One Stop Systems(US:OSS)2021-08-13 03:04Financial Data and Key Metrics Changes - One Stop Systems achieved record revenues for the first half of 2021, with Q2 revenue of $14.9 million, an increase of 12% from Q1 and up 28% year-over-year [4][9] - Net income increased to $1.7 million in Q2 2021, compared to a net loss of $12,000 in the same quarter last year [13] - Adjusted EBITDA reached $1.4 million, representing 9% of quarterly revenue, compared to $73,000 in the same year-ago quarter [14] Business Line Data and Key Metrics Changes - The core OSS business revenue increased by 25% to $9.1 million compared to $7.3 million in the same year-ago quarter [10] - Bressner, the European subsidiary, saw a revenue increase of 34%, contributing $5.8 million in Q2 compared to $4.3 million in the same period last year [10] - Gross margin for the core OSS business improved to 36.7%, up 2.4 percentage points year-over-year [11] Market Data and Key Metrics Changes - Revenue growth was driven by sales of ruggedized servers into the media and entertainment markets and military AI transportable products [9] - The company reported a notable increase in product orders from media and entertainment customers, particularly for new virtual products [10] Company Strategy and Development Direction - The company aims to strengthen its position in the edge computing industry and become a market leader in the AI transportable space [5] - A focus on diversifying the customer base and expanding into military applications is evident, with a significant portion of the pipeline now targeting AI transportable markets [44] Management's Comments on Operating Environment and Future Outlook - Management noted that while the pandemic's effects will continue, there is improving customer demand, particularly from commercial aerospace clients [25][26] - The company anticipates revenue guidance of $15.9 million for Q3, representing 8% growth over Q2 and 23% growth year-over-year [28] Other Important Information - The company has seen a tripling of shareholder value over the past two years, attributed to strategic execution and improved board composition [6] - Cash and cash equivalents totaled $4 million, with short-term investments of $14.5 million, down from $19.6 million as of March 31, 2021 [19] Q&A Session Summary Question: Impact of global supply chain issues on gross margins - Management acknowledged supply issues but emphasized that demand reflects real market needs, and they are focused on efficiency to offset price increases [32][33] Question: Operating expenses outlook - Operating expenses are expected to increase slightly due to trade shows and hiring, but management is cautious about significant increases [35] Question: RFP pipeline and end market dynamics - The pipeline includes 17 major pending opportunities, with a focus on higher-margin AI transportable markets [36][38] Question: Sustainability of entertainment vertical revenue - Management expressed confidence in the sustainability of revenue from virtual products, anticipating a stronger customer base in 2022 [40] Question: Revenue concentration from major customers - Both major customers have returned strong, but the company is diversifying its customer base and participating in more programs [42][43] Question: Staffing challenges - The company is adequately staffed but noted challenges in finding new talent due to geographic dynamics [55] Question: Design cycle for major customer wins - The design cycle for commercial customers typically takes 6 to 12 months, while military projects can take 12 to 24 months [57]