One Stop Systems, Inc. (Nasdaq: OSS), a leader in AI Transportable
solutions on the edge, reported results for the first quarter ended
March 31, 2022. All quarterly comparisons are to the same year-ago
period unless otherwise noted. The company will hold a conference
call at 5:00 p.m. Eastern time today to discuss the results (see
dial-in information below).
Q1 2022 Financial Highlights
- Record revenue $17.1 million, up
28%.
- Gross profit increased 16% to $5.1
million.
- Operating expenses up 8%.
- GAAP net income totaled $579,000 or
$0.03 per share versus $41,000 in the same year-ago quarter.
- Non-GAAP net income increased to
$978,000 or $0.05 per share as compared to $643,000 in the same
year-ago quarter (see definition of this and other non-GAAP
measures and reconciliation to GAAP, below).
- Adjusted non-GAAP EBITDA increased
to $1.4 million compared to $1.1 million in the same year-ago
quarter.
- Cash, cash equivalents and short-term investments totaled of
$15.8 million on March 31, 2022.
Q1 2022 Operational Highlights
- Six new major program wins,
including four in autonomous trucking, further validating the AI
Transportable strategy.
- Now shipping to three autonomous
truck leaders, in proposal phase with two more and in early
discussions with three others.
- Developed Centauri Storage
Accelerator for the AI Transportable market, currently deployed in
the autonomous truck portion of the market.
Management Commentary
“In the first quarter, OSS continued to make strong financial
and operational progress across the board,” commented OSS president
and CEO, David Raun. “Revenue grew 28% over the same year-ago
quarter, setting a record for a first quarter of $17.1 million. For
the second year in a row, we minimized the Q4 to Q1 seasonality to
about 4% as compared to 30% plus drops in prior years.
“This strong quarter over quarter growth included a record first
quarter for our top customer in the media and entertainment space
as their large gathering business, impacted significantly by COVID,
starts to layer back in on top of their newer virtual product
success. Their revenues are now greater than the pre-COVID
environment, with an expectation that we will see continued growth
throughout the year.
“Bressner, our European subsidiary, also performed exceptionally
well with revenue growth of 37%. This helped increase our gross
profit to $5.1 million from $4.4 million in the prior year same
quarter, while pushing our gross margins back over the 30% mark. We
increased overall GAAP net income to $579,000, non-GAAP net income
to almost $1 million, and adjusted EBITDA to $1.4 million—all
significant improvements. Further, while revenue increased 28%, our
operating expenses increased by only 8%.
“This strong performance was accomplished against unprecedented
supply chain headwinds. It seems every industry has been affected
by supply chain disruptions and OSS has been no exception. Long
lead-times, price increases, supply shortages, higher shipping
costs and missed shipments by suppliers continue to make business
more challenging. We have been able to leverage our strong cash,
limited debt, and positive cash flow position to bring in the right
products to support our continued growth.
“During the first quarter and continuing into the present, we
are seeing an acceleration in multiple verticals within the AI
Transportable market. We believe this further validates our new
growth strategy implemented last year, including the development
and introduction of more scalable standard products.
“Our flagship Rigel platform, a compact and rugged supercomputer
introduced late last year, and our recently introduced Centauri
Storage Accelerator, have been well received. While these products
are generating interest in multiple AI Transportable markets,
Centauri was co-defined with multiple autonomous truck leaders to
help address a need in this fast-growing market. Autonomous
trucking is a perfect example of an exciting market that demands
‘performance without compromise,’ and where we believe we can
leverage our superior technology for AI deployed in harsh
environments.
“Our recent progress in the area of AI Transportables for
autonomous trucks includes four confirmed program wins in Q1,
bringing the total to five for OSS storage and compute standard
products in this developing multi-billion-dollar vertical. We are
currently shipping products to three of the market leaders, are in
the proposal phase with two more, and pursuing others.
“Our ability to lead with technology like PCIe Gen 5 is one of
our differentiating capabilities in our highly fragmented
competitive landscape. We recently posted through social media
channels the industry’s first known successful Gen 5 PCI Express
over copper cable test. We look forward to official product
releases, demonstrations, and product shipments of this
leading-edge technology throughout the year.
“Looking ahead, our objective remains clear: leadership in the
fast-growing AI Transportable market. This includes enabling new
verticals with ‘performance without compromise’ in some of the most
challenging environments where the fragmented competitive landscape
struggles to participate.
“This enablement is just the beginning. We are starting to lay
the foundation to be the supplier not only in the early stage, but
also when the market develops and high-volume shipments begin. We
anticipate that AI Transportables can, over time, drive significant
positive bottom-line results and generate greater stockholder
value.
“As I believe we have demonstrated, we have provided solid
financial results from our traditional customer base and
applications. Although our value proposition in some of these
historic businesses, like media and entertainment as well as
Bressner in Europe, may not generate the margin percentages that we
seek in future years, they generate positive margin dollars and
income for OSS. We are pleased this part of our business continues
to grow and help fund our AI Transportable investments.”
Outlook
For the second quarter of 2022, OSS expects revenue of
approximately $17.3 million, which would represent 15% growth over
the second quarter of last year.
Q1 2022 Financial Summary
Revenue in the first quarter of 2022 totaled $17.1 million, up
28% compared to $13.3 million in the same year-ago quarter.
The company’s core OSS business revenue increased 23% to $10.6
million in the first quarter of 2022, as compared to the same
year-ago quarter. Bressner, the company’s European subsidiary,
revenue increased 37.3% to $6.5 million.
Gross profit increased $708,000, to $5.1 million. The gross
margin for the company’s core OSS business sequentially improved
from 33.2% in Q4-2021 to 35.7%, but experienced a decrease of 2.2
percentage points from the prior year same quarter due to the
continued growth and success of the company’s media and
entertainment customer. Bressner’s gross margin percentage
sequentially improved from 19.4% in Q4 2021 to 21.0% in Q1 2022,
but represented a decrease from 24.9% in the prior year same
quarter due to exchange rates and increases in material and
transportation costs.
Overall gross margin was 30.1% for the quarter, a sequential
improvement from 28.3% in Q4 2021, but a 3.2 percentage point
decrease compared to the prior year same quarter of 33.3%. Much of
these changes in margins were primarily attributable to the
strength of the media and Bressner business and due to the timing
of shipments to the company’s largest military customers.
Historically the predominance of these shipments has occurred in Q3
and Q4, and will be consistent with the company’s shipping schedule
for this year. However, in the prior year, there were strong
shipments in Q1-2021 due to deferred shipments from Q4 2020. While
the margin percentage is lower, profitability is higher.
GAAP net income totaled $579,000 or $0.03 per share compared to
a net income of $41,000 or $0.00 per share in the same year-ago
period.
Non-GAAP net income totaled $978,000 or $0.05 per share, as
compared to $643,000 or $0.03 per diluted share in the same
year-ago period.
Adjusted EBITDA, a non-GAAP term, totaled $1.4 million compared
to $1.1 million in the same year-ago period.
On March 31, 2022, cash and cash equivalents totaled $2.2
million with short-term investments of $13.6 million, combining for
$15.8 million. This compares to cash and cash equivalents and
short-term investments totaling $19.6 million on December 31,
2021.
While OSS is cash flow positive, we are purposely putting our
strong cash position to work with carefully thought-out inventory
investments. Cash provides the stability and flexibility to be
responsive to changes in our business and to issues imposed by
external global economic influences.
New Corporate Presentation with Audio
Narrative
OSS encourages you to visit the company’s investor relations
website at https://onestopsystems.com/pages/presentations to view
its latest corporate presentation that has more information and
color on the topics it covered today. There are two versions. One
is a standard PDF and the other has a voice over by CEO, David
Raun, in an mp4 file available here.
Annual General Meeting of Stockholders
The company has set May 18, 2022, as the date of its Annual
Meeting of Stockholders to be held at 11:00 a.m. Pacific time. The
Annual Meeting will be a virtual meeting of stockholders, meaning
stockholders will be able to attend the Annual Meeting as well as
vote during the live webcast of the meeting by visiting
www.proxydocs.com/OSS.
Conference Call
OSS management will hold a conference call to discuss its first
quarter 2022 results later today, followed by a question-and-answer
period.
Date: Thursday, May 12, 2022Time: 5:00 p.m. Eastern time (2:00
p.m. Pacific time)Toll-free dial-in number:
1-888-224-1005International dial-in number:
1-786-789-4797Conference ID: 1230393Webcast: here (live and
replay)
The webcast will include a slide presentation viewable via the
webcast link above.
Approximately two hours after the Q&A session, an archived
version of the webcast will be available in the Investors section
of the company’s website at 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 26, 2022.
Toll-free replay number: 1-844-512-2921International replay
number: 1-412-317-6671Replay ID: 1230393
Non-GAAP Financial MeasuresThe company 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, the company 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 the company 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 the company’s 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. The company does not consider adjusted EBITDA
to be a substitute for, or superior to, the information provided by
GAAP financial results.
|
For the Three Months EndedMarch
31, |
|
|
2022 |
|
|
2021 |
|
Net income |
$ |
579,234 |
|
|
$ |
41,198 |
|
Depreciation and amortization |
|
269,791 |
|
|
|
380,778 |
|
Stock-based compensation expense |
|
382,828 |
|
|
|
438,394 |
|
Interest expense |
|
58,715 |
|
|
|
149,982 |
|
Interest income |
|
(51,005 |
) |
|
|
(5,300 |
) |
Provision for income taxes |
|
165,308 |
|
|
|
60,522 |
|
Adjusted EBITDA |
$ |
1,404,871 |
|
|
$ |
1,065,574 |
|
|
|
|
|
|
|
|
|
Adjusted EPS excludes the impact of certain items, and
therefore, has not been calculated in accordance with GAAP. The
company 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 the
company’s peer company index and industry. The company uses this
measure along with the corresponding GAAP financial measures to
manage the company’s business and to evaluate the company’s
performance compared to prior periods and the marketplace. The
company defines non-GAAP income (loss) as income or (loss) before
amortization, stock-based compensation, expenses related to
discontinued operations, impairment of long-lived assets and
non-recurring 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. The company
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 non-GAAP net income (loss) and
basic and diluted earnings per share:
|
For the Three Months EndedMarch
31, |
|
|
2022 |
|
|
2021 |
|
Net income |
$ |
579,234 |
|
|
$ |
41,198 |
|
Amortization of intangibles |
|
15,809 |
|
|
|
163,900 |
|
Stock-based compensation expense |
|
382,828 |
|
|
|
438,394 |
|
Non-GAAP net income |
$ |
977,871 |
|
|
$ |
643,492 |
|
Non-GAAP net income per
share: |
|
|
|
|
|
|
|
Basic |
$ |
0.05 |
|
|
$ |
0.04 |
|
Diluted |
$ |
0.05 |
|
|
$ |
0.03 |
|
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
Basic |
|
18,886,939 |
|
|
|
17,348,164 |
|
Diluted |
|
19,764,069 |
|
|
|
18,642,061 |
|
|
|
|
|
|
|
|
|
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
major program wins, revenue growth generated by new and existing
products, 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 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
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 |
|
|
Audited |
|
|
March 31, |
|
|
December 31, |
|
|
2022 |
|
|
2021 |
|
ASSETS |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
2,219,800 |
|
|
$ |
5,101,174 |
|
Short-term investments |
|
13,540,410 |
|
|
|
14,535,750 |
|
Accounts receivable, net |
|
9,077,449 |
|
|
|
5,089,804 |
|
Inventories, net |
|
16,430,384 |
|
|
|
12,277,873 |
|
Prepaid expenses and other current assets |
|
1,055,181 |
|
|
|
580,651 |
|
Total current assets |
|
42,323,224 |
|
|
|
37,585,252 |
|
Property and equipment, net |
|
2,870,065 |
|
|
|
3,091,415 |
|
Operating lease right-of-use
assets |
|
1,082,774 |
|
|
|
- |
|
Deposits and other |
|
35,629 |
|
|
|
46,845 |
|
Deferred tax assets, net |
|
3,568,566 |
|
|
|
3,641,032 |
|
Goodwill |
|
7,120,510 |
|
|
|
7,120,510 |
|
Intangible assets, net |
|
89,577 |
|
|
|
105,385 |
|
Total Assets |
$ |
57,090,345 |
|
|
$ |
51,590,439 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Accounts payable |
$ |
4,393,220 |
|
|
$ |
2,059,059 |
|
Accrued expenses and other liabilities |
|
3,717,944 |
|
|
|
3,846,488 |
|
Current portion of operating lease obligation |
|
545,642 |
|
|
|
- |
|
Current portion of notes payable |
|
2,219,128 |
|
|
|
1,137,651 |
|
Current portion of senior secured convertible note, net of debt
discounts of $0 and $2,384, respectively |
|
- |
|
|
|
2,588,525 |
|
Total current liabilities |
|
10,875,934 |
|
|
|
9,631,723 |
|
Operating lease obligation,
net of current portion |
|
794,427 |
|
|
|
- |
|
Total liabilities |
|
11,670,361 |
|
|
|
9,631,723 |
|
Commitments and
contingencies |
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
|
Common stock, $0.0001 par value; 50,000,000 shares authorized;
19,914,548 and 18,772,214 shares issued and outstanding,
respectively |
|
1,991 |
|
|
|
1,877 |
|
Additional paid-in capital |
|
44,215,256 |
|
|
|
41,232,441 |
|
Accumulated other comprehensive income |
|
96,999 |
|
|
|
153,361 |
|
Accumulated earnings |
|
1,105,738 |
|
|
|
571,037 |
|
Total stockholders’ equity |
|
45,419,984 |
|
|
|
41,958,716 |
|
Total Liabilities and Stockholders' Equity |
$ |
57,090,345 |
|
|
$ |
51,590,439 |
|
|
|
|
|
|
|
|
|
ONE STOP SYSTEMS, INC.
(OSS)UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS
|
For the Three Months Ended March 31, |
|
2022 |
|
|
2021 |
|
Revenue |
$ |
17,052,677 |
|
|
$ |
13,315,752 |
|
Cost of revenue |
|
11,912,022 |
|
|
|
8,882,968 |
|
Gross profit |
|
5,140,655 |
|
|
|
4,432,784 |
|
Operating expenses: |
|
|
|
|
|
|
|
General and administrative |
|
1,774,689 |
|
|
|
2,157,619 |
|
Marketing and selling |
|
1,471,720 |
|
|
|
1,167,901 |
|
Research and development |
|
1,244,115 |
|
|
|
832,233 |
|
Total operating expenses |
|
4,490,524 |
|
|
|
4,157,753 |
|
Income from operations |
|
650,131 |
|
|
|
275,031 |
|
Other income (expense),
net: |
|
|
|
|
|
|
|
Interest income |
|
51,005 |
|
|
|
5,300 |
|
Interest expense |
|
(58,715 |
) |
|
|
(149,982 |
) |
Other income (expense), net |
|
102,121 |
|
|
|
(28,629 |
) |
Total other income (expense), net |
|
94,411 |
|
|
|
(173,311 |
) |
Income before income
taxes |
|
744,542 |
|
|
|
101,720 |
|
Provision for income
taxes |
|
165,308 |
|
|
|
60,522 |
|
Net income |
$ |
579,234 |
|
|
$ |
41,198 |
|
Net income per share: |
|
|
|
|
|
|
|
Basic |
$ |
0.03 |
|
|
$ |
0.00 |
|
Diluted |
$ |
0.03 |
|
|
$ |
0.00 |
|
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
Basic |
|
18,886,939 |
|
|
|
17,348,164 |
|
Diluted |
|
19,764,069 |
|
|
|
18,642,061 |
|
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