One Stop Systems, Inc. (OSS) Q4 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
Despite some positive elements like expected revenue growth and stable pipeline, the earnings call reveals significant concerns. The sharp decline in gross margins, increased losses, and lack of shareholder return plans are worrying. Regulatory issues, supply chain challenges, and competitive pressures add to the negative sentiment. The Q&A section highlights margin pressures and order delays, with management providing unclear responses. These factors, combined with no share repurchase program and financial losses, suggest a negative stock price reaction.
Key Financial Performance
Consolidated Revenue Q4 2024 $15.1 million, a 15.1% year-over-year increase due to double-digit growth across both OSS and Bressner segments.
Consolidated Gross Margin Q4 2024 15.7%, down from 33.7% year-over-year; excluding one-time charges, gross margin was 23.8%, reflecting a less profitable mix of revenue.
OSS Segment Gross Margin Q4 2024 9.4%, compared to 45.9% for the same period a year ago; excluding one-time charges, gross margin was 26.8%, indicating a less profitable mix of OSS segment revenue.
Total Operating Expenses Q4 2024 $5.5 million, a 15.1% year-over-year increase due to higher general and administrative costs related to marketing, sales, and program management investments.
GAAP Net Loss Q4 2024 $3.1 million or $0.15 per share, compared to a net loss of $278,000 or $0.01 per share in the prior year, impacted by a $1.2 million one-time charge.
Non-GAAP Net Loss Q4 2024 $2.6 million or $0.12 per share, compared to a non-GAAP net income of $219,000 or $0.01 per share for the same period last year, affected by the $1.2 million one-time charge.
Adjusted EBITDA Q4 2024 Loss of $2.3 million, including the $1.2 million one-time charges, compared to an adjusted EBITDA of $322,000 in the prior year fourth quarter.
Cash and Short-term Investments Q4 2024 $10 million, with no borrowings on the $2 million revolving line of credit and a consolidated balance of $1 million on term loans.
Cash Used in Operating Activities 2024 $108,000, compared to a use of cash of $440,000 for the 12 months ended December 31, 2023.
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Operating Highlights
Customer-Funded Development Revenue: Increased by 118% in 2024 to $3.7 million, indicating potential for larger revenues in future multiyear programs.
Accelerator Units Contract: Announced an initial contract for 100 accelerator units, with expectations for expansion to multiple customers in 2025.
Rugged Situational Awareness System: Delivered to the U.S. Army for testing, with potential production orders exceeding $200 million over 3-5 years.
Market Growth in Defense and Commercial Sectors: Experienced growth from both defense and commercial markets, including demand from U.S. Army and Navy programs.
Composable Infrastructure Opportunity: Identified a $200 million multiyear pipeline opportunity in composable infrastructure for data centers.
Operational Efficiencies: Adjusted legacy inventory and program-related issues to improve operational efficiencies and drive profitability.
Gross Margin Expectations: Expect OSS segment gross margin to improve to mid to upper 30% range in Q1 2025.
Long-term Growth Strategy: Pursuing growth opportunities driven by AI, machine learning, and sensor processing.
Book-to-Bill Ratio: Projected 2025 annual book-to-bill ratio of 1.2, indicating strong future order expectations.
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Risk or Challenges
Regulatory Issues: Uncertainty related to business and government spending is likely to continue throughout the first half of 2025, which may impact revenue and order placements.
Supply Chain Challenges: OSS incurred $7.1 million of inventory charges in 2024 related to obsolete and slow-moving inventory, indicating challenges in managing inventory during the transition of the company's business model.
Economic Factors: There is expected near-term volatility associated with budget delays and uncertainty related to the impact of tariffs on the economy.
Competitive Pressures: OSS faces competition in the defense and commercial markets, particularly in the adoption of new technologies such as AI and machine learning, which may affect market positioning.
Contractual Risks: OSS took a charge of $1.2 million related to contract losses for a customer-funded development contract, which may affect future financial performance.
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Guidance & Outlook
Revenue Growth: OSS returned to consolidated year-over-year revenue growth for the fourth quarter and sequential consolidated growth for every quarter in 2024.
Customer-Funded Development Revenue: Increased by 118% in 2024 to $3.7 million, indicating potential for larger revenues in future multiyear programs.
Book-to-Bill Ratio: Annual book-to-bill ratio lifted to 1.14 for OSS segment, with expectations of 1.2 for 2025.
Composable Infrastructure Opportunity: Expected to be a $200 million multiyear pipeline opportunity for OSS.
Defense Market Opportunities: Potential production orders exceeding $200 million over 3-5 years from U.S. Army's assessment of a new system.
2025 Revenue Projection: Projected consolidated revenue of $59 million to $61 million for 2025, with OSS segment revenue of approximately $30 million.
EBITDA Expectation: Expect to be EBITDA breakeven for the full year of 2025.
Gross Margin Expectations: Expect OSS segment gross margin to improve to mid to upper 30% range in Q1 2025.
Revenue Growth Expectation: Expect revenue and profitability to improve at a higher rate in the second half of 2025.
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Shareholder Return Plan
Share Repurchase Program: None
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Key Q&A
Q:What was it about the mix that pressured the OSS core segment gross margin? What is the lower margin revenue generated in core OSS?
A:The OSS segment gross margin variability is based on the mix of products, with lower margin work shipping in the fourth quarter. The full year 2024 gross margin for OSS was about 36.4%, stable compared to 36.5% in '23.
Q:Is it hardware pass throughs that are driving lower margins?
A:Yes, there were customer-funded NRE impacts and a variety of products with some being higher margin and others lower margin, leading to more lower margin products shipping in the fourth quarter.
Q:How have order delays affected your weighted pipeline and what's addressable in 2025?
A:Despite order delays, the pipeline remains stable with no significant shifts. The addressable pipeline for 2025 is still around $200 million, with increased opportunities being added.
Q:Where is the growth coming from in the OSS segment between commercial and defense markets?
A:Growth is balanced between commercial and defense markets, with opportunities in data centers, medical imaging, and long-term contracts with Raytheon and Lockheed Martin.
Q:Are there areas in the commercial segment where you’re seeing an uptick in orders that you weren’t originally forecasting?
A:Yes, medical imaging is coming on faster than anticipated due to quicker adoption of AI in imaging processing.
Q:How many current product programs under the OSS segment are in development?
A:The exact number wasn't provided, but customer-funded development is a key focus, leading to long-term production opportunities.
Q:Review of Unclear Management Responses
A:Management did not provide a specific number of current product programs under the OSS segment in development, indicating a lack of clarity.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
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OSS Transcript
One Stop Systems, Inc. (OSS) Q3 2025 Earnings Call Transcript
Positive11-5
The earnings call highlights strong financial performance with significant revenue growth, improved gross margins, and a return to profitability. The Q&A section reveals optimism about future opportunities, despite some delays due to the government shutdown. The company is strategically positioned in growing markets like AI and composable infrastructure. While there are some uncertainties regarding the timing of government and commercial contracts, the overall sentiment remains positive due to strong fundamentals and growth prospects.
One Stop Systems, Inc. (OSS) Q2 2025 Earnings Call Transcript
Positive8-9
The earnings call revealed strong financial performance with improved gross margins, reduced net losses, and a positive book-to-bill ratio. Despite some challenges in the Bressner segment, the OSS segment shows promising growth potential, particularly in the defense market. Management's optimistic guidance and strategic AI partnerships further support a positive outlook. However, the lack of concrete details on certain opportunities may temper enthusiasm slightly. Overall, the sentiment leans positive with potential for stock price appreciation.
One Stop Systems, Inc. (OSS) Q1 2025 Earnings Call Transcript
Unknown5-7
The earnings call revealed a mix of positive and negative elements. While there are promising opportunities with the U.S. Army and potential revenue growth in the second half, the current financial performance shows a GAAP net loss, increased operating expenses, and a decline in consolidated revenue. The Q&A highlighted uncertainties and delays due to government budget issues. The lack of a share buyback program and increased losses also contribute to a negative sentiment. Overall, these factors suggest a likely negative stock price movement in the near term.
One Stop Systems, Inc. (OSS) Q4 2024 Earnings Call Transcript
Unknown3-19
Despite some positive elements like expected revenue growth and stable pipeline, the earnings call reveals significant concerns. The sharp decline in gross margins, increased losses, and lack of shareholder return plans are worrying. Regulatory issues, supply chain challenges, and competitive pressures add to the negative sentiment. The Q&A section highlights margin pressures and order delays, with management providing unclear responses. These factors, combined with no share repurchase program and financial losses, suggest a negative stock price reaction.
OSS Report
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