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OSS Reports Q1 2020 Revenue Up 33% to $13.4 MillionESCONDIDO, Calif., May 14, 2020 (GLOBE NEWSWIRE) -- One Stop Systems, Inc. (Nasdaq: OSS), a global leader in specialized high-performance edge computing and AI on the Fly®, reported record results for its first quarter ended March 31, 2020. First Quarter 2020 Financial and Operational Highlights
Financial Summary Gross profit in the first quarter of 2020 was $3.4 million or 25.4% of revenue, compared to $2.4 million or 24.0% of revenue in the same year-ago quarter. Gross margin for the company’s core OSS business was down slightly to 28.1% in the first quarter of 2020 from 28.7% in the same year-ago quarter. Both Bressner and CDI gross margins improved, contributing 21.9% and 19.7%, respectively. Total operating expenses increased 10.4% to $4.9 million from $4.4 million in first quarter 2019. The increase was primarily due to increased general and administrative (G&A) expense that was primarily attributable to the accrual of severance benefits, as well as increased marketing and selling expense, which was partially offset by a decrease in R&D expense. Overall operating expenses decreased as a percentage of revenue to 36.7% in the first quarter of 2020, as compared to 44.2% in the same year-ago quarter. This expense level does not reflect the $2.5 million to $3.0 million in anticipated annual savings resulting from the company’s recently implemented expense reduction program. Excluding one-time severance cost, operating expenses would have been flat in the first quarter of 2020 compared to the same year-ago quarter. Net loss attributable to common stockholders on a GAAP basis totaled $1.1 million or $(0.07) per share in Q1 compared to a loss of $945,000 or $(0.07) per share in the year-ago period. Non-GAAP net loss attributable to common stockholders totaled $714,000 or $(0.04) per share in Q1, as compared to $428,000 or $(0.03) per share in the same year-ago period. Adjusted EBITDA, a non-GAAP term, was negative $950,000 in Q1, as compared to negative $1.4 million in the same year-ago period. (See the definitions of these non-GAAP terms and reconciliation to GAAP, below.) Cash and cash equivalents totaled $3.0 million at March 31, 2020, as compared to $5.2 million at December 31, 2019. The decrease is primarily due to cash used in operations and financing activities. Subsequent to the end of the quarter, the company raised $2.5 million in a convertible debt offering and also has received a Paycheck Protection Plan loan of approximately $1.5 million. Inclusive of these financing proceeds, the company currently has cash on hand of $5.0 million. The company believes its cash position and available funds provide it with sufficient liquidity to meet its cash requirements for the current operations. Management Commentary “Our strong top-line growth in the first quarter, which exceeded our expectations, was driven by our expanded product offerings and strengthened sales capabilities,” said David Raun, OSS interim CEO. “We recently received $3.5 million in production orders for our new Gen 4 PCIe products from multiple OEM customers for delivery in 2020. These OEM orders represent highly desirable ‘sticky’ engagements, where our technology is built into their designs. “The medical, military, and other critical applications served by our products, has required OSS to remain in operation and continue to provide the essential infrastructure products that we design and manufacture. While we have been impacted by COVID-19 like other companies, our teams acted swiftly in Q1 to secure supplies early and pivoted to a virtual workforce. “During the quarter we closed three new program wins exceeding $1 million each. Two of the three wins are with new customers, one military and one industrial OEM. As of today, we have 27 large opportunities in our pipeline. Eight of these involve our leadership in our PCI Express Gen 4 products. “On the new product front, we are planning to introduce four new PCI Express Gen 4 platforms in 2020. We are seeing significant interest in these leading-edge standard products, and we expect to convert this interest into more Gen 4 revenue later this year. “Over the past 90 days, the management team has been working to ensure sustainability while also laying a stronger foundation for future growth. Actions taking during this period include expense reductions, a reorganization and securing additional capital. While the objectives associated with most of these recently implemented changes will take time to yield the desired effect and propel the company to the next level, we expect the benefit from the expense reductions will start to show in the current quarter and be fully realized in the second half of the year. We eliminated approximately $2.5 million to $3.0 million in annual spend.” Outlook Although OSS’ large media & entertainment customer came close to forecast in Q1, their shipments in the current quarter are down significantly. The management teams from both companies are in constant contact and it appears the customer’s product offering is well positioned to capitalize on the market return. In addition, OSS has been impacted by supply chain issues, especially for high-end PCB boards, that affect multiple customer orders. Fortunately, other than these dynamics, customers want OSS products and demand remains solid. Consistent with prior years, the company expects a stronger second half of the year in terms of revenue and margin performance. While the impact of the coronavirus continues to create uncertainties, the programs that are expected to drive higher revenue and margins remain currently on track. Conference Call Date: Thursday May 14, 2020 The conference call will be webcast live and available for replay here as well as via a link in the Investors section of the company’s website at ir.onestopsystems.com. OSS regularly uses its website to disclose material and non-material information to investors, customers, employees and others interested in the company. Please call the conference telephone number five minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact CMA at 1-949-432-7566. A replay of the call will be available after 8:00 p.m. Eastern time on the same day through May 28, 2020. Toll-free replay number: 1-844-512-2921 About One Stop Systems OSS utilizes the power of PCI Express, the latest GPU accelerators and NVMe storage to build award-winning systems, including many industry firsts, for OEMs and government customers. The company enables AI on the Fly® by bringing AI datacenter performance to ‘the edge’ and on mobile platforms, and by addressing the entire AI workflow, from high speed data acquisition to deep learning, training and inference. OSS products are available directly or through global distributors. For more information, go to www.onestopsystems.com. Non-GAAP Financial Measures Adjusted EBITDA is not a measurement of financial performance under generally accepted accounting principles in the United States, or GAAP. Because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact a company’s non-cash operating expenses, OSS management believes that providing a non-GAAP financial measure that excludes non-cash and non-recurring expenses allows for meaningful comparisons between the company’s core business operating results and those of other companies, as well as providing the company with an important tool for financial and operational decision making and for evaluating its own core business operating results over different periods of time. The company’s adjusted EBITDA measure may not provide information that is directly comparable to that provided by other companies in its industry, as other companies in its industry may calculate non-GAAP financial results differently, particularly related to non-recurring, unusual items. The company’s adjusted EBITDA is not a measurement of financial performance under GAAP, and should not be considered as an alternative to operating income or as an indication of operating performance or any other measure of performance derived in accordance with GAAP. OSS management does not consider adjusted EBITDA to be a substitute for, or superior to, the information provided by GAAP financial results.
Adjusted EPS excludes the impact of certain items and, therefore, has not been calculated in accordance with GAAP. OSS management believes that exclusion of certain selected items assists in providing a more complete understanding of the company’s underlying results and trends and allows for comparability with its peer company index and industry. OSS management uses this measure along with the corresponding GAAP financial measures to manage its business and to evaluate the company’s performance compared to prior periods and the marketplace. The company defines Non-GAAP (loss) income attributable to common stockholders as (loss) or income before amortization, stock-based compensation, expenses related to discontinued operations, impairment of long-lived assets and non-recurring acquisition costs. Adjusted EPS expresses adjusted (loss) income on a per share basis using weighted average diluted shares outstanding. Adjusted EPS is a non-GAAP financial measure and should not be considered in isolation or as a substitute for financial information provided in accordance with GAAP. These non-GAAP financial measures may not be computed in the same manner as similarly titled measures used by other companies. The company expects to continue to incur expenses similar to the adjusted income from continuing operations and adjusted EPS financial adjustments described above, and investors should not infer from the company’s presentation of these non-GAAP financial measures that these costs are unusual, infrequent or non-recurring. The following table sets-forth non-GAAP net loss attributable to common stockholders and basic and diluted earnings per share:
One Stop Systems cautions you that statements in this press release that are not descriptions of historical facts are forward-looking statements. These statements are based on the company's current beliefs and expectations. These forward-looking statements include statements regarding the performance of OSS-products and industry trends regarding deployment of computing power in the field, and regarding the company's expectations for revenue growth generated by new products and design wins. The inclusion of forward-looking statements should not be regarded as a representation by One Stop Systems that any of our plans will be achieved. Actual results may differ from those set forth in this press release due to the risk and uncertainties inherent in our business, including, without limitation: location of customer deployments, timing of shipments by OSS and that our ability to close future production business may not develop as we expect; global pandemics (such as COVID-19) or other disasters or public health concerns in regions of the world where we have operations or source material or sell products, and other risks described in our prior press releases and in our filings with the Securities and Exchange Commission (SEC), including under the heading "Risk Factors" in our Annual Report on Form 10-K and any subsequent filings with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and we undertake no obligation to revise or update this press release to reflect events or circumstances after the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement, which is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Media Contact: Investor Relations:
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