One Stop Systems (OSS) Q3 2024 earnings summary

Executive summary

• Q3 2024 consolidated revenue was $13.7 million, nearly flat year-over-year, with OSS segment up 17.5% and Bressner down 12.2% due to weak European markets.

• Net loss for Q3 2024 widened to $6.8 million (32 cents/share), driven by a $6.1 million inventory obsolescence charge.

• Orders in the OSS segment outpaced revenue by 25% for the third consecutive quarter, driven by both defense and commercial markets.

• For the nine months ended September 30, 2024, revenue declined 17.2% year-over-year to $39.6 million, mainly from the loss of a major media customer and weaker German market.

• Leadership transition: CFO John Morrison retired, succeeded by Daniel Gabel.

Financial highlights

• Q3 2024 consolidated revenue was $13.7 million, exceeding guidance but slightly down year-over-year due to Bressner segment decline.

• Q3 2024 gross margin was negative 12.5% (including inventory charge); excluding the charge, it was 32%.

• Adjusted EBITDA loss was $6 million in Q3 2024, and $8 million for the nine months ended September 30, 2024.

• Free cash flow for nine months was $1.84 million, up from $(0.15) million in 2023.

• Cash and short-term investments totaled $12.6 million as of September 30, 2024; working capital was $26.7 million.

Outlook and guidance

• Q4 2024 consolidated revenue expected to be approximately $15 million.

• OSS segment Q4 revenue guidance is $7 million (over 9% year-over-year growth); Bressner segment expected at $8 million (17% growth due to easier comparison).

• 2024 is seen as a foundation for sustainable year-over-year revenue growth and a return to profitability in 2025.

• OSS segment revenue growth of 25% anticipated for 2025; Bressner segment expected to return to growth by Q2 2025.

• Management expects to focus on new customer orders, cost control, and margin improvement to offset lost media customer revenue.