Financial Data and Key Metrics Changes - For Q3 2024, the company reported consolidated revenue of $13.7 million, exceeding guidance of $13.3 million, with a slight year-over-year decrease due to a $1 million reduction in Bressner revenue, offset by a $1 million increase in OSS segment revenue [33] - The gross margin percentage was negative 12.5%, compared to 26.6% in the prior year quarter, while gross margin excluding a $6.1 million inventory charge was 32%, up from 26.6% [34] - The company reported a GAAP net loss of $6.8 million or $0.32 per share, compared to a net loss of $3.6 million or $0.18 per share in the prior year [37] Business Line Data and Key Metrics Changes - OSS segment revenue grew year-over-year by 17.5%, with gross margin of 43.2% excluding the inventory charge, a 10.8 percentage point increase from the same period last year [8][35] - Bressner segment had a gross margin percentage of 22%, a 0.6 percentage point decrease from the same period last year, driven by a less profitable mix of revenue [36] Market Data and Key Metrics Changes - The company’s five-year unfactored pipeline at the end of Q3 remained over $1 billion, with approximately 70% comprised of platform and multiyear opportunities [17] - Orders outpaced revenue by 25% for the third quarter in a row, driven by existing customers in the air and maritime C5ISR defense markets [20] Company Strategy and Development Direction - The company is focused on converting its $1 billion pipeline to sales and pursuing customer-funded development projects to establish itself as an incumbent on platforms driving future multiyear production contracts [7][12] - The strategic focus is on higher-margin revenue opportunities in commercial and defense markets, particularly in response to emerging requirements for AI, machine learning, and autonomy [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about sustainable revenue growth, with expectations for consolidated revenue of approximately $15 million in Q4 2024 and OSS segment revenue of $7 million, representing over 9% year-over-year growth [41][42] - The company anticipates a rebound in the Bressner segment in 2025, likely to see growth around Q2, contingent on improvements in the European economy [61][64] Other Important Information - The company announced the retirement of CFO John Morrison and welcomed Daniel Gabel as the new CFO, emphasizing the importance of leadership in executing growth strategies [28][29] - The company has expanded its product development efforts, currently working on five product initiatives focused on edge computing for both defense and commercial applications [27] Q&A Session Summary Question: What is driving the strengthening trends in bookings? - Management noted that the growth in bookings is driven by both defense and commercial markets, with a broader outreach and application of products since the new VP of Sales joined [44] Question: What is the percentage of government versus commercial bookings? - Management estimated that approximately 55% to 60% of bookings are from defense [46] Question: What are the expectations for the Bressner segment in 2025? - Management anticipates a potential rebound in the Bressner segment around Q2 2025, depending on the European economic recovery [64] Question: What is the expected gross margin for the OSS segment in the next 18 months? - Management expects to drive gross margins up to 35% or better as the mix of products and customer-funded development grows in volume [50] Question: How does the customer-funded development translate into future revenue? - Management indicated that customer-funded development typically represents 10% to 20% of a whole program, with potential for significant revenue during production phases [58]
One Stop Systems(OSS) - 2024 Q3 - Earnings Call Transcript