One Stop Systems(US:OSS)2020-11-13 03:04Financial Data and Key Metrics Changes - Revenue for Q3 2020 was $13 million, up 12% from $11.6 million in the previous quarter but down 13% from $14.9 million in Q3 2019 [12] - Operating margin, EBITDA, and net income all improved compared to the same quarter last year [8] - Net income on a GAAP basis totaled $858,000 or $0.05 per share in Q3 2020, compared to $545,000 or $0.03 per share in the same period last year [27] - Non-GAAP net income totaled $1.2 million or $0.07 per diluted share in Q3 2020, compared to $900,000 or $0.05 per diluted share in the same year-ago period [28] Business Line Data and Key Metrics Changes - Core OSS business contributed $9 million in Q3, down from $9.7 million in the same period last year [15] - European subsidiary Bressner contributed $4 million in Q3, down from $5.2 million in the same year-ago period [16] - Gross margins for the core OSS business increased to 44.6% in Q3 from 39% in the same year-ago quarter [19] Market Data and Key Metrics Changes - The media and entertainment business saw a revenue decrease of approximately $1.8 million due to the COVID-19 pandemic [13] - Revenue for the nine months ended September 30, 2020, was $38 million, a decrease of 5% compared to $39.9 million in the same period last year [14] Company Strategy and Development Direction - The company is focusing on diversifying its customer base and has closed four major opportunities in industrial, medical, and military programs [32] - A multi-year strategic plan is being developed to enhance the product roadmap and leverage employee talents [40] - The company aims to create higher value products for specific target verticals, particularly in military and transportable applications [41] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of COVID-19 on revenue growth, estimating $9.9 million in lost or delayed revenue [7] - The company expects strong growth in the military vertical based on user engagement and value proposition [39] - For Q4 2020, the company is on target to generate approximately $13 million in revenue [43] Other Important Information - Operating expenses decreased by 15% to $3.9 million in Q3 2020 compared to $4.6 million in Q3 2019 [21] - Cash and cash equivalents totaled $5.5 million as of September 30, 2020, compared to $4.7 million as of June 30, 2020 [30] Q&A Session Summary Question: Impact of COVID-19 on revenue - Management clarified that over half of the $9.9 million loss was related to the largest customer, with military sales showing delays rather than losses [46][49] Question: Comparison of ramp to revenue in new markets - The commercial market typically has a 6 to 12-month ramp, while government contracts take 12 to 18 months [52] Question: Status of largest client and receivables - The accounts receivable from the largest client has been reduced to under $2 million, with ongoing payments being made [63] Question: Military revenue outlook - Military revenue for Q4 is expected to be strong, with solid wins in multiple programs anticipated to kick in 2021 [70] Question: Virtual events and customer engagement - Virtual events have been effective in maintaining customer engagement, with a mix of webinars and virtual trade shows [72][75]