One Stop Systems (OSS) 9 May 242024 Q1 Earnings call transcript

Good day, everyone, and welcome to today's One Stop Systems 2024 Quarter 1 Conference Call and Webcast. [Operator Instructions]. Please note this call is being recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to President and CEO, Mr. Knowles. Mike sir. ahead, go Please

you, Jennifer. joining thank for everyone, Good call. afternoon, today's and you Thank

So company business joined pursue and are media they commercial the niche emerging focused ago, a and and on we opportunities year markets. within transitioning growing customers our enterprise away large legacy as from to CEO defense almost

defense unfactored to with at efforts the positive new our products future support and X-year months and pipeline platform-based As sales of applications our customers. our phase on large-scale at or map we prospective as opportunities OSS product and existing have enter our new our of or learning to machine sensor company's year early created technology new enterprise-class a that to processing existing team commercial align support This as made road to intelligence I'm organization, market-leading new and customers. assembled infrastructure development billion and the have sales, markets first rebuild management opportunity with of expanded strong and extremely extremely With adopters pleased compute strong and and also the XX ML edge, my engage business the with have the offerings, continue the over our and value progress for building opportunities throughout multiyear a the believe proven sales first and and and $X products. we trends we AI, pipeline defense feedback applications current with as significant had continually transformation focused opportunities will program past and growing identify believe necessary over utilize associates. well serve commercial sales adoption. of to and market OSS' hear rugged products engineering artificial customers the well I on I've capabilities.

opportunities, our which help current revenue of to pipeline predictable we multiyear backlog approximately is platform and will contribute comprised XX% In of addition, believe OSS.

at our of We strategic have second aimed also a pursued multiyear growth-focused phase transformation creating a plan.

presented next updated plan and was their the subsequent our strategic finalized pursuing conference and X-year plan we strategies is on to or in an incorporating are our quarterly presentation in the we of calls. plan X, new growth feedback. Directors financial Our early month our Once to are May, including in now targets we achieve Board

against shareholders. our our build The profitably third of our will and to phase and focus executing customers, strategic business associates our for value long-term scale transformation plan on X-year greater

we this OSS bookings, is with provide first sales investments made and pipeline revenue, are Overall, margin want continued plan. as everyone year remainder sheet. and expectations building. or like the review of have to EBITDA the we by the hard met to additional gross for and our over during I'd made the our quarter. within consolidated the balance our quarter XXXX on first year information John results we to to call and first So turning encouraged overview, our progress during quarter before XXXX performance the the I'm for the and quarter the diverse and thank focus a past over our to their teams work testament product the I during at exceeded sales This

companies. and quarter in recent for edge cycle early hardware, primarily AI first The and center data rugged software investments have explosion solutions multiyear the the Our select also investment provide. results benefited a and of overall we days reflect ML computing ML AI,

funded focus opportunities concept in prioritize identify sales getting get and The pursue the and are at funded of in phase customers, which development, trends spec-ed or OSS platform-based edge. rugged testing basis. will in platform, design opportunities early require high While enterprise-class to moves to commercialization. the are the near-term believe of believe many years, and the allows compute the coming we these we to benefit are at solutions pursuing strategic our OSS our quarters of organization once opportunities resources have position and our project in we Discovering the a is that likelihood still solidifies

offer In we approach ruggedized truck order deployment. the to also a this new our liquid to manufacture technology $XXX,XXX business as design The and creates design cooling moat engineering around we are progress meet the addition, a power a not opportunities building this current requirements, the engineered cooling making and announced but needed that only customer's quarter solutions that future we provide technology highly meet compute significant for technology value incumbent order integrated initial and A of first is system potential a importantly, our are a that self-driving in developed expect to the position. requirements, protected This multiyear creating commercialized. recent solutions as new with a in relationships prototypes.More thus example and approach we on autonomous programs commercial the team was provide reflects create was platform. pursuing valuable for

we revenue While and in development from for final believe opportunity this production, years away work OSS current the future. supports is customer a our configuration still significant multiyear

associated pursuing We out to show and cost with potential track customer-funded more easily. our lines relationships to we win in are revenue financial actively similar break and our development separate started and new results projects

historic programs, development We on program-related company's Through customer-funded our statements. solution the integrated providing as to development customer-funded financial have typically are we offerings. more work compared development defined a

contract. on is multiyear In an addition, as a OSS establishes what always incumbent almost it

relationships X production to As model backlogs future. from benefit recurring X a to to orders. leading annual result, mix Development contracted higher the take multiyear to years business our and expected of before we a are expect in revenue

building to from a revenue opportunities. So steady benefit we business solid as quarter-on-quarter our while program growth scales, of foundation large-scale potential expect

follow-on included to X production XU the are as lead to pilot latest time, It customers early more has infrastructure quarter same to next liquid Additional the deployable grow and former orders to station. storage customer $X shipments Accelerator continue ground use provider the Pro a to from At $X expected Gen provide large in for we in revenues transformation we momentum quarters. important system in shipping over years. defense X begun between in total System composable a to our in started expected within cool will we This with a the customer. that quarter second markets. the project and the our the merchant a coming is data million to a and is project to and media note commercial million of transition feel impact We

from budgeting impacting first which softer fiscal we not extended Finally, from our prolonged process and resolution business XXXX, for an certain continuing quarter. contracts immune resulting demand in European affected the year Bressner U.S. are government the

focused are positive pleased new controlling As our our which cash the we've investing customer the and base. months, These progress X flow maintaining capital product bookings, with and at to our business also increase past cash improving growing successfully positive efficiency. transform million a to expanding under term working over quarter, a fluid include loans in balance the sheet. during strong I'm pay items our maintaining we we control pipeline navigate operating environment, a down efforts in and more used converting operating our made generate OSS the book-to-bill position. Bressner $X Near-term allowed development into and on we our priorities ratio, supporting

are sheet million we investments result, our included that As of we stronger sheet XX, a growth ended $XX.X strategies, flexibility committed December of and being good to at believe $XX.X long-term with support quarter a and capital. balance us with cash XXXX. our net company's short-term significant compared We stewards balance the million provides to the to

remainder the business drive by to XXXX, to look of strategies we growth. are excited are and the long-term we As scale we pursuing our profitable

backlog. and anticipate throughout the ratio the year positive order of first pipeline a successfully of as X.X, converts segment our OSS remainder we continue trends with Our orders ended to growing the book-to-bill quarter will and

are value continue review multiyear shareholders. XXXX to in detail. thank a strategies and new invest this quarter hard to our our ahead. on for building forward the Morrison, future, to compelling you overview, John, in We our want over team financial our work With I I'd we results aimed pursue call call. I more CFO, our John their to to go like look please for that as sharing to continued dedication the we next and with strategy finalizing growth greater turn first at

calls. show look you, all and afternoon, believe returns future a to Thank on are path on deliver to we progress forward over everyone. I strong financial clear investors and the I Mike, good coming making years, updating the

revenue, quarter our I financial gross plans. to our transformation of continued the met charter the environment. effect results XXXX, pleased that consolidated report EBITDA as our first well model of our to our first a or Despite exceeded ended March business operating am as impacts, results for fluid margin the reflects and Turning these XX,

operated United has As X a of in company our the OSS is the processing, focused and States in systems. and involved compute, edge All high-performance primarily operating storage segment manufacture design reminder, and connectivity rugged and segments. operates the in

part of the Our first components. is who products are also OSS systems standard Middle XXXX upon and the comparison markets. quarter integrator Bressner European a and are throughout East system the in channel and our compared all based a as Bressner following segment for of of operates first results quarter Europe to serves customer to one and The comments as to XXXX.

million. of we XX.X% large million, $XX.X orders exceeds quarter, data reduction The revenue guidance defense primarily customer. in revenue For $XX.X year-over-year for was the from the due first which reported component consolidated of storage consolidated of timing to our our

this first by in $X.X resulted from a year-over-year the a on which an million orders quarter of customer basis quarterly basis. Our on dollars, swing can during fluctuate millions approximately

volumes compared amount anticipate For of year. similar as XXXX, a to with customers the prior order annual we

reduction million and in an in existing was the customers. experienced additional approximately existing offset aerospace autonomous truck incremental related the $XXX,XXX $X.X by This in our customer In million addition, customers. we to $X.X revenue to media year-over-year revenue former revenue to

primarily segment Our to program. due $X.X to and discontinued XX.X% expected million delays the and revenue Bressner decreased as

a Customer with cost for revenue design line and the financial with Mike statements, by nonrecurring mentioned, our paid our introduction products and of new funded typically work. development first customer-funded As work items associated in represents breakout, separate we associated development started quarter customers. development

segment. XX.X% was gross customer-funded strategies compared to more profitable margin That our quarter to This capability. revenue provide a to period integrated XXXX, same quarter benefiting first with pursuing our professional more XX.X% gross services Consolidated which which operating manufacturing was Total in grow was restructuring fourth R&D expenses associated we customer the year. are costs elimination basis absorption primarily base. the under quarter. We from last was expenses, expect solutions slight points, in our attributable expenses are selling consolidated the by absorption. particularly X.X% growing year to our decline our to organization Compared was of and Bressner primarily first revenue our development $X offset of offset as reduced and the to our higher by due XXX mix for production the of to quarter, to decreased profit primarily gross throughout million, down consolidated margin during as the at to well outside marketing higher the due

share For or quarter, a $X.XX first loss $X.XX net loss in to compared share. first per share a in GAAP of year was $XXX,XXX share net million reported EBITDA company $X.X income non-GAAP the prior of $XXX,XXX or the $X.XX company to reported per metric the net of $XXX,XXX of year. per net The non-GAAP diluted a of a $X.XX $XXX,XXX a the of or quarter. loss non-GAAP to or compared positive $XX,XXX loss per prior a EBITDA, Adjusted compared

looking in sheet more at balance the Now detail.

XXXX, XXXX, X XXXX. $X no of operations revolving of on XX, XXXX. of outstanding from company's to total million million cash XX, XXXX, of as million, securities marketable cash, and and OSS $X.X $XX.X XX, total credit borrowings marketable equivalents outstanding had The on and cash on XXXX, of total line million capital capital had As $X.X and had working $X.X million of December of $XX.X million XX, on March and and million compared equivalents working cash XX, March $XX.X $XX.X XX, on and loans December of December million Bressner its respectively. XXXX, March securities OSS on down a XX, March balance consolidated

the the $XX,XXX compared March XXXX, X generated ended March activities for XXXX. $X ended months months cash operating in OSS XX, For to XX, from X million

of $XX expect of second the XXXX. we revenue forward, quarter million Looking in

the delays for program of revenue of a the XXXX customers quarter from government for the expected near Our year budget guidance and defense as for prolonged includes second the and European fiscal demand process term. XXXX softer continuing certain customer result resolution

will be the continue ratio on quarter growth be revenue pipeline. opportunity throughout sequential continued we positive year. the on book-to-bill believe While experience will in a This down we will a growing we converting on execute we expect supported our second by revenue as year-over-year our basis, to

improve growth quarter and Jennifer? in European call bookings the and in In half and in review XXXX the our our higher This help to addition, demand is case year-over-year expected would revenue core now second business to open positive the quarters. the coming to to support for questions. EBITDA completes consolidated like of financial

[Operator Instructions]. question And Michaelis Street we'll Capital Lake take from with our Markets. first Max

First growth for was increase a maybe share for return and wondering bookings could see you growth It's I me. quarter one a nice to if from bookings percentage QX. here. to number this

would think asking if question, the growth we bookings? year-on-year percentage have you're for for Thanks I the Max.

is QX? your what maybe then and quarter this for maybe expectation Yes, for

have that than our ratio fiscal but I continue is go we handy, as year. see X to those the don't the don't numbers following quarters and to positive if I -- John expecting into QX greater know in we're -- book-to-bill

then Gross margin from And more couple seemed a outperform. me. to

I I'm think, correct me the prior XX% wrong, to in XX% was OSS for segment. expectation if

little What may norm? do XX%. maybe you to return can I over QX? Is guys this or the QX, in QX, the outperformance to for quarter came expecting Or expect outer think you continue? guys you a be

of a see over No, in throughout as And XX.X% the for a as go period increased about to the see year. you're range we to stand-alone. XX% going Bressner, the of time. be revenue norm XX% to you returning And our you'll more for

side. cancellations. last to the one order some know me. if the I seen are any you defense seeing delays guys on Wondering then you've And

the On the our of cancellations, side, Max. order been biggest we have not seen CR. Realistically, because impact has

award that there's allowed So have not few are or to in CR. under that new new to programs release we programs government bids tied The is new a programs.

it mid-April CR finally it for the or when that I believe So Defense was lifted other was approved. Department. budgets

been and and now awarded. has So the flowing spending getting weeks last few the and government money months aligning

in cancellations no So the or pipeline. our in forecast

other then maybe defense and And commercial Okay. markets. other of outside

Yes.

We cancellations in have not seen commercial either.

some economy. second as Just an the data European year. still there, if of recovery we've experts in the checked in mentioned as and the will, we But with with you there's half softness, Bressner expected in

[Operator Instructions].

our will We with from Joe Noble next take question Gomes Capital.

customer size when the the big I if we when transitioning when you So away niche enterprise talk could what for was. away about from? all that But you're you about size possibly customers, wonder do I you understand how transitioning of talk legacy you're media of that business

Sure.

size we're I of the think what from. away business asking you're the media moving was customer

revenue No, that. those to making what away you're customers we of just say from, on all enterprise to knew transitioning When get company. that also niche contribution were the size trying customers you

Yes. they to media were comparative customer. minimal the

lot a there. sounds it then And of Okay. opportunity

starts you growth. you're of think the a that give what's after going quarter, But some see confidence? guys historically. lot seen You system to delays, going many to some sequential second We've really,

you sequential on handle growth better a get actually of revenue to we're see what back that in trying start is going that half to year? the the just to so confidence And here there giving

for Joe, question. Thanks, Yes. that

I things. couple a think it's of

some bids So out a programs right couple are opportunities and there. of that that multiple now, other we of multiyear have customer-funded these we out contract have for development

to ability So start the those expect from are will QX lay in. to on in that built awards. have to Those see ones quarter-on-quarter that see to we'll backlog

out company had a have of that me scope I pursuing. When of kinds that So and we're programs the proposals we scale did gives over already confidence. the joined we or that not these ago, year

So good me some that gives confidence.

comment of type the and year-on-year multiyear us as around continues through up drive it of as XX% floor to consistent growth. I'll allows reestablished bringing be that build that gone we've build built to programs opportunities And to available just prosecute take our would is and customers back The those, quarter-on-quarter, revenue on out to company. pipeline, and is made, other our pipeline we I that reorganized the it and one the

the gives have kind confidence kind for what QX That's be that revenue multiyear of already QX QX, foundation sequential we that establish of firm we the and out year. me submitting this the So bids opportunities. drive have and the year forecasted, to and between growth this that given we'll ones of

I and it's just color commercial Great. opportunities but then Craig days, a you looking here at early very know international little international And hired defense and maybe some on opportunities. that and

Just date. maybe give an update us to on progress

Yes, we're I making effort. that think, steady on progress,

that a DoD There's to and addition. in key a U.S. bear was market. space the the bringing in into his pipeline Craig So just the given he's experience lot

to in ability with U.K. outreach technical shows the the technical their the operate across just But really our market to products channel we're lot amount growing a sell. of through that in just here. the able them open developing and and leveraging with few in And and has about excited year. us He's build Bressner supporting other and say Canada last U.S. up markets. last we've through training our to weeks an products his time started those Europe, he's trade reach of of to a some facility in spent for pull really after already the making product through in their continuing we've East and channel as experience at avenues done and the out But into our that his that. job look areas to into lot pursue the been to the given our use go and reach for really pipeline that opportunities we're some really Europe. short they So thing procure and We've of for opportunity to here. site in ability good our other year in utilize and year-on-year And been is addition, impacts they've expanded all a the to Middle I'd

So expanding that's we're reach with our another have. existing the we that way international finding resources

look grow to even that more. company continue we the expand As as affordable, we'll upon and to

Instructions]. [Operator

for to allow We our appears presenters that we moment I turn have further over no for to queue. back the will now or this a will It time. questions any remarks. pause at questions to additional closing program

support, for thank transition ending We the we you your can and call.

today's gentlemen. concludes ladies and you, teleconference. Thank This

disconnect. may You now