One Stop Systems(US:OSS)2022-08-11 20:05Revenue and Income - Revenue for Q2 2022 was $18,303,343, an increase of 22.5% compared to $14,905,009 in Q2 2021[151] - Net income for Q2 2022 was $322,822, a significant decrease from $1,697,122 in Q2 2021[151] - Total revenue for the three months ended June 30, 2022, increased by $3,398,334, or 22.8%, compared to the same period in 2021, with OSS revenue up by $1,612,926 (17.7%) and Bressner revenue up by $1,785,408 (30.8%) due to improved shipments and economic conditions in Europe[154][155] - For the six months ended June 30, 2022, total revenue increased by $7,135,259, or 25.3%, with OSS revenue up by $3,592,997 (20.3%) and Bressner revenue up by $3,542,262 (33.7%) attributed to increased shipments and strategic product availability[155] - For the three months ended June 30, 2022, the net income was $322,822, compared to $1,697,122 for the same period in 2021[215] - Non-GAAP net income for the three months ended June 30, 2022, was $871,265, compared to $812,005 in 2021, indicating a growth of about 7.3%[219] Costs and Expenses - Gross profit for Q2 2022 was $5,200,318, representing a gross margin of 28.4%, down from 31.2% in Q2 2021[151] - Operating expenses for Q2 2022 totaled $4,798,395, which is 26.2% of revenue, compared to 27.7% in Q2 2021[151] - Cost of revenue for Q2 2022 was $13,103,025, which is 71.6% of revenue, up from 68.8% in Q2 2021[151] - General and administrative expenses increased by $172,660, or 10.5%, for the three months ended June 30, 2022, with OSS up by $278,357 (25.0%) and Bressner down by $105,697 (19.7%), while the expense as a percentage of revenue decreased to 10.0% from 11.1%[161] - Selling and marketing expenses increased by $245,621, or 16.6%, for the three months ended June 30, 2022, with OSS up by $187,382 (16.3%) and Bressner up by $58,239 (17.8%), while the expense as a percentage of revenue decreased to 9.4% from 9.9%[163][165] - Research and development expenses increased by $244,020, or 24.2%, for the three months ended June 30, 2022, with OSS up by $237,857 (26.2%), while the expense as a percentage of revenue remained flat at 6.8%[166] - Interest expense for the three months ended June 30, 2022, was $44,949, a decrease from $169,031 in 2021, indicating a reduction of approximately 73.5%[215] - Stock-based compensation expense for the three months ended June 30, 2022, was $532,636, compared to $465,336 in 2021, representing an increase of approximately 14.4%[219] Cash Flow and Liquidity - As of June 30, 2022, the company had total cash and cash equivalents of $2,874,831 and short-term investments of $11,514,047, resulting in total working capital of $32,914,013[176] - For the six months ended June 30, 2022, the company used $7,576,355 in cash for operating activities, a decrease of $10,364,718 compared to the cash provided by operating activities of $2,788,363 in the same period of 2021[188] - The net cash provided by investing activities during the six months ended June 30, 2022, was $2,878,600, compared to $14,723,446 used in the prior year, resulting in a net change of $17,602,046[192] - The company generated $2,614,463 in cash from financing activities for the six months ended June 30, 2022, compared to $9,628,718 in the same period of 2021[193] - The company anticipates using liquidity and cash flows from operations to fund growth and may evaluate potential acquisitions, which could require additional financing[178] - Net working capital requirements for the six months ended June 30, 2022, were $10,071,443, an increase of $10,360,900 compared to the prior year[191] - The company obtained a domestic revolving line of credit of $2 million in April 2022, which requires maintaining cash and investments balances of at least $4 million[183] - Management believes that sufficient liquidity exists to meet anticipated working capital requirements for at least the next twelve months, although there are no assurances regarding the effectiveness of cost reduction efforts[185] Economic and Market Conditions - The company is experiencing increased pricing and longer lead times, leading to higher inventory balances[136] - The geopolitical instability and inflation are contributing to economic uncertainty, impacting customer spending and operations[135] - The company experienced increased product pricing due to semiconductor shortages and rising transportation costs, which are being actively managed[198] - The company is subject to interest rate risk due to recent increases in Federal Reserve interest rates, which may impact borrowing costs[206] Tax and Other Income - The effective tax rate for the period ended June 30, 2022, is anticipated to be approximately 20.86%, with recorded provisions of $85,490 for Q2 2022 and $235,293 for Q2 2021[174] - Other income for the three months ended June 30, 2022, resulted in a net expense of ($4,169), a decrease of $1,527,167 compared to the prior year, primarily due to the prior year's gain on the forgiveness of a PPP loan[171][172] - Interest income decreased by $6,291 for the three months ended June 30, 2022, due to lower investments in marketable securities, while it increased by $39,414 for the six months ended June 30, 2022, due to interest on newly purchased securities[168] Future Outlook - Management plans to control costs and conserve cash in response to economic uncertainties[140] - Research and development expenses are expected to increase as the company invests in new and existing products[147] - The company expects to continue incurring expenses similar to the adjusted income from continuing operations and adjusted EPS financial adjustments[217] - The company employs derivatives to manage market risks, specifically using foreign exchange forward contracts as cash flow hedges[210]