One Stop Systems(US:OSS)2022-08-12 02:28Financial Data and Key Metrics Changes - Q2 2022 revenue reached a record $18.3 million, up 7% sequentially and 23% year-over-year [4][12] - Gross profit for Q2 was $5.2 million, a 12% increase from the previous year, resulting in a gross margin of 28.4%, down from 31.2% year-over-year [5][14] - GAAP net income was $323,000 or $0.02 per diluted share, down from $1.7 million or $0.09 per diluted share in the same period last year [16] - Non-GAAP net income was $871,000 or $0.04 per diluted share, up from $812,000 or $0.04 per diluted share year-over-year [17] Business Line Data and Key Metrics Changes - Core OSS business revenue increased 18% to $10.7 million, representing 59% of total revenue [12] - Revenue from Bressner, the European subsidiary, increased 31% to $7.6 million, accounting for 41% of total revenue [13] - Gross margin for the core OSS business decreased to 33%, primarily due to lower-margin media and entertainment revenue [13][14] Market Data and Key Metrics Changes - The media and entertainment sector saw a revenue increase of 135% to a record $6.4 million [4] - Supply chain constraints continue to impact product availability, with lead times extending to 52 weeks or more for key components [8][10] Company Strategy and Development Direction - The company aims for leadership in the AI Transportable market, focusing on high-performance platforms for commercial, military, and industrial applications [39][32] - Investments in R&D and marketing for higher-margin businesses, particularly AI Transportables, are ongoing [6][15] - The formation of a Strategic Advisory Board aims to enhance navigation within military markets and improve product and market strategies [38][70] Management's Comments on Operating Environment and Future Outlook - Management expects supply chain challenges to persist through the remainder of the year and into the first half of next year [8][10] - The revenue outlook for Q3 2022 is projected at $18.5 million, representing a 16% growth year-over-year [39] - Management remains optimistic about military program engagements, anticipating stronger revenue in the second half of the year [44][54] Other Important Information - The company has approximately $20.4 million in inventory, with $11.6 million designated for the core OSS business and $8.8 million for Bressner [10] - Operating expenses as a percentage of revenue improved to 26.2% from 27.7% year-over-year, despite a 16% increase in total operating expenses [15] Q&A Session Summary Question: Inventory availability for Bressner vs. other products - Management explained that Bressner's status as a value-added reseller allows it to gain market share, which contributes to its strong inventory availability [42][43] Question: Military customer sales activity - Management noted increased military design activity but indicated that revenue from military customers is expected to be stronger in the second half of the year [44] Question: Production line efficiencies - The company is moving some manufacturing to Mexico to improve delivery amidst shipping constraints [45][46] Question: Updates on agricultural and mining verticals - Management stated that while these verticals are potential future opportunities, current focus remains on more immediate prospects in the autonomous truck space [47] Question: Revenue from autonomous vehicle customers - Management refrained from disclosing specific revenue figures but indicated that revenue from autonomous vehicle customers is expected to increase [50][51] Question: Pricing strategies with lower-margin customers - Management confirmed that pricing adjustments are possible under existing contracts, and they are focusing on strategic business opportunities [52][53] Question: Delays in government projects - Management clarified that delays are not solely due to budget issues, and they expect significant business from a key military customer in the future [54][56] Question: Strength of media and entertainment customer - Management anticipates continued strength from this customer but expects revenue to normalize after an exceptionally large quarter [58][59] Question: Growth drivers for Bressner - Management highlighted strategic investments and a talented team as key factors driving Bressner's growth [60][61]