One Stop Systems Reports Q4 2023 Results
- Operational highlights include winning a U.S. government program with Leidos’ Dynetics, unveiling a new Gen 5 short-depth server, and starting a collaboration with FLYHT Aerospace.
- Consolidated revenue decreased by 27.9% to $13.2 million in Q4 2023, with OSS segment revenue declining by 43.5%.
- Consolidated gross margin increased by 640 basis points to 33.7% in Q4 2013.
- The company reported a net loss of $278,000 in Q4 2013.
- Anticipated revenue for Q1 2024 is approximately $12.5 million.
- Consolidated revenue decreased due to lower shipments to a former media customer and softer economic conditions.
- OSS segment revenue declined significantly by 43.5% in Q4 2013.
- The company reported a net loss of $278,000 in Q4 2013.
The reported financial results from One Stop Systems, Inc. (OSS) indicate a strategic shift in the company's focus towards high-margin AI and ML markets. Despite a notable decline in revenue due to the discontinuation of lower-margin media sales, OSS has reported an increase in gross margin both for the year and the fourth quarter. This demonstrates a successful reorientation towards more profitable product lines. The reported increase in their sales pipeline, particularly with respect to AI Transportables, suggests potential for future revenue growth. However, investors should be mindful of the current net loss and the decrease in adjusted EBITDA compared to the previous year, which indicates that the company is still in the process of stabilizing its financial position post-transition.
The reported partnership with Leidos' Dynetics and the multi-year collaboration with FLYHT Aerospace signal OSS's commitment to diversifying its revenue streams and strengthening its foothold in specialized markets. These developments, coupled with the anticipated return to year-over-year sales growth in the second half of 2024, could potentially attract investor interest. Nonetheless, the increase in operating expenses, primarily due to transition costs and the impairment of goodwill are factors that could raise concerns about the company's operational efficiency and asset management.
The HPC and AI/ML sectors are witnessing significant growth, driven by the need for advanced computing at the edge. OSS's unveiling of the Gen 5 short-depth server at Super Compute 23 responds to this demand, highlighting the company's innovation and potential to capture market share in this expanding industry. The focus on defense and commercial markets for AI Transportables is particularly timely, given the increased investment in defense technology and the growing commercial applications of AI. The strategic pivot and realignment of the company's go-to-market strategy appear to be in line with industry trends towards high-performance, rugged edge processing solutions.
However, the reported softer economic conditions and timing delays with certain government programs are reminders of the external challenges that OSS and similar companies face. These factors could impact future revenue streams and should be monitored closely by stakeholders. The company's anticipation of $12.5 million in revenue for the first quarter of 2024 provides a benchmark for investors to gauge the company's progress in achieving its strategic objectives and managing external economic pressures.
OSS's engagement with large prime contractors, such as the multi-million-dollar U.S. government program win with Leidos' Dynetics, positions the company within the lucrative defense sector. The defense industry's reliance on cutting-edge technology for applications like mobile AI signal collection and 360-degree situational awareness aligns with OSS's product offerings. The company's ability to secure and expand its role in government programs is indicative of its competitive edge and technical capabilities in providing rugged compute solutions. Such contracts not only contribute to the company's revenue but also enhance its credibility and reliability as a defense supplier.
It is important to consider the long procurement cycles and stringent requirements of the defense industry, which can affect the timing and certainty of revenue recognition for OSS. The company's reported increase in its unfactored pipeline suggests optimism, yet the conversion of this pipeline into concrete orders will be a critical factor in evaluating OSS's future performance in the defense market.
Company to Hold a Conference Call Today at 5:00 p.m. Eastern Time
ESCONDIDO, Calif., March 21, 2024 (GLOBE NEWSWIRE) -- One Stop Systems, Inc. (Nasdaq: OSS), a leader in rugged high-performance compute (HPC) for artificial intelligence (AI), machine learning (ML) and sensor processing at the edge, reported results for the fourth quarter and twelve months ended December 31, 2023. All quarterly and twelve-month comparisons are to the same year-ago period unless otherwise noted.
“2023 was a transformative year for OSS, highlighted by a new management team, new board members, and a successful transition away from lower margin media revenues to our strategic plan focused on large and rapidly growing global markets driven by AI and ML,” stated OSS president and CEO, Mike Knowles. “Although revenue for 2023 reflects a
“During the second half of 2023, we began an extensive review of our go-to-market strategy and sales pipeline to align with our strategic focus on AI Transportables within the commercial and defense markets,” continued Knowles. “After a prudent review and qualification process, our five-year, unfactored pipeline has increased to over
Q4 2023 Operational Highlights
- Won a multi-million-dollar U.S. government program with Leidos’ Dynetics, a provider of mission-critical solutions, for an emerging specialized mobile AI signal collection application. The award is the first multi-year win OSS has secured with this prime contractor and is valued at approximately
$2.5 million to$3.5 million over the next three years, with an initial award of$500,000. - Unveiled a Gen 5 short-depth server (SDS), at Super Compute 23, the international conference for high performance computing. Powered by four PCIe NVIDIA H100 Tensor Core GPUs, the OSS Gen 5 SDS addresses the growing demand for more powerful AI compute, storage and latency performance at the edge.
- Commenced a multi-year design and manufacturing collaboration for FLYHT Aerospace’s automated flight information reporting systems (AFIRS™) Edge family. The design and manufacturing agreement with FLYHT is valued at a minimum of
$6 million over the initial five-year term. - Booked an additional award from the U.S. Army Ground Vehicle Systems Center for the 360 Degree Situational Awareness program to include sensor processing for video data, increasing OSS scope to all rugged compute and switching for the full system solution.
- Continued to reprofile the board of directors, including the appointments of Mitchell Herbets and Joseph Manko, Jr. to the company’s board.
Outlook
The company anticipates revenue of approximately
Q4 2023 Financial Summary
Consolidated revenue decreased
OSS segment revenue declined
Consolidated gross margin percentage increased 640 basis points to
Total operating expenses increased
OSS reported a net loss of
The company reported non-GAAP net income of
Adjusted EBITDA, a non-GAAP metric, was
On December 31, 2023, cash and short-term investments totaled
Full Year of 2023 Financial Summary
For the full year of 2023, consolidated revenue decreased
OSS segment revenue was
Consolidated gross margin increased 130 basis points to
Bressner segment gross margin was
Total operating expenses increased
Excluding a goodwill impairment charge of
OSS reported a net loss of
The company reported a non-GAAP net loss of
Adjusted EBITDA totaled
Loss before the provision for income taxes on a proforma basis, excluding the impairment of goodwill, CEO transition and board reprofiling costs and the benefit of the employee retention credit resulted in a proforma loss of
Conference Call
OSS will hold a conference call later today to discuss its results for the fourth quarter and full year ended December 31, 2023, followed by a question-and-answer period.
Date: Thursday, March 21, 2024
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
Toll-free dial-in number: 1-888-886-7786
International dial-in number: 1-416-764-8658
Webcast: here (live and replay)
A replay of the call will be available after 8:00 p.m. Eastern time on the same day and through April 4, 2024.
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 14953211
About One Stop Systems
One Stop Systems, Inc. (Nasdaq: OSS) is a leader in AI Transportable solutions for the demanding ‘edge.’ OSS designs and manufactures the highest performance compute and storage products that enable rugged AI, sensor fusion and autonomous capabilities without compromise. These hardware and software platforms bring the latest data center performance to the harsh and challenging applications, whether they are on land, sea or in the air.
OSS products include ruggedized servers, compute accelerators, flash storage arrays, and storage acceleration software. These specialized compact products are used across multiple industries and applications, including autonomous trucking and farming, as well as aircraft, drones, ships and vehicles within the defense industry.
OSS solutions address the entire AI workflow, from high-speed data acquisition to deep learning, training and large-scale inference, and have delivered many industry firsts for industrial OEM and government customers.
As the fastest growing segment of the multi-billion-dollar edge computing market, AI Transportables require—and OSS delivers—the highest level of performance in the most challenging environments without compromise.
OSS products are available directly or through global distributors. For more information, go to www.onestopsystems.com. You can also follow OSS on X, YouTube, and LinkedIn.
Non-GAAP Financial Measures
We believe that the use of adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, is helpful for an investor to assess the performance of the Company. The Company defines adjusted EBITDA as income (loss) before interest, taxes, depreciation, amortization, acquisition expense, impairment of long-lived assets, financing costs, government funded programs, fair value adjustments from purchase accounting, stock-based compensation expense and expenses related to discontinued operations.
Adjusted EBITDA is not a measurement of financial performance under generally accepted accounting principles in the United States, or GAAP. Because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact a company’s non-cash operating expenses, we believe that providing a non-GAAP financial measure that excludes non-cash and non-recurring expenses allows for meaningful comparisons between our core business operating results and those of other companies, as well as providing us with an important tool for financial and operational decision making and for evaluating our own core business operating results over different periods of time.
Our adjusted EBITDA measure may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently, particularly related to non-recurring and unusual items. Our adjusted EBITDA is not a measurement of financial performance under GAAP, and should not be considered as an alternative to operating income or as an indication of operating performance or any other measure of performance derived in accordance with GAAP. We do not consider adjusted EBITDA to be a substitute for, or superior to, the information provided by GAAP financial results.
| For the Three Months Ended December 31, | For the Year Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net loss | $ | (277,560 | ) | $ | (3,263,644 | ) | $ | (6,716,176 | ) | $ | (2,229,055 | ) | ||||
| Depreciation and amortization | 263,743 | 265,252 | 1,077,516 | 1,050,299 | ||||||||||||
| Stock-based compensation expense | 454,461 | 533,487 | 2,345,358 | 1,991,117 | ||||||||||||
| Interest income | (159,487 | ) | (84,832 | ) | (544,958 | ) | (237,751 | ) | ||||||||
| Interest expense | 29,662 | 28,681 | 117,774 | 162,391 | ||||||||||||
| Employee retention credit (ERC) | - | - | (1,716,727 | ) | - | |||||||||||
| Impairment of goodwill | - | - | 5,630,788 | - | ||||||||||||
| Provision for income taxes | 41,796 | 4,136,643 | 927,128 | 4,423,597 | ||||||||||||
| Adjusted EBITDA | $ | 352,615 | $ | 1,615,587 | $ | 1,120,703 | $ | 5,160,598 | ||||||||
Adjusted EPS excludes the impact of certain items and, therefore, has not been calculated in accordance with GAAP. We believe that exclusion of certain selected items assists in providing a more complete understanding of our underlying results and trends and allows for comparability with our peer company index and industry. We use this measure along with the corresponding GAAP financial measures to manage our business and to evaluate our performance compared to prior periods and the marketplace. The Company defines non-GAAP income (loss) as income or (loss) before amortization, government funded programs, impairment of long lived assets, stock-based compensation, expenses related to discontinued operations, and acquisition costs. Adjusted EPS expresses adjusted income (loss) on a per share basis using weighted average diluted shares outstanding.
Adjusted EPS is a non-GAAP financial measure and should not be considered in isolation or as a substitute for financial information provided in accordance with GAAP. These non-GAAP financial measures may not be computed in the same manner as similarly titled measures used by other companies. We expect to continue to incur expenses similar to the adjusted income from continuing operations and adjusted EPS financial adjustments described above, and investors should not infer from our presentation of these non-GAAP financial measures that these costs are unusual, infrequent or non-recurring.
The following table reconciles net loss to adjusted EPS and diluted earnings per share:
| For The Three Months Ended December 31, | For the Year Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net loss | $ | (277,560 | ) | $ | (3,263,644 | ) | $ | (6,716,176 | ) | $ | (2,229,055 | ) | ||||
| Amortization of intangibles | - | 15,807 | 42,154 | 63,231 | ||||||||||||
| Stock-based compensation expense | 454,461 | 533,487 | 2,345,358 | 1,991,117 | ||||||||||||
| Employee retention credit (ERC) | - | (1,716,727 | ) | - | ||||||||||||
| Impairment of goodwill | - | - | 5,630,788 | |||||||||||||
| Non-GAAP net (loss) income | $ | 176,901 | $ | (2,714,350 | ) | $ | (414,603 | ) | $ | (174,707 | ) | |||||
| Non-GAAP net (loss) income per share: | ||||||||||||||||
| Basic | $ | 0.01 | $ | (0.14 | ) | $ | (0.02 | ) | $ | (0.01 | ) | |||||
| Diluted | $ | 0.01 | $ | (0.14 | ) | $ | (0.02 | ) | $ | (0.01 | ) | |||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | 20,632,300 | 20,059,269 | 20,854,777 | 19,730,698 | ||||||||||||
| Diluted | 20,632,300 | 20,059,269 | 20,854,777 | 19,730,698 | ||||||||||||
Forward-Looking Statements
One Stop Systems cautions you that statements in this press release that are not a description of historical facts are forward-looking statements. These statements are based on the company's current beliefs and expectations. The inclusion of forward-looking statements should not be regarded as a representation by One Stop Systems or its partners that any of our plans or expectations will be achieved, including but not limited to, management’s expectation for new opportunities in the AI transportable solutions and other spaces, the company’s penetration of the Defense and AI Transportable sectors, our ability to successfully convert our pipeline to sales, our expectations regarding revenue growth, the anticipated value of our project wins, future changes to our business objectives, and other future financial projections. Actual results may differ from those set forth in this press release due to the risk and uncertainties inherent in our business, including risks described in our prior press releases and in our filings with the Securities and Exchange Commission (SEC), including under the heading "Risk Factors" in our latest Annual Report on Form 10-K and any subsequent filings with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and the company undertakes no obligation to revise or update this press release to reflect events or circumstances after the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement, which is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Media Contacts:
Katie Rivera
One Stop Systems, Inc.
Tel (760) 745-9883
Email contact
Tim Randall
CMA Media Relations
Tel (949) 432-7572
Email Contact
Investor Relations:
Ronald Both or Grant Stude
CMA Investor Relations
Tel (949) 432-7557
Email contact
| ONE STOP SYSTEMS, INC. (OSS) CONSOLIDATED BALANCE SHEETS | ||||||||
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 4,048,948 | $ | 3,112,196 | ||||
| Short-term investments | 7,771,820 | 10,123,535 | ||||||
| Accounts receivable, net | 8,318,247 | 11,327,244 | ||||||
| Inventories, net | 21,694,748 | 20,775,366 | ||||||
| Prepaid expenses and other current assets | 611,066 | 502,156 | ||||||
| Total current assets | 42,444,829 | 45,840,497 | ||||||
| Property and equipment, net | 2,370,224 | 2,570,124 | ||||||
| Operating lease right-of use assets | 1,922,784 | 731,043 | ||||||
| Deposits and other | 38,093 | 60,243 | ||||||
| Goodwill | 1,489,722 | 7,120,510 | ||||||
| Intangible assets, net | - | 42,154 | ||||||
| Total Assets | $ | 48,265,652 | $ | 56,364,571 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 1,201,781 | $ | 4,592,713 | ||||
| Accrued expenses and other liabilities | 3,202,519 | 3,013,869 | ||||||
| Current portion of operating lease obligation | 390,926 | 536,588 | ||||||
| Current portion of notes payable | 2,077,895 | 2,952,447 | ||||||
| Total current liabilities | 6,873,121 | 11,095,617 | ||||||
| Long-term debt, net of current portion | - | 409,294 | ||||||
| Deferred tax liability, net | 44,673 | 138,662 | ||||||
| Operating lease obligation, net of current portion | 1,765,536 | 397,249 | ||||||
| Total liabilities | 8,683,330 | 12,040,822 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Common stock, 20,661,341 and 20,084,528 shares issued and outstanding, respectively | 2,066 | 2,008 | ||||||
| Additional paid-in capital | 47,323,673 | 45,513,807 | ||||||
| Accumulated other comprehensive income | 675,310 | 510,485 | ||||||
| Accumulated deficit | (8,418,727 | ) | (1,702,551 | ) | ||||
| Total stockholders’ equity | 39,582,322 | 44,323,749 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 48,265,652 | $ | 56,364,571 | ||||
| ONE STOP SYSTEMS, INC. (OSS) UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| For the Three Months Ended December 31, | For the Year Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | $ | 13,155,208 | $ | 18,249,481 | $ | 60,896,797 | $ | 72,421,345 | ||||||||
| Cost of revenue | 8,720,637 | 13,270,713 | 42,942,175 | 52,023,736 | ||||||||||||
| Gross margin | 4,434,571 | 4,978,768 | 17,954,622 | 20,397,609 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | 1,970,746 | 1,793,232 | 9,264,447 | 7,279,401 | ||||||||||||
| Impairment of goodwill | 5,630,788 | - | ||||||||||||||
| Marketing and selling | 1,667,765 | 1,745,085 | 6,651,516 | 6,806,306 | ||||||||||||
| Research and development | 1,127,194 | 1,087,554 | 4,331,024 | 4,743,574 | ||||||||||||
| Total operating expenses | 4,765,705 | 4,625,871 | 25,877,775 | 18,829,281 | ||||||||||||
| (Loss) income from operations | (331,134 | ) | 352,897 | (7,923,153 | ) | 1,568,328 | ||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 159,487 | 84,832 | 544,958 | 237,751 | ||||||||||||
| Interest expense | (29,662 | ) | (28,681 | ) | (117,774 | ) | (162,391 | ) | ||||||||
| Employee retention credit | - | - | 1,716,727 | - | ||||||||||||
| Other expense, net | (34,455 | ) | 463,951 | (9,806 | ) | 550,854 | ||||||||||
| Total other income (expense), net | 95,370 | 520,102 | 2,134,105 | 626,214 | ||||||||||||
| (Loss) income before taxes | (235,764 | ) | 872,999 | (5,789,048 | ) | 2,194,542 | ||||||||||
| Provision for income taxes | 41,796 | 4,136,643 | 927,128 | 4,423,597 | ||||||||||||
| Net loss | $ | (277,560 | ) | $ | (3,263,644 | ) | $ | (6,716,176 | ) | $ | (2,229,055 | ) | ||||
| Net loss per share: | ||||||||||||||||
| Basic | $ | (0.01 | ) | $ | (0.16 | ) | $ | (0.32 | ) | $ | (0.11 | ) | ||||
| Diluted | $ | (0.01 | ) | $ | (0.16 | ) | $ | (0.32 | ) | $ | (0.11 | ) | ||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | 20,632,300 | 20,059,269 | 20,854,777 | 19,730,698 | ||||||||||||
| Diluted | 20,632,300 | 20,059,269 | 20,854,777 | 19,730,698 | ||||||||||||
FAQ
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