One Stop Systems (OSS) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue reached $13.2 million, a sequential increase but down 23.3% year-over-year due to the loss of a major media customer and European market softness.

• OSS segment orders outpaced revenue by over 20% for the second consecutive quarter, indicating future growth momentum in defense and commercial aerospace markets.

• Customer-funded development revenue rose to $1.4 million in Q2 2024 from $365,000 in the prior quarter, supporting future multiyear contracts.

• Strategic investments in product development, program management, and sales to support growth in AI Transportables and military/defense sectors.

• Net loss for Q2 2024 was $2.3 million ($0.11/share), compared to $2.4 million ($0.12/share) last year.

Financial highlights

• Q2 2024 consolidated revenue: $13.2 million, down from $17.2 million year-over-year.

• Gross margin was 25.2%, down from 27.9% last year, due to under-absorption and higher inventory reserves.

• Adjusted EBITDA loss was $1.3 million, compared to positive $520,000 last year.

• Cash and short-term investments at June 30, 2024: $11.8 million; working capital: $32.6 million.

• Free cash flow for H1 2024 was $1.02 million, down from $1.75 million in H1 2023.

Outlook and guidance

• Q3 2024 consolidated revenue expected at $13.3 million, with OSS segment revenue up 15% year-over-year to $6.3 million.

• Management anticipates continued sequential growth, with some orders pushed to Q4 due to timing.

• Expects softness in European markets to persist through 2024, with recovery in 2025.

• Focus remains on cost control, cash conservation, and margin improvement while targeting new defense and industrial contracts.

• Sufficient liquidity is expected for at least the next twelve months, with access to a $2 million undrawn credit line.