One Stop Systems, Inc. (Nasdaq: OSS), a leader in AI Transportable™
solutions on the edge, reported results for the first quarter ended
March 31, 2021. All quarterly comparisons are to the same year-ago
period. The company will hold a conference call at 5:00 p.m.
Eastern time today to discuss the results (see dial-in information
below.)
Financial Highlights
- Revenue totaled $13.3 million,
matching previous record.
- Gross margin was 33.3%, up 790 basis
points.
- Operating expenses decreased 15.3%
to $4.2 million.
- GAAP net income totaled $41,000 or
$0.00 per share, up $1.1 million.
- Non-GAAP net income was $643,000, up
$1.4 million (see definition of this and other non-GAAP measures
and reconciliation to GAAP, below).
- Adjusted EBITDA was $1.1 million, up
$2.0 million.
- Cash and cash equivalents totaled $19.6 million at March 31,
2021, up from $6.3 million at December 31, 2020. During the
quarter, raised net proceeds of approximately $9.2 million with a
registered direct offering.
Operational Highlights
- New program wins continued at a
strong pace with three new $1 million-plus programs, including two
representing new customers.
- Secured first production orders for
a ruggedized-edge, transportable system from a self-driving truck
technology company that utilizes level 4 driving automation.
- Received fourth program win with a
major military prime contractor which involves building an AI
system consisting of a cluster of three OSS custom GPU-accelerated
rugged servers.
- Introduced ExpressBox 4400 (EB4400)
which was designed to support challenging AI Transportable
applications such as autonomous trucks. It can expand a host
processor system with up to four of the latest PCI Express Gen 4
datacenter-class GPUs.
Financial Summary
Revenue in the first quarter of 2021 totaled
$13.3 million as compared to the record Q1 of $13.4 million in the
same year-ago quarter. Although the higher margin OSS core business
improved, it was offset by a modest decrease in Bressner
revenue.
Gross profit was $4.4 million or 33.3% of
revenue, up from $3.4 million or 25.4% of revenue in Q1 2020. The
significant improvement in quarterly margin was attributed to a
higher mix of government business of $2 million, with this revenue
primarily generated by three of the company’s 2020 design wins,
including Datacenter in the Sky, Data Storage Units and 4U Pro.
Operating expenses decreased 15.3% to $4.2
million compared to $4.9 million in the same year-ago quarter.
Operating expenses as a percentage of revenue decreased to 31.2% in
the first quarter of 2021 versus 36.7% in the year-ago quarter.
These improvements were primarily due to the cost reduction
initiative that the company implemented in April 2020, including
streamlining and reorganizing the company, and implementing new
cost containment programs.
Net income on a GAAP basis totaled $41,000 or
$0.00 per basic and diluted share compared to a net loss of $1.1
million or $(0.07) per basic and diluted share in the year-ago
period.
Non-GAAP net income totaled $643,000 or $0.03
per diluted share, as compared to a non-GAAP net loss of $714,000
or $(0.04) per basic and diluted share in the same year-ago
period.
Adjusted EBITDA, a non-GAAP term, totaled $1.1
million as compared to negative $1.0 million in the same year-ago
period.
Cash and cash equivalents totaled $19.6 million
as of March 31, 2021, as compared to $6.3 million at December 31,
2021. During the first quarter, the company raised net proceeds of
approximately $9.2 million from a registered direct offering and
improvements in working capital. As of May 2021, the company
received notification that the PPP loan of $1.5 million was
forgiven. The company believes its cash position and other
available funds provides sufficient liquidity to meet its cash
requirements for working capital and paying down debt, while also
supporting the company’s growth and strategic initiatives.
Management Commentary
“We drove a $2 million improvement in adjusted
EBITDA over the first quarter of 2020 on similar revenues,” stated
OSS president and CEO, David Raun. “This result was a combination
of increased gross margin of 7.9 percentage points and decreased
expenses of $749,000, which generated positive adjusted EBITDA of
$1.1 million—a record for an OSS first quarter. We also produced
first quarter GAAP net income as another first for the company.
“We also exceeded our top-line revenue
expectations for the first quarter by more than $300,000, nearly
matching last year’s first quarter, which was a record first
quarter for OSS unhindered by the pandemic. This was a direct
result of continued improvement with some of our largest customers
as well as progress on the diversification front.
“This strong performance was the direct result
of the transformative steps we took last year that laid a new
foundation for better bottom-line execution and growth. These steps
included new senior leadership and corporate reorganization,
reduced spending, focus on margins and an enhanced value
proposition, while also adding three new independent board
members.
“The results also reflect how we have been
executing on a new long-term strategic vision and product road map.
This multi-year plan is designed to strengthen our market position
and value proposition in a fast-growing segment of the edge
computing market that we call AI Transportables™.
“AI Transportables are mobile, high-performance
computing systems delivering the latest in high-performance data
acquisition, storage and accelerated computing for AI applications,
particularly where actionable intelligence is required at that very
edge. These tend to be applications that are in challenging or
harsh environments, which play to our strengths.
“Our AI Transportable solutions are currently
the fastest-growing, highest margin segment of our business. It
contributed over one fourth of total revenue in Q1. A perfect
example is our recent win of a long-haul trucking program for our
new AI Transportables EB4400 solution. This marked our second
significant program win for autonomous vehicles and it is an
excellent example of additional products we are developing to
address this quickly expanding market.
“For additional information on our AI
Transportable strategy and market position, please visit our
Investors section of our web site for a video presentation we
posted today.
“Looking ahead, we continue to have our sights
on higher margin strategic sales, the further diversification of
our customer base, and our new AI Transportables market
initiatives. We expect this focus to drive revenue growth and
industry expansion opportunities for OSS throughout the rest of the
year and beyond.
“To support this focus, we will continue to use
our expertise and industry-leading capabilities to bring the
performance of the datacenter to the very edge without compromise.
We are now well positioned to aggressively capitalize on this
growing market and further carve out a leadership position in AI
Transportables. I look forward to updating you with our progress in
this exciting, fast-growing space that leverages our greatest
strengths.
“Now that we’re about halfway through the second
quarter, we can provide a revenue expectation of about $14.4
million for the quarter. This represents more than 24% growth over
the second quarter of last year. We also expect the fundamental
improvements we’ve made throughout the organization to also
continue to drive positive bottom-line results and generate greater
shareholder value. Assuming continuing societal health and industry
restoration, we see our progress gaining momentum on all fronts,
including revenue growth.”
OutlookFor the second quarter of 2021, OSS
expects revenue of approximately $14.4 million which would be an
increase of 8.3% sequentially and 24% versus the same year-ago
quarter.
Conference CallOSS management will hold a
conference call to discuss its first quarter 2021 results later
today, followed by a question-and-answer period.
Date: Thursday, May 13, 2021Time: 5:00 p.m. Eastern time (2:00
p.m. Pacific time)Toll-free dial-in number:
1-800-437-2398International dial-in number:
1-786-204-3966Conference ID: 9721579
The conference call will be webcast live and
available for replay here as well as via a link in the Investors
section of the company’s website at ir.onestopsystems.com. OSS
regularly uses its website to disclose material and non-material
information to investors, customers, employees and others
interested in the company.
Please call the conference telephone number five
minutes prior to the start time. An operator will register your
name and organization. If you have any difficulty connecting with
the conference call, please contact CMA at 1-949-432-7566.
A replay of the call will be available after
8:00 p.m. Eastern time on the same day through May 27, 2021.
Toll-free replay number:
1-844-512-2921International replay number: 1-412-317-6671Replay ID:
9721579
About One Stop SystemsOne Stop
Systems, Inc. (OSS) designs and manufactures innovative AI
Transportable edge computing modules and systems, including
ruggedized servers, compute accelerators, expansion systems, flash
storage arrays and Ion Accelerator™ SAN, NAS and data recording
software for AI workflows. These products are used for AI data set
capture, training, and large-scale inference in the defense, oil
and gas, mining, autonomous vehicles and rugged entertainment
applications. OSS utilizes the power of PCI Express,
the latest GPU accelerators and NVMe storage to build award-winning
systems, including many industry firsts, for industrial OEMs and
government customers. The company enables AI on the Fly® by
bringing AI datacenter performance to ‘the edge’, especially on
mobile platforms, and by addressing the entire AI workflow, from
high-speed data acquisition to deep learning, training and
inference. OSS products are available directly or through global
distributors. For more information, go to
www.onestopsystems.com.
Non-GAAP Financial
MeasuresManagement believes 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 expenses, impairment of long-lived assets, financing
costs, 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, management believes that providing a non-GAAP
financial measure that excludes non-cash and non-recurring expenses
allows for meaningful comparisons between the company’s core
business operating results and those of other companies, as well as
providing management with an important tool for financial and
operational decision making and for evaluating the company’s own
core business operating results over different periods of
time. The company’s adjusted EBITDA measure may not
provide information that is directly comparable to that provided by
other companies in its industry, as other companies in the
company’s industry may calculate non-GAAP financial results
differently, particularly related to non-recurring, unusual items.
The Company’s 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. Management does not consider adjusted EBITDA
to be a substitute for, or superior to, the information provided by
GAAP financial results.
Adjusted EBITDA |
|
For the Three MonthsEnded March
31, |
|
|
|
2021 |
|
|
|
2020 |
|
Net income (loss) attributable to
common stockholders |
|
$ |
41,198 |
|
|
$ |
(1,096,032 |
) |
Depreciation and amortization |
|
|
380,778 |
|
|
|
395,825 |
|
Amortization of deferred gain |
|
|
- |
|
|
|
(41,479 |
) |
Stock-based compensation expense |
|
|
438,394 |
|
|
|
207,761 |
|
Interest income |
|
|
(5,300 |
) |
|
|
(24,637 |
) |
Interest expense |
|
|
149,982 |
|
|
|
68,784 |
|
Provision (benefit) for income taxes |
|
|
60,522 |
|
|
|
(467,298 |
) |
Adjusted EBITDA |
|
$ |
1,065,574 |
|
|
$ |
(957,076 |
) |
Adjusted EPS excludes the impact of certain
items and therefore has not been calculated in accordance with
GAAP. Management believes that exclusion of certain selected items
assists in providing a more complete understanding of the company’s
underlying results and trends and allows for comparability with its
peer company index and industry. Management uses this measure along
with the corresponding GAAP financial measures to manage the
company’s business and to evaluate its performance compared to
prior periods and the marketplace. The Company defines Non-GAAP
(loss) income as (loss) or income before amortization, stock-based
compensation, expenses related to discontinued operations,
impairment of long-lived assets and non-recurring acquisition
costs. Adjusted EPS expresses adjusted (loss) income 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.
Management expects 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 the company’s presentation of these non-GAAP financial
measures that these costs are unusual, infrequent or
non-recurring.
The following table reconciles net loss attributable to common
stockholders and diluted earnings per share:
Adjusted Earnings Per Share |
|
For the Three MonthsEnded March
31, |
|
|
|
2021 |
|
|
2020 |
|
Net income (loss) attributable
to common stockholders |
|
$ |
41,198 |
|
$ |
(1,096,032 |
) |
Amortization of intangibles |
|
|
163,900 |
|
|
174,525 |
|
Stock-based compensation expense |
|
|
438,394 |
|
|
207,761 |
|
Non-GAAP net income
attributable to common stockholders |
|
$ |
643,492 |
|
$ |
(713,746 |
) |
|
|
|
|
|
Non-GAAP net income per share
attributable to common stockholders: |
|
|
|
|
Basic |
|
$ |
0.04 |
|
$ |
(0.04 |
) |
Diluted |
|
$ |
0.03 |
|
$ |
(0.04 |
) |
Weighted average common shares
outstanding: |
|
|
|
|
Basic |
|
|
17,348,164 |
|
|
16,332,898 |
|
Diluted |
|
|
18,642,061 |
|
|
16,332,898 |
|
Forward-Looking StatementsOne
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, to our management’s
expectations for revenue growth generated by new products and
design wins. 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 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 we
undertake 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 Contact: Katie RiveraOne Stop Systems,
Inc. Tel (760) 745-9883Email contact
Investor Relations:Ronald Both or Justin
LumleyCMATel (949) 432-7557 Email contact
ONE STOP SYSTEMS, INC. (OSS)
UNAUDITED CONSOLIDATED BALANCE
SHEETS
|
|
Unaudited |
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
ASSETS |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
19,614,315 |
|
|
$ |
6,316,921 |
|
Accounts receivable, net |
|
5,733,675 |
|
|
7,458,383 |
|
Inventories, net |
|
9,548,960 |
|
|
9,647,504 |
|
Prepaid expenses and other current assets |
|
889,043 |
|
|
655,708 |
|
Total current assets |
|
35,785,993 |
|
|
24,078,516 |
|
Property and equipment, net |
|
3,368,959 |
|
|
3,487,178 |
|
Deposits and other |
|
45,136 |
|
|
81,709 |
|
Deferred tax assets, net |
|
3,638,073 |
|
|
3,698,593 |
|
Goodwill |
|
7,120,510 |
|
|
7,120,510 |
|
Intangible assets, net |
|
498,357 |
|
|
662,257 |
|
|
|
$ |
50,457,028 |
|
|
$ |
39,128,763 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable |
|
$ |
2,735,695 |
|
|
$ |
976,420 |
|
Accrued expenses and other liabilities |
|
3,585,102 |
|
|
3,481,444 |
|
Current portion of notes payable, net of debt discount of $292 and
$2,047, respectively |
|
1,190,065 |
|
|
1,365,204 |
|
Current portion of related party notes payable, net of debt
discount of $962 and $6,726, respectively |
|
50,685 |
|
|
199,943 |
|
Current portion of senior secured convertible note, net of debt
discounts of $165,731 and $256,242, respectively |
|
2,288,814 |
|
|
1,789,212 |
|
Total current liabilities |
|
9,850,361 |
|
|
7,812,223 |
|
Senior secured convertible
note, net of current portion and debt discounts of $0 and
$14,107 |
|
136,364 |
|
|
531,347 |
|
Paycheck protection program
note payable |
|
1,499,360 |
|
|
1,499,360 |
|
Total liabilities |
|
11,486,085 |
|
|
9,842,930 |
|
Commitments and contingencies |
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
Common stock, $.0001 par value; 50,000,000 shares authorized;
18,502,902 and 16,684,424 shares issued and
outstanding, respectively |
|
1,850 |
|
|
1,668 |
|
Additional paid-in capital |
|
40,652,472 |
|
|
30,758,354 |
|
Accumulated other comprehensive income |
|
37,159 |
|
|
287,547 |
|
Accumulated deficit |
|
(1,720,538 |
) |
|
(1,761,736 |
) |
Total stockholders’ equity |
|
38,970,943 |
|
|
29,285,833 |
|
|
|
$ |
50,457,028 |
|
|
$ |
39,128,763 |
|
|
|
|
|
|
|
|
ONE STOP SYSTEMS, INC. (OSS)
UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS
|
|
For the Three Months Ended March 31, |
|
|
|
2021 |
|
|
|
2020 |
|
Revenue |
|
$ |
13,315,752 |
|
|
$ |
13,359,637 |
|
Cost of revenue |
|
|
8,882,968 |
|
|
|
9,963,950 |
|
Gross profit |
|
|
4,432,784 |
|
|
|
3,395,687 |
|
Operating expenses: |
|
|
|
|
General and administrative |
|
|
2,157,619 |
|
|
|
2,514,065 |
|
Marketing and selling |
|
|
1,167,901 |
|
|
|
1,189,351 |
|
Research and development |
|
|
832,233 |
|
|
|
1,203,425 |
|
Total operating expenses |
|
|
4,157,753 |
|
|
|
4,906,841 |
|
Income (loss) from operations |
|
|
275,031 |
|
|
|
(1,511,154 |
) |
Other income (expense),
net: |
|
|
|
|
Interest income |
|
|
5,300 |
|
|
|
24,637 |
|
Interest expense |
|
|
(149,982 |
) |
|
|
(68,784 |
) |
Other income (expense), net |
|
|
(28,629 |
) |
|
|
(8,029 |
) |
Total other income (expense), net |
|
|
(173,311 |
) |
|
|
(52,176 |
) |
Income (loss) before income
taxes |
|
|
101,720 |
|
|
|
(1,563,330 |
) |
Provision (benefit) for income
taxes |
|
|
60,522 |
|
|
|
(467,298 |
) |
Net income (loss) |
|
$ |
41,198 |
|
|
$ |
(1,096,032 |
) |
Net income (loss) per share: |
|
|
|
|
Basic |
|
$ |
0.00 |
|
|
$ |
(0.07 |
) |
Diluted |
|
$ |
0.00 |
|
|
$ |
(0.07 |
) |
Weighted average common shares
outstanding: |
|
|
|
|
Basic |
|
|
17,348,164 |
|
|
|
16,332,898 |
|
Diluted |
|
|
18,642,061 |
|
|
|
16,332,898 |
|
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