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 for the second consecutive quarter, indicating future growth momentum, driven by defense and commercial aerospace markets.

• Customer-funded development revenue rose to $1.4 million in Q2 2024 from $365,000 in Q1 2024, supporting future multiyear contracts.

• Strategic investments in product development, program management, and sales leadership to support growth in defense and commercial markets.

• The company is shifting focus to AI Transportables and military/defense sectors, with increased investment in marketing and sales.

Financial highlights

• Q2 2024 consolidated revenue: $13.2 million, down from $17.2 million year-over-year, but exceeding guidance of $13 million.

• Q2 2024 gross margin was 25.2%, down from 27.9% in Q2 2023, due to under-absorption of production capacity and higher inventory reserves.

• GAAP net loss for Q2 2024 was $2.3 million ($0.11/share) vs. $2.4 million ($0.12/share) prior year; non-GAAP net loss was $1.8 million ($0.09/share) vs. $84,000 ($0.00/share) prior year.

• Adjusted EBITDA loss was $1.3 million, compared to positive $520,000 in Q2 2023.

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

Outlook and guidance

• Q3 2024 consolidated revenue expected at $13.3 million, with OSS segment revenue of $6.3 million (15% year-over-year growth).

• 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.