One Stop Systems(US:OSS)2022-05-12 20:06Revenue Performance - Total revenue for the three months ended March 31, 2022, increased by $3,736,925, or 28%, compared to the same period in 2021[154] - OSS's revenue increased by $1,980,071, or 23%, primarily due to increased shipments to media and entertainment customers[154] - Bressner's revenue improved by $1,756,854, or 37.3%, attributed to economic recovery in Europe as the impact of COVID-19 diminished[154] Cost of Revenue - Cost of revenue for the three months ended March 31, 2022, increased by $3,029,054, or 34.1%, compared to the prior year[155] - OSS's cost of revenue rose by $1,460,349, or 27.3%, mainly due to improved sales to media and entertainment customers[155] - Bressner's cost of revenue increased by $1,568,705, or 44.3%, primarily due to higher sales and changes in product mix[155] Gross Margin - Overall gross margin percentage decreased from 33.3% in March 2021 to 30.1% in March 2022, a decline of 3.2 percentage points[156] - OSS's gross margin percentage for the three months ended March 31, 2022, was 35.7%, down 2.2 percentage points from 37.9% in the prior year[156] - Bressner's gross margin decreased to 21% from 24.9% in the prior year, primarily due to increased material and transportation costs[156] Management Strategy - Management plans to control costs, conserve cash, strengthen margins, and improve execution in response to the changing economic landscape[139] Operating Expenses - General and administrative expenses decreased by $382,930, or 17.8%, to 10.4% of revenue for the three months ended March 31, 2022, compared to 16.2% in the same period in 2021[157] - Selling and marketing expenses increased by $303,819, or 26%, to 8.6% of revenue for the three months ended March 31, 2022, compared to 8.8% in the same period in 2021[158] - Research and development expenses increased by $411,882, or 49.5%, to 7.3% of revenue for the three months ended March 31, 2022, compared to 6.2% in the same period in 2021[159] Cash Flow and Liquidity - Net cash used in operating activities was $5,018,398 for the three months ended March 31, 2022, a decrease of $9,309,464 compared to cash provided of $4,291,066 in the same period in 2021[175] - Cash generated from investing activities was $1,028,504 for the three months ended March 31, 2022, compared to cash used of $121,759 in the prior year, an improvement of $1,150,263[178] - Cash generated from financing activities was $1,131,345 for the three months ended March 31, 2022, compared to $9,173,593 in the same period in 2021[179] - The company had $2,219,800 in cash and cash equivalents as of March 31, 2022, down from $5,101,174 at the end of 2021, indicating a liquidity contraction[194] Tax and Income - The company recorded an income tax provision of $165,308 for the three months ended March 31, 2022, compared to $60,522 in the same period in 2021[163] - The annual expected tax rate for 2022 is anticipated to be approximately 20.66%[163] - For the three months ended March 31, 2022, net income was $579,234, compared to $41,198 for the same period in 2021, representing a significant increase[203] - Non-GAAP net income for the three months ended March 31, 2022, was $977,871, compared to $643,492 in 2021, showing an increase of approximately 52%[206] - Basic adjusted EPS for the three months ended March 31, 2022, was $0.05, compared to $0.04 in the same period in 2021, reflecting a 25% increase[206] EBITDA - Adjusted EBITDA for the three months ended March 31, 2022, was $1,404,871, up from $1,065,574 in the prior year, indicating a growth of approximately 31.8%[203] Free Cash Flow - Free cash flow for the three months ended March 31, 2022, was $(5,104,239), a decrease from $4,169,307 in the same period of 2021, reflecting a negative cash flow trend[209] Interest and Borrowing - Interest income increased by $45,705 for the three months ended March 31, 2022, due to interest on marketable securities purchased in April 2021[160] - Interest expense for the three months ended March 31, 2022, was $58,715, down from $149,982 in the prior year, indicating a reduction in borrowing costs[203] Currency Risk Management - The company is exposed to foreign currency risk primarily through its operations in Germany, where transactions are conducted in Euros, affecting financial results due to exchange rate fluctuations[196] - The company employs derivatives to manage market risks, specifically using foreign exchange forward contracts to hedge against currency fluctuations[198] Accounting Changes - The company adopted ASU No. 2016-02, Leases, effective January 1, 2022, which requires recognition of lease liabilities and right-of-use assets[192]