One Stop Systems (OSS) 8 Aug 242024 Q2 Earnings call transcript

Good day, and. welcome to the One Stop Systems second quarter 2024 Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.

As part of the discussion today, the representatives of OSS will be making certain forward-looking statements regarding the company's future financial and operating results as well as their business plans, objectives and expectations. These statements are based on the company's current beliefs and expectations. regarded plans representation achieved. or be any OSS, not these of expectations should as of a that And will be

be the the forward-looking safe these that these OSS Act advised statements. covered avail And the Please the itself safe to under for to of statements XXXX. harbor of Securities Private are of desires Litigation protections Reform provision that harbor

OSS due materially to advised press annual that subsequent the risks company's or the update the from any its differ on Form those OSS be could duty forward-looking making that by the revise stated recent required as statements reports law. also quarterly including X Please forward-looking SEC. is report be applicable releases. uncertainties results statements certain and in future XX-K, those implied the by disclaims filings reports or actual the and from described XX-Q to will and Form recent except the These with most

is CEO, Mr. to It and Please ahead, go OSS Knowles. turn over sir. to now the Mike President conference pleasure my

afternoon, our John. emerging within we XXXX, everyone, markets. commercial made large quarter growing the thank continue joining today's you Good pursue call. the I'm during you, Thank second we defense and as progress business for to pleased transitioning with and and opportunities

AI, learning edge computing. and Second quarter performance pursue was aligned with our machine to opportunities plan as we in continue

customer. X.X% revenue outpaced revenue; as revenue of Highlights revenue X Positive growth for have development segment expanded orders; the quarterly former X.X%, to customer a exclude OSS to and revenue in the last XX,XXXnd include: media attributable quarters; of quarter of adjusted which year-over-year X growth sequential segment

the advantage developed. revenue XXXX. positioning continued favorable sequential have remainder year, take market been to and X important trends OSS We we've pipeline of believe healthy we growth favorable on are focused of dynamics the these objectives This for throughout

multiyear opportunities And customer-funded we we First, in are our converting segment. orders development our incumbent that will on as contracts. establish focused to OSS we driving OSS second, an on production future are believe pursuing pipeline platforms

Across partners requirements support our autonomy sensor solutions. expanding enterprise-class markets, AI, trends company's at platforms and emerging and the demand center the are trends. machine customers processing of edge. that to rugged data needs believe and OSS compute learning, hardware will the for for technology defense and are and their for commercial to Driving current global looking latest these take future allow challenging to software The harsh OSS best-in-class we bring performance -- applications advantage like future

quarter year second half our is plan. the with the during first and performance of underlying aligned Our

XXXX growth We is foundation for continue XXXX. to believe sustainable creating in profitability revenue a strong and year-over-year

and recovery economic expected Even we uncertainty in through European markets continued navigate as XXXX, XXXX. in our growing with weakness

quarter with during second So we with at take in the progress our a this made convert look to pipeline more our the detail, efforts starting let's introduction, to orders.

at of investments XX% transformation predictable the and hardware backlog will for positive our of of pipeline billion. the platforms. our making organization, pipeline, sales remained end current opportunities, believe second quarter unfactored multiyear the Our help comprised is to OSS. of $X our platform we drive and pipeline revenue which we over software and contribution I'm growth strategic demand our reflecting development pleased product with the growing the in the and are of Approximately

within in grow remains XXXX As plan our we pipeline, operating segment. to on continue pursuing OSS opportunities our orders focused our increasing

aerospace in and customers driven by orders saw from ISR row. the intelligence, market. existing as second quarter, commercial the for we outpace a the by ground, reconnaissance past X quarter the XX% months XXXX, over surveillance revenue the known was in growth the in and over For Order second market customers market,

new market. in ISR addition, customer awards In air had we the

future in new of these multiyear into many periods. engagements follow-on opportunities evolve revenue expect will We

focused on is Second programs. this important objective presence growing we on customer-funded development our year pursuing are

on associated revenue results wins. projects separate customer-funded our and As cost financial to lines development first call, we in disclose new mentioned and quarter track with to started show we our our potential

customer-funded development financial We on statements. work have development as our defined program-related

are offerings. providing Through development to compared we integrated a more programs, company's the solution typically customer-funded historic

In OSS multiyear as incumbent contract. is on addition, it establishes follow-on almost a production a always what and platform support

a As recurring contracted higher from business our we of result, future. benefit backlogs expect model annual the mix multiyear and a in to revenue

X expected to leaving are orders. production relationships X to years take Development before to

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

compared months customer I'm quarter for by in the an report revenue This new expansion million a fielding X and to the pleased was to that customer-funded just aerospace with growth of a principally production. of increased follow-on existing ago. to product XXXX, $X.X commercial $XXX,XXX relationship second development driven

we we to are expected, seeing interest from multiple and currently their submitted. As support programs, proposals increased customers have development

believe revenue. we result, XXXX the we will sequential customer-funded in development a As experience growth of remainder continue to throughout

currently expanded this computing and applications. X product under and have OSS edge defense also the on product have in focused development efforts both segment our year We development commercial for efforts

announce in to XXXX. of the the half We second and half of these products first expect and demonstrate this year

results future investments Our current second reflect support also we strategic are and growth. quarter to making

programs personnel allow production experience experience development We markets. customers. Over complex XX government new even the months, commercial and for will defense and larger defense have management pursue managing past we to added for and production and in programs their development with us believe program large,

we strategic quarter, last plan. new a developing mentioned growth-focused are multiyear I As

additional markets X-year required Our time which our has plan. rapidly to finalize strategic are evolving,

year. We expect growth are presentation we communicate pursuing this to the strategies in our later

growing by of XXXX, to growth. Though As our time, profitable we pursuing drive the we and as the underway some it ourselves our long-term has I'm encouraged progress taken look establish by remainder I'm markets. business scale strategies are excited we to the in

transformation revenue orders, We driving growing improving continue to backlog, against plan as profitability. focus near-term we our building execute and on

strong to our our shareholders. building to for our timing and the dedication their objectives. want growth work are we factor as we for aimed value as hard strategy long-term will orders achieve confident at building continued a While foundation of I'm team scale, pursue compelling thank growth to greater we a remain get I

of approximately Looking anticipate we quarter $XX.X which $X.X accounts that to orders we XXXX, consolidated for forward, the approximately the in of third pushed fourth million million of revenue quarter.

of due markets. the revenue European guidance includes $X.X Our million, offset third expected growth also by OSS for representing segment XXXX quarter the OSS revenue year-on-year in of partially segment. the softness lower in Bressner company's to continued XX%

are impact and long-term While create our shareholders. Europe advantage we second solutions, global believe uncertain leading half economic of balance team may positive positioned and for to strong markets enterprise-class, softness negatively conditions take committed value our across consolidated sheet well fundamentals and performance, compute in

John, like to With go over I'd review turn call XXXX, financial in CFO, to second our this the to more overview, detail. John results our ahead. please Morrison, quarter

Thank good XXXX, and orders. continued improvements our afternoon, model and in results everyone. you, quarter reflect the second business Mike, our ongoing of -- transformation

of As is comprised X segments. a company operating the reminder,

Our manufacture OSS the of and ruggedized United is that and high-performance connectivity States focused compute, in systems. the edge primarily storage design segment operates processing, and involved in

products and Our Europe as Bressner Middle Bressner with throughout also East as hardware the standard European and for operates channel all-in-one segment and serves and OSS to systems a a integrator custom markets. components. system

comparison second XXXX. of upon quarter comments quarter to second of following are The XXXX based results the

attributable new million and development funded a a revenue consolidated new Europe. customers. quarter, orders was in to decline customer with year-over-year former in second we was associated of in new the a economic XX.X% primarily existing $X.X which reported million, partially customer-funded in For $X.X The by guidance our our consolidated decline by exceeds -- million customer quarter related $XX.X of revenue million. revenue slower activity reduction media revenue Bressner revenue revenue to second and growth to Lower offset and $XX

new media from Revenue grew million at from Looking X.X%, our the customers OSS revenue and at new former the and success our and out customer initial a development customer-funded OSS settlement reflecting backing project. existing growth $X.X impact adding segment

customer in of our of separately work represents the we XXXX, and revenue statements. work development associated quarter Customer-funded associated financial period in design underabsorption for As quarter to products the consolidated additional grow attributable expect items decline inventory our with primarily new line Mike by in mentioned, customer-funded of to in gross for compared started second capacity profit development segment OSS reserves. same The XX.X% of was and customer, XX.X% Consolidated first introduction our nonreoccurring to our the development year. we cost margin development throughout sales funded last and gross paid the with typically XXXX. was the production to disclose

elimination expenses to were second million, of prior decreased attributable Total quarter professional by and organizational associated and and the these investments the outside made to costs restructuring management year program during planned partially with operating which offset services, was quarter. $X.X XX.X%

-- of impairment retention benefit were XXXX $X.X related results employee employee million to to the me, tax a the financial the $X.X goodwill to related for quarter our million $X.X addition, excuse and million In the retention credit. impacted charge charge by a second related

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

balance the at detail. sheet more looking Now, in

cash, at working cash total marketable XXXX. and cash of of total is equivalents to As and OSS $XX.X million cash, capital December $XX.X total XX, XX, and total securities compared and $XX.X working million June had $XX.X of marketable million. securities This of XXXX, million capital of equivalents

balance XX, had its December Bressner respectively. and of at XX, XX, had revolving line June on June credit and XX, of OSS million, XXXX, consolidated at outstanding $X operations $X.X down on million its XX, -- no June XXXX, company's on a The outstanding from million XXXX, December at loans XXXX. borrowings million $X.X line term $X XXXX,

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

questions. for now We call would like completes our -- financial John? This the quarter. turn the open to review to Operator,

our now comes [Operator from line question. We Capital. And Filling the have Street from this of Tony Lake Instructions]. first

for Tony This Felling filling Eric in is Yes. Martinuzzi.

feel on for a customers? properly the focus So tighter do defense we company the is staffed

we've do. we And really some over good I made really, to the year where progress are. Tony, Yes,

well really set have. very too scale actually with think I well we we're people the to

over quick back going the year, of summary. the So a just course

of Of brought years. defense. not Kalebaugh. years' marketing decade but I has selling defense a experience Robert on we worked defense in in joined commercial U.S. into, And run He global and Marketing, Sales of the defense, a XX course, the VP over and together XX-plus myself, but for then team, background market. He and the

running to large-scale I with we programs et development, experienced the as fielding, mentioned managers then that are in have script, defense team sustainment, And the cetera. augment program used production, to who wanted

So side. on Each, the have experienced X million-plus running program own the right, to their we defense added managers staff. who, programs in $XXX

So really there. situated well we're

ISO In ASXXXX certified. addition, defense really certified process in and and to required as cetera, policy XXXX standards well meet commercial. the company, et quality, for We're set

a execute good we're really place think in I to programs. defense So against

That's Or where is that risk mean, focus terms great. revenue I more think do . customers on there's the kind with of in headed? any forward? you concentration we're defense And of going

you front Tony? of repeat maybe Can that, the end

risk defense revenue customers? in with risk of focus terms with concentration on -- Just more revenue concentration

Yes, I company, side. I primarily value to a When were showed larger commercial on the the up don't think so. we

increased to XX-XX we've now. right as up kind So about of a ratio

next at looking ratio X that we're our pipeline. pipeline and projecting to the X our see same years, for we're in we As

out don't in get here success a we'll customers concentration across risk. would the seen to first anything, revenue that specifically that had. more a we've the broadening defense a that quite become year revenue think customers we've addition in So in deep I If commercial

see risk . don't concentration in the I in So defense. a

now Brian from we next Kinstlinger from of this our comes AGP. question, And have line and the

do always at for you government then to federal you if new budget elongated? which seeing steady set reasonable ensure procurement still fiscal to environment? Are the speak as all? delays, a what brings of orders, government, company Can the sales flow the a And year they can of we cycles? Are the enter

bane defense the actually, it's business the the of also. Brian, government Yes, existence, with the same doing in U.S. most and MODs global

we've kind generally have technology market, the thing would I the frames normal interesting time their mentioned, cycles map the, from markets So consistent. I the say, acquisition like of been ISR is road seen

the when The needs. So has there where the concerned really in biggest their kind markets this of and it was or used terms when of for a impact source. the now not it's take been they're has to right, as a going, XX trend be, been the -- procurement, those really weeks getting now winner factor over extensions, are longer X see might years end awarded it to the -- might sometimes I really last winners to sole has contract taking to we're X contracts you to selected of the award as say on not out exorbitantly or and be which X side, . And selected a X bigger is, seeing weeks, have that contract time them been XX procurement just to arms process already on uncommon to timing. gotten to a

So we That's bit. some little our timing risk. through worked issues a biggest probably

their of remain technology still fairly consistent. those are the process and and the needs they've terms gone demand, market In the through,

the prior concerned CRs. year, as The get then get benefit usually about affect And is starts. new [ year always winning for next ] you on yes, the CRs programs we

we in on more We next the we plan the keep an year. win the customers, But to into this year, for we work more CRs. those. best business you stability can have eye the do with So

have this year them the thought X X or months had CR did this they to we to get We then that longer appropriated. we of would and the of X hit having delayed impact because the when year just programs follow-on money were past close

our the to and So timing do closely rather can work things deal definitely Not customers, with. ready we with issues, go. we to aligned than have have much

seen know waiting considerations smaller taking to to large funding award. some but protect of We going Have have primes. are for on awards on get schedules they they're companies

doing can. do use our it's CR, some help not we can we just been office to we programs a movement. help place our and lobbying to we've thing timing or put work is there's we [indiscernible] of and last in efforts the then lobbying anything Ultimately, And through resolve facilitate if do. much our But right,

think programs of customer-funded in of turns it funded a case, -- do Great. describe take these call or average And until how might program? into then customer I that I'm or And something how sure development government you it? not about leading are growth it development, to awards? you talk when the the indicators take time a how And might typically I that's larger assume production if long about

beyond XX win. bidding generally Yes. think I or we've No, for the you kinds started and order to the to safe development X the or Brian, that see say it's XX of -- what now could programs to we're months. of We'll NRE the period

years at in development that size production. we're the on lower low initial the can on the then up that's fieldings. then to and X have delivered or that. within that to usually period. XX-month first, risk that So first back to end cycle system Usually, X, X X production rolls X- depending you range kind developing. anywhere that's into after X XX to the the first of, of a rate in technology the and to That that end period. prototypes, X of development scope risk, Usually, refresh And -- the months have X usually usually the the months, X we're X That's roll the you the from run usually of

some second example we're perfect a think, or for our for Raytheon is there. been update part is for And initial system refresh. have. on, program program next finishing years the tech X There we development X, front-end on now technology just PX now. of our that I the development. We're the So better We've refresh third right

development on that's programs. these getting front-end in the So of customer benefit

what front-end XX a development. scope a us on to long depending is average but months say those for between would I of on is the little answer, So bit X

have, segment. like that start quantify I revenue question to from the either book-to-bill? or months we think can expectations months XX X about you there trailing as the think the to Last about way first we OSS Is any the

Yes.

this So tracking we've been year.

OSS outpacing So in be revenue the those earnings So the book-to-bill have -- been would segment ratio... call, little I as that a like -- mentioned over by XX%. bookings that right, the Right? in

X.X?

Brian? sorry, I'm

the So initial kind last So X.X in is quarter valuation? this maybe maybe of -- X.X like

Yes.

months. X trailing the For

little bit of we've was this were probably bit quarter The We stronger. X.XX. over to upwards X.X. For been here year, little a closer little last a a

see So And lot the of to next we some see than where initiated work to based forecasting that things. then side last a pickup we're starting continued ratio the greater booking positive see from on that through we're year. two quarters book-to-bill we X on

as bid have awards, competitions on or come on be where based timing pipeline The awards we've biggest on work. in we're sole-source we that sure But the we're of either waiting right would the impact making sitting, is majority now, planned. won the some,

pretty potentially as working the scope and the pull the we're the through systems. mentioned, timing, through. I on could in So we it confident value feeling that processing We're

after protects in. one more helps a businesses Back the to typically you've your because at obviously in in to for year. it do squeeze end have generally, against is year flush a end business budget Obviously, government budget had year the me -- from of had September, plus that a fiscal not Let we're benefit Do some have the some and the case? the that? this of that the budget Or CR. you also the government year,

much So last year. not

use generally, up production additional for when They on the a they will the end buys. to the side, government and year-end buying or trying go So budget get they're buys to generally year. of spare at

return funds. platform, those incumbent on a you're sweep-up a if you'll on generally, better year-end So see

early the to other those so we we of Because positioning way some could try some in some lab them can the see grab pickups. we've so can of you advantage did We are interested can year, is, that. or So sometimes in or organizations work in they started to their funds start technology up fieldings of usually, exercises. ourselves position some if programs, take labs in work last sweep those them of

that relationships opportunities program So we try for across we've in want so their who year. lab to defense of might anticipation pursue where or people experiment our the for a expanded some in for to buy we the can something following

So will really we'll We start see as bit across a then And that that penetration a can defense, more just incumbency get few and money opportunities. to lever a need we in a we share more we'll bigger think definitely platforms. little I pull. add be more -- sweep-up to market our

there continue. this time, questions are at further sir. And Please no

appreciate you John, very We much. it. Okay. thank

concludes conference you today. our This participating. you. Thank Thank for for all

You may now disconnect.