ended March 31, 2026, with zero reported in the prior year quarter.
Current report
Bank Factoring Fees
Current report
Bank factoring fees decreased from $1.5 million in the prior year quarter to $0.7 million in the current quarter. This is due to the overall decline in the gross value of deals as the basis on which we are charged factoring fees is the gross billings factored, which includes the amount of procurement revenues “netted” out for GAAP-basis procurement revenues, as presented in the table in theNon-GAAP Revenue, Gross Profit and Gross Margins section above. Also contributing to the decrease in bank factoring fees is a slight decrease in prevailing short-term interest rates, which have a direct impact on the fees we pay.
Current report
We recognized an operating income of $2.3 million in the current quarter compared to operating income of $2.6 million in the prior year quarter. The majority of this decline is attributable to increased SG&A expenses as described above as the overall decline in total revenues was offset by our improved operational efficiency and gross margins. We expect revenues will continue to ramp at a faster pace than SG&A costs, which will lead to overall expected increases in operating income for the remainder of the year.
Current report
Interest Expense
Current report
In the current quarter, we recorded interest expense of $0.3 million compared to no interest expense in the prior year quarter. This increase was due to our long-term debt converting into an interest-bearing note in the third quarter of the prior year. As such, all interest charges in the prior year quarter were capitalized as part of the build-out costs of our new Georgetown facility.
Current report
Interest Income
Current report
Income tax expense
Current report
Due to a history of consolidated net operating losses, we had historically recorded a full valuation allowance against our deferred tax asset (“DTA”). The minimal income tax expense recorded in periods prior to the fourth quarter of 2025 represented primarily Texas state franchise tax, with any federal taxes offset by a partial utilization of the DTA and related release of the offsetting valuation allowance. In light of our improved financial performance and expectation of continued generation of taxable income in future periods, we reversed in the quarter ended December 31, 2025 the majority of the valuation allowance we had previously recorded against our DTA.
Current report
The income tax expense in the current quarter was $0.4 million, or 14.7% of pre-tax income, compared to $49,000, or 1.6% of pre-tax income in the prior year quarter. The current quarter effective tax rate is comprised of federal and state income taxes of 28.2% of pre-tax income, net of a large discrete tax benefit tied to excess tax benefits on employee stock compensation in the first quarter of 2026. We expect the effective tax rate in the second through fourth quarters of 2026 to be approximately 26.0%, yielding a full-year effective tax rate of approximately 22.7%. This could be affected by large discrete items in future periods.
Current report
After the $0.4 million charge for income taxes, our net income was $2.3 million, or $0.08 per diluted share in the current quarter, compared to net income of $3.0 million, or $0.12 per diluted share in the prior year quarter. This reflects the net effect of the items discussed above, as well as a greater number of shares outstanding following our August 2025 sale of stock.
Current report
Our primary sources of liquidity on March 31, 2026 were our cash and cash equivalents on hand and projected cash flows from operating activities. The $17.7 million net decrease in cash and cash equivalents was primarily attributable to a net use of $14.9 million in operating activities, reflecting largely the $2.5 million net income, net of $20.5 million cash used to reduce accounts payable and accrued expenses. Financing activities used $1.0 million for scheduled principal payments on our debt and $1.4 million to repurchase stock upon employees’ vesting in restricted stock. Investing activities were comprised of a $0.5 million use of cash for capital expenditures. In the prior year quarter, we invested $14.9 million in the continued buildout of our headquarters and integration facility in Georgetown, Texas. As of March 31, 2026, the Company was in compliance with all applicable covenants under its debt agreements. To secure the additional electrical capacity required to support increased demand, the utility provider required us to provide a $1.8 million bank letter of credit, which was issued during the current quarter and collateralized by a corresponding amount of restricted cash. In December 2025, we amended the long-term AI rack integration agreement with our OEM customer. This agreement calls for certain minimum monthly payments to us, which we believe will be sufficient to cover the majority of the costs for the facility, including increased power consumption, and debt service payments tied to the build-out of the factory for which we are responsible.
Current report
Cash used in operating activities was $14.9 million in the current quarter, compared to $20.6 million of cash provided by operating activities in the prior year quarter. With net income only $0.7 million different between the two periods, the primary difference was due to changes in operating assets and liabilities in each period. Operating cash flow in the current quarter was primarily due to the $2.3 million of net income, more than offset by a $20.1 million net use of cash for the change in operating assets and liabilities, largely to pay down accounts payable and accrued expenses as we paid costs related to projects that were in process at the beginning of the current quarter. In the prior year quarter, the $20.6 million cash provided by operating activities was comprised primarily of $3.0 million of net income combined with a $16.0 million net inflow of cash from the change in operating assets and liabilities, primarily an increase in accounts payable and accrued expenses during that period stemming from a large procurement project.
Current report
Despite the improvements in our earnings, financial position and liquidity over the last two years, there can be no assurance as to the Company’s ability to continue to operate profitably or to scale its business operations on terms upon which additional financing might be available.
Current report
Net cash used in financing activities were $2.3 million compared to a $1.6 million used in the prior year quarter. This increase in cash outflows is due to repayments made on our current debt outstanding of $1.0 million in the current quarter, which was not required in the comparative period. We used $1.4 million in the current quarter to repurchase stock upon employees’ net settlement on the vesting of restricted stock and option exercises, compared to $1.7 million used for this same purpose in the prior year quarter.
Current report
During the three months ended March 31, 2026, the Company entered into a letter of credit arrangement with a financial institution in support of utility service requirements associated with its operations. The letter of credit was required by the Company’s utility provider to ensure adequate electrical capacity and reliability.
Current report
The letter of credit is fully collateralized by an equivalent amount of restricted cash, which is reflected on the Company’s condensed consolidated balance sheets as of March 31, 2026. Accordingly, the Company’s maximum potential exposure under this arrangement is limited to the amount of restricted cash posted, and the arrangement does not create an obligation for additional future funding beyond amounts already recognized in the financial statements.
Current report
The Company does not expect the letter of credit to be drawn under normal circumstances and does not believe this arrangement is reasonably likely to have a material impact on its liquidity, capital resources, or financial condition. The primary effect of the arrangement is the classification of a portion of cash as restricted, which is discussed in the notes to the condensed consolidated financial statements.
Current report
Other than the letter of credit described above, the Company has not entered into any material off‑balance sheet arrangements during the three months ended March 31, 2026.
Removed paragraphs (24)
Previous report
To meet our customers’ evolving requirements for more powerful racks and greater cooling capabilities, we invested more in our facility than initially estimated and have increased the electrical power now available in our facility, which substantially increased minimum monthly charges from the local utility provider. In the current quarter, we were charged a flat fee of approximately $231,000 monthly, plus variable charges for actual power consumption. As we have recently further increased the available power to 15 megawatts, that flat monthly fee is scheduled to increase to $289,000. We made these additional capital and power investments during the current period with the expectation that they will help us generate greater revenues by increasing volume in future periods.
Previous report
We recognized an operating loss of $0.9 million in the current quarter compared to operating income of $3.8 million in the prior year quarter. The majority of this loss is attributable to the incremental operations related depreciation and fixed electrical power costs in advance of the expected incremental revenues, as well as the timing of revenue projects and increased SG&A expenses as described above. As revenues continue to ramp at the new factory and SG&A costs moderate, we anticipate operating income in the final three months of 2025 will exceed the comparable period of 2024. If we are successful in subleasing our prior Round Rock, Texas facility, that will further enhance our operating income in future periods.
Previous report
Interest Expense and Interest Income
Previous report
In the current quarter, we recorded interest expense of $1.0 million compared to $1.3 million in the prior year quarter. The decrease was due to the decrease in the gross value of procurement transactions and other revenues from our primary customer in the current quarter compared to the prior year quarter. The factoring charge we incur is based on the total gross value of transactions with our largest customer, including the gross value of procurement deals, whether we account for such deals as gross or net deals. During the current quarter we exercised the $5.0 million accordion feature on our existing term loan, increasing the outstanding debt on which interest accrues by that amount.
Previous report
Net Income (Loss)
Previous report
After a $0.1 million charge for income taxes, our net loss was $1.5 million, or $0.06 per diluted share in the current quarter, compared net income of $2.6 million, or $0.10 per diluted share in the prior year quarter. We anticipate returning to profitability in the fourth quarter of 2025 as we begin to realize incremental revenues stemming from our recent investments in our facility and access to additional electrical power.
Previous report
Nine Months Ended September 30, 2025
Previous report
Unless otherwise noted, all comparisons in this section are between the nine-month period ended September 30, 2025 (the “current year-to-date period” or “current period”) and the nine-month period ended September 30, 2024 (the “prior year-to-date period,” “prior year period” or “this period last year”).
Previous report
Revenues
Previous report
Total revenues in the current year-to-date period increased 88% to $184.8 million, driven primarily by significant growth in our two largest segments - procurement and systems integration. Procurement revenues increased by $77.3 million (100%) and systems integration revenues increased by $11.4 million (78%). These increases were somewhat offset by a $2.0 million (32%) decrease in revenue from the facilities management segment, primarily due to the timing of discrete projects in the facilities management business and a smaller decrease in ongoing maintenance revenues.
Previous report
The increase in procurement revenues was driven primarily by an increase in purchases from the federal government and certain large purchases from private companies, combined with a mix shift with a greater proportion of the revenues coming from gross deals, as opposed to net deals. As much of our procurement business is ultimately related to federal government buying, we believe this can contribute to some variability of these revenues from quarter to quarter. We cannot accurately predict when government-related or other large procurement activity will occur.
Previous report
The gross value of all procurement transactions increased 82% from the prior year-to-date period, from $120.6 million to $219.8 million in the current year-to-date period. The majority of the current period’s procurement transactions were gross deals, whereas a greater portion of the prior year period’s transactions were net deals, in which we record only our agent fee as revenues. As a result, the recorded revenue increased from $77.0 million in the prior year period to $154.3 million in the current year period. Gross profit recognized on all procurement transactions increased 127% from $5.4 million to $12.1 million before interest charges.
Previous report
Our SG&A expenses increased by $5.9 million (65%) in the current year-to-date period. Of the total increase, $2.3 million is from non-cash equity-based compensation, with the remainder primarily from higher headcount and related compensation costs to support the growing scale of the organization combined with higher accruals for incentive compensation tied directly to the improvements in sales and earnings. We had further increased expenses related to non-capitalizable costs associated with the continued buildout of the Georgetown, Texas facility and increased utility expenses. Included in the current period are incremental costs for the 2025 annual audit and costs associated with our preparation of SOX 404(b) readiness.
Previous report
Depreciation and amortization not allocated to cost of revenues increased from $0.4 million in the prior year period to $0.8 million in the current year-to-date period in line with the overall growth in the business.
Previous report
Operating Income
Previous report
Operating income was $5.4 million in the current year-to-date period compared to $5.7 million in the prior year-to-date period. This slight decline is due to the increased SG&A expenses (described above), mostly offset by the increase in gross profit.
Previous report
Interest Expense and Interest Income
Previous report
In the current year-to-date period, we recorded interest expense of $3.3 million compared to $2.0 million in the prior year-to-date period. The increase was due to the increase in the gross value of procurement transactions and other revenues from our primary customer in the current period compared to the prior year-to-date period, combined with the interest on our outstanding construction loan, whereas we had no outstanding debt in the prior year period. The factoring charge we incur is based on the total gross value of transactions with our largest customer, including the gross value of procurement deals whether we account for such deals as gross or net deals.
Previous report
After a $0.1 million increase in income taxes, our current year-to-date net income was $3.0 million, or $0.11 per diluted share, compared to a net income of $4.1 million, or $0.16 per diluted share in the prior year-to-date period.
Previous report
Our primary sources of liquidity at September 30, 2025 are our cash and cash equivalents on hand, vendor trade-credit, projected cash flows from operating activities and approximately $6.8 million of tenant improvement funds we expect to collect from our landlord in the fourth quarter of 2025 as all prerequisite conditions have been met and approved by the landlord. In the past two years, we have also received certain reimbursements from our largest customer to help us expand our capacity to serve them and could receive similar reimbursements in future periods if they ask us to expand to even greater capacity.
Previous report
As discussed above, we signed a multi-year agreement in 2024 to integrate an expected minimum weekly volume of AI-enabled computer racks for several years. Due to the increasing power and cooling demands expected in upcoming generations of those racks, we leased a new facility in Georgetown, Texas which can provide sufficient power for the foreseeable future and began operations in that facility in May 2025. The new facility is almost 213,000 square feet compared to the 105,000 square foot leased facility in which we previously operated. Through September 30, 2025, we have invested approximately $35.1 million in that facility, funded with a $20 million construction loan and cash on hand. In the current year-to-date period, we borrowed the remaining $11.3 million available on the construction loan beyond the $8.7 million that was outstanding at the beginning of the year. On July 5, 2025, the outstanding $20.0 million balance converted to a fully amortizing term loan with a maturity date of January 5, 2030. The monthly payment will vary somewhat as the loan bears a floating interest rate, with monthly principal and interest payments of approximately $437,000 beginning in August 2025. In September 2025 we exercised the accordion feature of that loan, borrowing an additional $5.0 million, bringing the total gross value borrowed to $25.0 million, better aligning our long-term facility with long-term financing. The accordion feature has all the same terms and conditions as the existing term loan, and the two loans are coterminous. We anticipate receiving funds from our customer sufficient to offset the debt service for the full term of this debt and the majority of the costs to operate the new facility as most of that facility will be used in that activity. If we are unable to sublease our prior 105,000 square foot facility, we may incur the costs of two facilities for a period of time.
Previous report
Cash provided by operating activities was $19.1 million in the current year-to-date period, compared to $36.9 million in the prior year-to-date period. This change in cash provided by operating activities was primarily attributable to the significant increase in accounts payable in the prior period of $37.6 compared to the decrease in accounts payable in the current year-to-date period of $4.8 million offset by an $8.2 million higher increase in deferred revenues in the current period and an $8.1 million greater increase in the right-of-use asset period-over-period. In the current year-to-date period, we also decreased our held inventory by $6.4 million, whereas we invested $2.6 million in inventory growth in the prior year-to-date period. Changes in our receivables, inventory, and accounts payable during the current period are attributable primarily to the timing of procurement transactions, with some of the accounts payable decrease related to construction costs recognized in the prior period coming due. We have been able to structure our procurement activities in such a way as to minimize their overall impact on our liquidity by using trade creditors as the primary means to finance these activities. However, due to timing it is possible to see fluctuations on a quarterly or annual basis for procurement contracts in progress at the end of a particular reporting period. We believe that we will have adequate trade credit available to us to continue financing our procurement activities as we grow this business during 2025 and beyond.
Previous report
Net cash inflows from financing activities were $66.2 million compared to a $0.6 million outflow in the prior year period. In the current period, loan proceeds to fund our construction provided $15.8 million of cash, offset by $4.9 million used to repurchase treasury stock from employees, and debt principal repayments of $0.6 million. In August 2025, we also sold 3,450,000 shares of our common stock, netting cash inflows of $55.3 million after deducting transaction costs of $0.4 million, significantly increasing funds available to invest in future expansion and growth opportunities.
Previous report
As of September 30, 2025 and December 31, 2024, we had no off-balance sheet arrangements.
Reworded paragraphs (26)
Previous wording
TSS, Inc. ("TSS”, the "Company”, "we”, "us” or "our”) provides a comprehensive suite of services for the integration of complex AI technologies, planning, design, deployment, maintenance and refresh of end-user and enterprise systems, including the mission-critical facilities in which they are housed. We provide a single source solution for enabling technologies in data centers, operations centers, network facilities, server rooms, security operations centers, communications facilities and the infrastructure systems that are critical to their function. Our services consist of technology consulting, design and engineering, project management, systems integration, systems installation, facilities management and IT procurement services. Beginning in 2024, our systems integration services have been enhanced to include integration of Artificial Intelligence (AI) enabled data center server racks. TSS was incorporated in Delaware in December 2004.
Current wording
We provide a comprehensive suite of services for the integration of complex Artificial Intelligence (AI) technologies, planning, design, deployment, maintenance and refresh of end-user and enterprise systems, including the mission-critical facilities in which they are housed. We provide a single source solution for enabling technologies in data centers, operations centers, network facilities, server rooms, security operations centers, communications facilities and the infrastructure systems that are critical to their function. Our services consist of technology consulting, design and engineering, project management, systems integration, systems installation, facilities management and IT procurement services. Beginning in 2024, our systems integration services have been enhanced to include integration of AI enabled data center server racks. TSS was incorporated in Delaware in December 2004.
Previous wording
We deliver complex solutions to a broad range of enterprise customers who utilize our services to deploy solutions in their own data centers, in modular data centers (MDCs), in colocation facilities or at the edge of the network. This market remains highly competitive and is subject to constant evolution as new computing technologies or applications drive continued demand for more advanced computing and storage capacity. In recent years, these enterprises have shifted their investment priorities towards AI and accelerated computing infrastructure initiatives. Enterprise and data center operators are facing immense pressure to rapidly integrate and deploy the latest generative and inferencing AI equipment and GPUs (Graphics Processing Units) and will need to adapt these next-generation servers and custom rack-scale architectures to quickly and successfully compete in the market. Ensuring adequate power and thermal management systems are implemented to support these new technologies while meeting increasingly stringent sustainability requirements is critical to a successful deployment. TSS exists to assist these operators in achieving these benefits over the life cycle of their IT investments.
Current wording
We deliver complex solutions to a broad range of enterprise customers who utilize our services to deploy solutions in their own data centers, in modular data centers (MDCs), in colocation facilities or at the edge of the network. This market remains highly competitive and is subject to constant evolution as new computing technologies or applications drive continued demand for more advanced computing and storage capacity. In recent years, these enterprises have shifted their investment priorities towards AI and accelerated computing infrastructure initiatives. Enterprise and data center operators are facing immense pressure to rapidly integrate and deploy the latest generative, inferencing and agentic AI equipment and GPUs (Graphics Processing Units) and will need to adapt these next-generation servers and custom rack-scale architectures to quickly and successfully compete in the market. Ensuring adequate power and thermal management systems are implemented to support these new technologies while meeting increasingly stringent sustainability requirements is critical to a successful deployment. TSS exists to assist these operators in achieving these benefits over the life cycle of their IT investments.
Previous wording
Most of the components used in our systems integration business are consigned to us by our largest OEM customer or its end-user customers. Thus, our revenues reflect only the services we provide, and the consigned components are not reflected in our statement of operations or on our balance sheet. We also offer procurement services whereby we procure third-party hardware, software and services on their behalf. Our configuration and integration services businesses often integrate these components to deliver a complete system to our customers.
Current wording
Most of the components used in our systems integration business are consigned to us by our largest OEM customer or its end-user customers. Thus, most of our systems integration revenues reflect only the services we provide, and the consigned components are not reflected in our statement of operations or on our balance sheet. We also offer procurement services whereby we procure third-party hardware, software and services on their behalf. Our configuration and integration services businesses often integrate these components to deliver a complete system to our customers.
Previous wording
In October 2024, we signed a multi-year agreement with our largest customer to provide systems integration services for AI-enabled computer racks at an expected minimum monthly volume. To support this level of production, and to be able to provide increased volumes over our prior facility, we moved our headquarters and production facility to a new location in May 2025. Through September 30, 2025, we have invested approximately $35.1 million in improvements to that leased facility, primarily to significantly increase the available electrical power and related cooling capabilities for both air-cooled and direct liquid cooled computer racks. We are financially responsible for all fixed and variable costs related to this activity, including debt service requirements related to the capital expenditures, direct and indirect labor related to this activity, and all facility and related costs. While there may be some variability in the number of racks built in any given period, we believe the structure of the agreement with our customer provides reasonable assurance to us that absent our material breach of the agreement or our termination of the agreement, the revenues we earn from this arrangement will be sufficient to cover the aforementioned costs we expect to incur in fulfilling our obligations. Our customer could terminate the agreement if we were to materially breach the agreement, leaving us with the financial obligations of the lease and debt service regardless of whether we had revenues sufficient to cover those costs. Likewise, if we were to terminate the agreement other than due to the other party’s material breach of the agreement, the other party would be relieved of any further obligation. Funding sources for the build-out costs at the new facility include approximately $6.8 million to be contributed by our landlord, $25 million from a bank term loan, and cash on hand for the remainder of the costs. We expect to receive the $6.8 million from our landlord in the fourth quarter of 2025 and borrowed the final $5 million under the term loan in August 2025. Those funds reimbursed us for capital expenditures we had previously funded using cash on hand.
Current wording
In October 2024, we signed a long-term agreement with our largest customer to provide systems integration services for AI-enabled computer racks at an expected minimum monthly volume. To support this level of production, and to be able to provide increased volumes over our prior facility, we moved our headquarters and production facility to a new location in May 2025. Through March 31, 2026, we have invested approximately $40 million in improvements to that leased facility, primarily to significantly increase the available electrical power and related cooling capabilities for both air-cooled and direct liquid cooled computer racks. We are financially responsible for all fixed and variable costs related to this activity, including debt service requirements related to the capital expenditures, direct and indirect labor related to this activity, and all facility and related costs. In December 2025, we signed an amendment to the long-term agreement whereby both parties agreed to extend the term of the agreement for an additional two years beyond its original multi-year term, with automatic one-year renewals if not earlier terminated, and to provide pricing updates to account for increased power consumption and capital expenditures beyond the original expectations. While there may be some variability in the number of racks built in any given period, we believe the structure of the agreement with our customer provides reasonable assurance to us that absent our material breach of the agreement or our termination of the agreement, the revenues we earn from this arrangement will be sufficient to cover the aforementioned costs we expect to incur in fulfilling our obligations. Our customer could terminate the agreement if we were to materially breach the agreement, leaving us with the financial obligations of the lease and debt service regardless of whether we had revenues sufficient to cover those costs. Likewise, if we were to terminate the agreement other than due to the other party’s material breach of the agreement, the other party would be relieved of any further obligation. Funding sources for the build-out costs at the new facility include approximately $6.8 million contributed by our landlord, $25 million from two related bank term loans, and cash on hand. In December 2025, we repaid the second $5 million bank loan, and our current loan balance reflects the remaining balance on only the original $20 million loan.
Previous wording
The volume of our strategic procurement services grew substantially in the nine-month periods ended September 30, 2025 compared to the nine-month periods ended September 30, 2024. Customers value our ability to source disparate hardware, software and services and provide a single-source solution for their IT needs. In some cases, we merely act as agents in these transactions, and so the reported revenues will reflect only our fees earned in the transaction (“net deals”). If the procurement activities include integration services or other value-add work beyond just the procurement activity, the transaction is recorded at its gross value (“gross deals”), and revenue and costs are allocated to the procurement and systems integration segments based on the value created in each and the effort involved to fulfill the contracts.
Current wording
Customers continue to value our ability to procure disparate hardware, software and services and provide a single-source solution for their IT needs. In some cases, we merely act as agents in these transactions, and so the reported procurement services revenues will reflect only our fees earned in the transaction (“net deals”). If the procurement activities include integration services or other value-add work beyond just the procurement activity, the transaction is recorded at its gross value (“gross deals”), and revenue and costs are allocated to the procurement and systems integration segments based on the value created in each and the effort involved to fulfill the contracts.
Previous wording
Revenues consist of fees earned from planning, design and project management for mission-critical facilities and information infrastructures, as well as fees earned from providing maintenance services for these facilities. We also earn revenues from providing system configuration and integration services, and procurement services, to IT equipment vendors. We began integration services on AI racks in June 2024 and have continued with that activity throughout the current quarter. Currently we derive substantially all our revenue from the U.S. market.
Current wording
Revenues consist of fees earned from the planning, design and project management for mission-critical facilities and information infrastructures, as well as fees earned from providing maintenance services for these facilities. We also earn revenues from providing system configuration and integration services, as well as procurement services, to IT equipment vendors. We began integration services on AI racks in June 2024 and have continued that activity to date. Currently we derive substantially all our revenue from the U.S. market.
Previous wording
We contract with our customers with various contract types: fixed-price service and maintenance contracts, time and material contracts, cost-plus-fee, guaranteed maximum price and fixed-price contracts. Cost-plus-fee and guaranteed maximum price contracts are typically lower risk arrangements and thus yield lower profit margins than time-and-materials and fixed-price arrangements, which generally generate higher profit margins, relative to their higher risk. Certain of our service and maintenance contracts provide comprehensive coverage of all the customers’ equipment (excluding IT equipment) at a facility during the contract period. Where customer requirements are clear, we prefer to enter comprehensive fixed-price arrangements or time-and-materials arrangements rather than cost-plus-fee and guaranteed maximum price contracts.
Current wording
We contract with our customers with various contract types: service and maintenance, time and material, and guaranteed maximum price contracts, all of which are fixed-price exclusive of time and material contracts. Guaranteed maximum price contracts are typically lower risk arrangements and thus yield lower profit margins than time-and-materials arrangements which generally generate higher profit margins, relative to their higher risk. Certain of our service and maintenance contracts provide comprehensive coverage of all the customers’ equipment (excluding IT equipment) at a facility during the contract period.
Previous wording
Most of our revenue is generated based on services provided either by our employees or subcontractors. To a lesser degree, the revenue we earn includes reimbursable travel and other costs to support the project. Since we earn higher profits from the labor services that our employees provide compared with the use of subcontracted labor and other reimbursable costs, we seek to optimize our labor content on the contracts we are awarded to maximize our profitability. Occasionally, our revenues will reflect certain reimbursements received from customers for expanding our capacity, typically through capital expenditure or for adding headcount to support specific customer requests. In 2024, we invested approximately $1.7 million in our Round Rock facility to expand our capacity to integrate generative AI-enabled server racks, including both air cooled and direct-liquid cooled systems. One of our customers reimbursed us for the majority of those investments and we are amortizing that reimbursement into systems integration revenues over the expected useful life of three years.
Current wording
Most of our revenue is generated based on services provided either by our employees or subcontractors. To a lesser degree, the revenue we earn includes reimbursable travel and other costs to support the project. Since we earn higher profits from the labor services that our employees provide compared with use of subcontracted labor and other reimbursable costs, we seek to optimize our labor content on the contracts we are awarded to maximize our profitability. Occasionally, our revenues will reflect certain reimbursements received from customers for expanding our capacity, typically through capital expenditures, or for adding headcount to support specific customer requests. In 2024, we invested approximately $1.7 million in our Round Rock facility to expand our capacity to integrate generative AI-enabled server racks, including both air-cooled and direct-liquid cooled systems. One of our customers reimbursed us for the majority of those investments. Prior to December 2025, we were amortizing that reimbursement into service integration revenues over the expected useful life of three years; the same period over which we were depreciating the related fixed assets. As the production of AI racks has now fully moved to our Georgetown facility and we no longer expect to utilize the assets installed in our Round Rock facility to support AI rack integration, we accelerated the revenue recognition and depreciation of those assets in the fourth quarter of 2025.
Previous wording
Our maintenance and integration services traditionally earn higher margins and maintenance contracts typically renew annually, providing consistency and predictability of revenues. We focus our design and project management services on smaller jobs typically connected with addition or retrofit activities to obtain better margins and a more predictable pattern of earnings than are typically seen when such efforts are concentrated in fewer high-value contracts for the construction of new data centers, which would otherwise require greater levels of working capital and tend to yield lower margins. We have also focused on providing maintenance services for modular data center applications as this market has expanded. We continue to focus on increasing our systems integration revenues through more consistent revenue streams that will better utilize our assets in that business, and through adding revenue streams such as procurement services to help drive volume through the integration facility.
Current wording
Our maintenance and integration services traditionally earn higher margins and maintenance contracts typically renew annually, providing consistency and predictability of revenues. We focus our design and project management services on smaller jobs typically connected with addition or retrofit activities to obtain better margins and a more predictable pattern of earnings than are typically seen when such efforts are concentrated in fewer high-value contracts for the construction of new data centers, which would otherwise require greater levels of working capital and tend to yield lower margins. We have also focused on providing maintenance services for MDC applications as this market has expanded. We continue to focus on increasing our systems integration revenues through more consistent revenue streams that will better utilize our assets in that business, and through adding revenue streams such as procurement services to help drive volume through the integration facility.
Previous wording
Total revenues in the current quarter decreased 40% to $41.9 million. Procurement revenues decreased by $29.4 million (49%) in comparison to an unusually large volume of procurement activity in the prior year period and facilities management revenues decreased by $0.4 million (19%). These decreases were somewhat offset by an increase in systems integration revenues of $1.6 million (20%). Deferred revenues increased $8.7 million compared to the balance at December 31, 2024, for contracts and projects that were ongoing in the September 2025 quarter that are not expected to be completed until the fourth quarter of 2025 and to a smaller degree the first half of 2026. The deferred revenues expected in 2026 relate primarily to facilities management annual maintenance agreements.
Current wording
Total revenues in the current quarter decreased 44% to $55.3 million. Procurement revenues decreased by $50.2 million (56%) in comparison to an unusually large volume of procurement activity in the prior year quarter and facilities management revenues decreased by $0.1 million (1%). These decreases were somewhat offset by an increase in systems integration revenues of $6.6 million (88%). Deferred revenues decreased $11.5 million compared to the balance at December 31, 2025, for contracts and projects that were completed in the period ended March 31, 2026, including one unusually large order that was in process at December 31, 2025.
Previous wording
The $1.6 million (20%) increase in systems integration revenues was due primarily to the continued growth in integration of AI-enabled computer racks, which began with significant volume in June 2024, and an increase in certain fixed monthly fees as we became fully operational in our new Georgetown facility. This agreement calls for certain minimum monthly payments to us, which we believe will be sufficient to cover the majority of the costs for the facility and debt service payments tied to the build-out of that factory for which we are responsible. While those payments are required under the terms of this agreement, our customer could terminate the agreement if we were to materially breach it, leaving us with the financial obligations of the facility and debt service regardless of whether we have revenue sufficient to cover those costs. Likewise, if we were to terminate the agreement other than due to our customer’s material breach of the agreement, they would be relieved of any further obligation. If the customer were to terminate the agreement for convenience, they would continue to be obligated to pay us for the monthly fixed charge, but would no longer have any minimum volume commitments, as discussed below.
Current wording
The $6.6 million (88%) increase in systems integration revenues was due primarily to the continued growth in integration of AI-enabled computer racks, which began with significant volume in June 2024, and an increase in certain fixed monthly fees as we amended our long-term agreement with our main customer in December 2025. This agreement calls for certain minimum monthly payments to us, which we believe will be sufficient to cover the majority of the costs for our facility and debt service payments tied to our financing of the build-out of Georgetown, Texas facility which was completed in 2025. While those payments are required under the terms of this agreement, our customer could terminate the agreement if we were to materially breach it, leaving us with the financial obligations of the facility and debt service regardless of whether we have revenue sufficient to cover those costs. Likewise, if we were to terminate the agreement other than due to our customer’s material breach of the agreement, they would be relieved of any further obligation. If the customer were to terminate the agreement for convenience, they would continue to be obligated to pay us for the monthly fixed charge, but would no longer have any minimum volume commitments, as discussed below.
Previous wording
In addition to the fixed monthly fees to which we are entitled under that agreement, we also receive payments that scale depending on the volume of AI racks integrated and for which we are prepared to integrate. To mitigate the impact of demand fluctuations and supply-chain issues on our growing AI-enabled rack integration business, our primary customer has committed to pay us for maintaining staffing levels to support an agreed minimum weekly quantity of racks. To the extent we do not meet the minimum weekly volume due to our production downtime or labor shortages compared to agreed-upon levels, we will reduce the fee, billing only for the quantity of racks we configured or could have configured given the actual staffing levels. We contractually agreed to use commercially reasonable efforts to mitigate our customer’s costs for under-utilized staff, including during periods of extended lulls in demand or supply chain issues experienced by our customer. While any reduction in available staff such as seen in the current quarter reduces the revenues to which we are entitled under this agreement, we believe our long-term partnership with our customer is strengthened as we help them mitigate a portion of the costs for which they would otherwise be responsible. The periodic reduction of revenues has a muted impact on our overall results, as we also reduce our labor costs in line with the reduced revenues.
Current wording
In addition to the fixed monthly fees to which we are entitled under our long-term agreement, we also receive payments that scale depending on the volume of AI racks integrated and for which we are prepared to integrate. To mitigate the impact of demand fluctuations and supply-chain issues on our growing AI-enabled rack integration business, our primary customer has committed to pay us for maintaining staffing levels to support an agreed minimum weekly quantity of racks. To the extent we do not meet the minimum weekly volume due to our production downtime or labor shortages compared to agreed-upon levels, we will reduce the fee, billing only for the quantity of racks we actually configured or could have configured given the actual staffing levels. We contractually agreed to use commercially reasonable efforts to mitigate our customer’s costs for under-utilized staff, including during periods of extended lulls in demand or supply chain issues experienced by our customer. While any reduction in available staff reduces the revenues to which we are entitled under this agreement, we believe our long-term partnership with our customer is strengthened as we help them mitigate a portion of the costs for which they are responsible. The periodic reduction of revenues has a muted impact on our overall results, as we also reduce our labor costs in line with the reduced revenues.
Previous wording
Our non-AI rack integration services, without such minimum commitments, may be impacted by periodic supply chain issues for certain components and lulls in demand. These supply chain disruptions periodically cause delays in the timing of systems integration revenue for us as we await delivery of required components, and our vendors and partners expect these supply-chain issues to continue for at least the next several quarters, though they appear to be improving in general. It is not yet known the extent to which tariffs currently threatened or imposed by the United States may or may not impact these supply chain issues.
Current wording
Our non-AI rack integration services, without such minimum commitments, may be impacted by periodic supply chain issues for certain components and lulls in demand. These supply chain disruptions periodically cause delays in the timing of systems integration revenue for us as we await delivery of required components, and our vendors and partners expect these supply-chain issues to continue for at least the next several quarters.
Previous wording
The decrease in procurement revenues was driven primarily by a decrease in purchases from the federal government, when compared with the large volume in the prior year quarter. Declines were noted in both the gross and net procurement revenue deals as ongoing projects were shifted into the fourth quarter and the first half of 2026. As much of our procurement business is ultimately related to federal government buying, we believe this can contribute to some variability of these revenues from quarter to quarter. We do not rely on a predictable flow of business, but we promote the importance of a procurement services solution alongside our customer using our sales personnel. We cannot accurately predict the potential impact of the temporary federal government shutdown that began October 1, 2025 but we do anticipate some disruption in the timing of procurement orders from the federal government that require the interaction of individuals who have been temporarily furloughed.
Current wording
The prior year quarter included an unusually high level of sales to our largest customer for both governmental and private enterprise end users. As much of our procurement business is ultimately related to federal government buying, we believe this can contribute to some variability of these revenues from quarter to quarter. We do not rely on a predictable flow of business, but we promote the importance of a procurement services solution alongside our customer using our sales personnel.
Previous wording
Due to the lighter effort required to execute procurement transactions, the gross margins are less robust in that line of business. As a result, increases and decreases in that business have a smaller impact on our overall margins and profitability compared to increases in the facilities management or systems integration lines of business. The following table presents the results of our procurement activities, in terms of the gross value of the transactions, regardless of whether they were recorded as gross deals or net deals, along with the recorded values, to aid in an analysis of the underlying economics (unaudited, in thousands, except percentages):
Current wording
Due to the lighter effort required to execute procurement transactions, the gross margins are less robust in that line of business. As a result, increases and decreases in that business have a smaller impact on our overall margins and profitability compared to increases in the facilities management or systems integration lines of business.
Previous wording
Due to the lighter effort required to execute procurement transactions, the gross margins are less robust in that line of business. As a result, increases and decreases in that business have a smaller impact on our overall margins and profitability compared to increases in the facilities management or systems integration lines of business. The following table presents the results of our procurement activities, both in terms of the gross value of the transactions, regardless of whether they were recorded as gross deals or net deals, along with the recorded values, to aid in an analysis of the underlying economics (unaudited, in thousands, except percentages):
Current wording
The following table presents the results of our procurement activities, in terms of the gross value of the transactions, regardless of whether they were recorded as gross deals or net deals, along with the recorded values, to aid the analysis of the underlying economics (unaudited, in thousands, except percentages):
Previous wording
The following table provides a reconciliation of the non-GAAP figures presented above to the most closely related GAAP figures presented. We review these non-GAAP figures not as a substitute for the GAAP figures, but to help in our internal analysis of the underlying economics of each transaction as we do not believe the GAAP figures are as useful for that purpose as are the non-GAAP measures considered on a gross basis (unaudited, in thousands):
Current wording
The following table provides a reconciliation of the non-GAAP figures presented above to the most closely related GAAP figures presented. We review these non-GAAP figures not as a substitute for the GAAP figures, but to help our internal analysis of the underlying economics of each transaction as we do not believe the GAAP figures are as useful for that purpose as are the non-GAAP measures. We believe presentation of the gross value of procurement revenues is also helpful in forecasting and analyzing bank factoring costs of the related receivables, as the factoring fee is calculated based on the gross value of the transactions (unaudited, in thousands):
Previous wording
The gross value of all procurement transactions decreased 40% from the prior year quarter, from $80.0 million to $48.1 million in the current quarter. Gross profit recognized on all procurement transactions decreased 30% from $3.7 million to $2.6 million before interest charges.
Current wording
The gross value of all procurement transactions decreased 53% from the prior year quarter, from $106.0 million to $49.4 million in the current quarter. Gross profit recognized on all procurement transactions decreased 62% from $7.0 million to $2.7 million before interest charges. The prior year quarter included an elevated level of sales to the federal government, as well as one individually large transaction to an enterprise client, with a larger than normal margin in the prior year quarter.
Previous wording
Although the margins are less robust than our other lines of business, efforts required to support the procurement business are minimal, so any incremental activity remains additive to our net income and can lead to additional cross-selling opportunities for higher yielding integration services, so we continue to view this business as a growth vehicle. As mentioned previously, the procurement business can fluctuate widely from quarter to quarter, and the recorded revenues can fluctuate even more widely if there is a substantial shift between gross and net deals, even if the underlying economics between the two are relatively similar.
Current wording
Although the margins are thin, efforts required to support the business are minimal, so any incremental activity remains additive to our net income and can lead to additional cross-sales of higher yielding integration services, so we continue to view this business as a growth vehicle. The procurement business can fluctuate widely from quarter to quarter, and the recorded revenues can fluctuate even more widely if there is a substantial shift between gross and net deals, even if the underlying economics between the two are relatively similar.
Previous wording
Cost of revenue includes the cost of component parts for our products, labor costs expended in the production and delivery of our services, subcontractor and third-party expenses, equipment and other costs associated with our test and integration facilities, shipping costs, the costs of support functions such as purchasing, logistics and quality assurance, and depreciation of fixed assets directly related to our revenue-producing operations. Our consolidated gross margin remained consistent with the prior year quarter at 11%. Gross margins for the current quarter were 8% for the procurement business, 13% for the systems integration business, and 55% for the facilities management business. In the prior year quarter, gross margins were 6% for the procurement business, 45% for the systems integration business and 37% for the facilities management business.
Current wording
Cost of revenue includes the cost of component parts for our products, labor costs expended in the production and delivery of our services, subcontractor and third-party expenses, equipment and other costs associated with our test and integration facilities, depreciation of our manufacturing equipment, shipping costs, and the costs of support functions such as purchasing, logistics and quality assurance, and depreciation of fixed assets directly related to our revenue-producing operations. Our consolidated gross margin significantly improved, increasing from 9.3% in the prior year quarter to 15.9% in the current quarter. Gross margins for the current quarter were 6.7% for the procurement business, 37.5% for the systems integration business, and 64.7% for the facilities management business. In the prior year quarter, gross margins were 7.8% for the procurement business, 22.1% for the systems integration business and 40.9% for the facilities management business.
Previous wording
Selling, general and administrative expenses consist primarily of compensation and related expenses, including sales commissions and other incentive compensation for our executive, administrative and sales and marketing personnel, as well as related travel, selling and marketing expenses, equity-based compensation, professional fees, facility costs, insurance and other corporate costs. Our SG&A expenses increased by $1.4 million in the current quarter compared to the prior year quarter. Approximately half of the increase was due to an increase in non-cash equity-based compensation. The remainder increased primarily due to higher headcount and related compensation costs to support the growing scale of the organization combined with higher accruals for incentive compensation tied directly to the year-to-date improvements in sales and earnings. Also included in the current quarter are incremental costs for the 2025 annual audit and ongoing SOX 404(b) implementation.
Current wording
Selling, general and administrative expenses consist primarily of compensation and related expenses, including sales commissions and other incentive compensation for our executive, administrative and sales and marketing personnel, as well as related travel, selling and marketing expenses, equity-based compensation, professional fees, facility costs, insurance and other corporate costs. As a percentage of gross profit, SG&A expenses increased from 53% in the prior year quarter to 63% in the current quarter. In dollar terms, our SG&A expenses increased by $0.6 million (13%) due to higher non-cash equity based compensation, headcount and related compensation costs to support the growing scale of the organization.
Previous wording
Due primarily to the higher average balance of cash on hand in the current quarter, interest income increased to $0.4 million compared to $0.2 million earned in the prior year quarter. The cash balance increased approximately $55.3 million as a result of our stock offering completed in August 2025, as described below in Liquidity and Capital Resources.
Current wording
Due primarily to the higher average balance of cash on hand in the current quarter, interest income increased to $0.7 million compared to $0.4 million earned in the prior year quarter. The cash balance increased primarily due to our raising $55.3 million as a result of our stock offering completed in August 2025, combined with continued net cash flows from operations.
Previous wording
The majority of the Company’s receivables are from a single customer with 80-day payment terms. We generally factor our receivables from that customer through a bank factor, so that we are paid within 2-3 days of invoicing rather than needing to wait the full term to receive funds. We believe this is an efficient program, as we estimate the effective annualized interest rate to utilize that program is less than the rate at which we could borrow funds. We hold excess funds in an interest-bearing account so that we can earn some interest income on the funds we receive immediately from the factoring program but do not have to pay to our vendors for 30-45 days on typical payment terms.
Current wording
The majority of the Company’s receivables are from a single customer with 80-day payment terms. We generally factor our receivables from that customer through a bank, so that we are paid within 2-3 days of invoicing rather than needing to wait the full term to receive funds. We believe this is an efficient program, as we estimate the effective annualized interest rate to utilize that program is less than the rate at which we could borrow funds. We hold excess funds in interest-bearing accounts so that we can earn some interest income on the funds we receive immediately from the factoring program but do not have to pay our vendors for 30-45 days on typical payment terms.
Previous wording
As of September 30, 2025 and December 31, 2024, we had cash, cash equivalents and restricted cash of $75.7 million and $23.2 million, respectively. At both dates, $5.0 million of that amount was held in a money market account as collateral against our outstanding bank debt and therefore is not immediately accessible other than to use for repayment of the debt.
Current wording
As of March 31, 2026, we had cash and cash equivalents of $67.8 million, of which $1.8 million was held in a money market account as collateral against our outstanding letter of credit and therefore was not immediately accessible, as describe above.
Previous wording
We invested $32.7 million of cash in the nine months ended September 30, 2025 primarily in the buildout of our new leased integration facility and headquarters. These costs are largely for enhancements to our electrical and cooling systems to support our growth in AI-enabled rack integration. This compares to only $1.8 million invested in capital assets in the prior year-to-date period.
Current wording
We invested $14.9 million of cash in the three months ended March 31, 2025 primarily in the continued buildout of our leased integration facility and headquarters. These costs were largely for enhancements to our electrical and cooling systems to support our growth in AI-enabled rack integration. This compares to only $0.5 million invested in capital assets in the current quarter as the buildout of our new facility and associated capital expenditures were completed in the prior year.
Previous wording
Our primary liquidity and capital requirements are to fund working capital from current operations and to fund the repurchase of treasury shares from employees upon option exercises or vesting of restricted stock to allow them to cover their tax liabilities. Our primary sources of funds to meet our liquidity and capital requirements include cash on hand and funds generated from operations including the funds from our customer financing program. We believe that if future results do not meet expectations, we can implement reductions in selling, general and administrative expenses to better achieve profitability and therefore improve cash flows, or that we could take further steps such as the issuance of new equity or debt. However, the timing and effect of these steps may not completely alleviate a material effect on liquidity. We may also require additional capital if we seek to introduce a new line of business or if we seek to acquire additional businesses, further expand our facility, or operate both facilities.
Current wording
Our primary liquidity and capital requirements are to fund working capital from current operations, to fund the repurchase of shares from employees upon option exercises or vesting of restricted stock to allow them to cover their tax liabilities and to fund the repayments of our outstanding debt. Our largest customer has also recently requested that we further enhance our integration facility, which we expect will require us to invest approximately $17 million in capital expenditures. We expect to recapture these costs, plus the cost of capital and a profit margin through increased fees for integration services over the next several years, tied to our multi-year AI rack integration agreement. Our primary sources of funds to meet our liquidity and capital requirements include cash on hand and funds generated from operations including the funds from our customer financing program. We believe that if future results do not meet expectations, we can implement reductions in selling, general and administrative expenses to better achieve profitability and therefore improve cash flows, or that we could take further steps such as the issuance of new equity or debt. However, the timing and effect of these steps may not completely alleviate a material effect on liquidity. We may also require additional capital if we seek to introduce a new line of business or if we seek to acquire additional businesses or further expand our facility. While we have no immediate plans to do so and there are no assurances that we could issue equity or other securities on terms that are satisfactory to us, we could raise an additional $94.3 million under our currently effective shelf registration statement.
Rearranged previous paragraphs (8)
Previous report — wording carried elsewhere
The following table provides a reconciliation of the non-GAAP figures presented above to the most closely related GAAP figures presented. We review these non-GAAP figures not as a substitute for the GAAP figures, but to help our internal analysis of the underlying economics of each transaction as we do not believe the GAAP figures are as useful for that purpose as are the non-GAAP measures considered on a gross basis (unaudited, in thousands):
Previous report — wording carried elsewhere
Although the margins are less robust than our other lines of business, efforts required to support the procurement business are minimal, so any incremental activity remains additive to our net income and can lead to additional cross-selling opportunities for higher yielding integration services, so we continue to view this business as a growth vehicle.
Previous report — wording carried elsewhere
The $11.4 million (78%) increase in systems integration revenues was due primarily to the continued growth in integration of AI-enabled computer racks, which began with significant volume in June 2024.
Previous report — wording carried elsewhere
Cost of Revenue and Gross Margins
Previous report — wording carried elsewhere
Cost of revenue includes the cost of component parts for our products, labor costs expended in the production and delivery of our services, subcontractor and third-party expenses, equipment and other costs associated with our test and integration facilities, shipping costs, the costs of support functions such as purchasing, logistics and quality assurance, and depreciation of fixed assets directly related to our revenue-producing operations. Our consolidated gross margin decreased from 15% in the prior year-to-date period to 12% in the current year-to-date. Gross margins for the current year-to-date period were 8% for the procurement business, 24% for the systems integration business, and 57% for the facilities management business. In the prior year-to-date period, gross margins were 7% for the procurement business, 42% for the systems integration business and 57% for the facilities management business.
Previous report — wording carried elsewhere
Selling, General and Administrative (SG&A) Expenses
Previous report — wording carried elsewhere
Depreciation and Amortization Outside Cost of Revenues
Previous report — wording carried elsewhere
Due primarily to the higher average balance of cash on hand in the current year-to-date period, interest income increased to $1.0 million compared to $0.4 million earned in the prior year-to-date period. The cash balance increased approximately $55.3 million as a result of our stock offering completed in August 2025, as described below in Liquidity and Capital Resources.