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One Stop Systems announced that Michael Knowles has been appointed as its new President and CEO, effective June 5, 2023. Knowles has held executive leadership positions at several defense contractors, including Cubic Corporation, Rockwell Collins, Lockheed Martin, and Curtiss Wright Defense Solutions. Over his career he has effectively developed and launched market-changing technologies and products in both defense and commercial markets. Consistent with previous announcements, David Raun's last day as the company's President and CEO will be June 5, 2023, the same day on which Knowles will begin serving in such roles.
Alliance Global Partners analyst Brian Kinstlinger lowered the firm's price target on One Stop Systems to $4 from $5 and keeps a Buy rating on the shares post the Q1 results. The company discussed a pipeline for 2024-2026 that supports 20%-30% annual revenue growth, but this is optimistic given that the government is slow to adopt new technology, long sales cycles, and budget challenges, the analyst tells investors in a research note. While One Stop's pipeline is growing, the timeline for converting opportunities into revenue is uncertain, says the firm.
OSS president and CEO, David Raun said, "As communicated on our last call, 2023 is a transitional year for OSS on many fronts, ranging from reducing low margin business, increasing high margin AI Transportable business, bringing down inventory levels, delivering more military proof-points and the addition of new talent. We are projecting growth from our industrial portion of the business, including autonomous trucks, cellular carrier trucks, agricultural equipment, as well as multiple segments within the military. Our 2023 objective remains the same: to offset the reduction of our lower-margin media business with AI Transportable growth and move back into an overall growth mode in 2024."
Reports Q1 revenue $16.8M, consensus $16.5M. "In the first quarter, our consolidated revenue totaled $16.8 million, slightly above our guidance of $16.6 million," commented OSS president and CEO, David Raun. "Excluding our legacy lower-margin media business, revenue increased 21.8% for the quarter compared to the same period last year. OSS classic revenue, excluding the lower-margin media business, increased 17.3% for the quarter compared to the same period a year ago. OSS Europe also had strong revenue growth, increasing 26.0%, which includes $1.2 million in OSS core product sales as we engage with more industrial and military AI Transportable European customers. In contrast, we sold approximately $180,000 of OSS core products in Europe in the first quarter of 2022. Our overall gross margin was 30.2% in first quarter, up from 27.3% last quarter and a slight increase from the same period a year ago, driven by increased sales of OSS core products in the U.S. and Europe, as well as a planned reduction of low-margin sales to our legacy media customer."
One Stop Systems, OSS, has received an initial order from a new military prime contractor for OSS 3U short-depth servers, SDS, for use by a U.S. Air Force anti-electronic warfare system. OSS has already commenced shipments under an initial purchase order. This program is the company's first with this prime contractor. It is valued at approximately $3.5M over the next three years and has opened up additional opportunities for OSS AI Transportable solutions. The servers feature proprietary OSS Gen 4 PCI express NVMe controllers, OSS transportable hot-swap drive canisters, and NVMe SSDs that support government encryption standards. The servers are expected to serve as a head storage node for data collection located at U.S. Air Force ground stations that house military aircraft. They will be capable of recording large volumes of simulation data and deliver it at high speeds with low latency to data scientists on the network. "The several key differentiators that secured this initial Air Force order include our uniquely flexible SDS design for rack mount installations and our proprietary firmware that enables PCIe support for multiple high-speed devices, like NVMe U.2 storage and compute accelerators," noted OSS CEO, David Raun. "Our transportable hot-swap SSD drive canisters set a high standard for ruggedness, flexibility and practicality, which is why they have become highly desirable for U.S. military use across multiple air, sea and ground AI transportable applications." OSS SDS storage systems are highly scalable and can support up to nine racks of simulation equipment, with their dual hot-swap, high-capacity 490TB OSS drive canisters providing quick and easy data transport.
One Stop Systems (OSS) has received NVIDIA (NVDA) systems certification for its OSS Rigel Edge Supercomputer. Rigel is the only edge-certified AI system using four of NVIDIA's powerful GPUs based upon the NVIDIA HGX A100 platform. The Rigel system was thoroughly tested by OSS and evaluated by NVIDIA to ensure it met the NVIDIA-Certified standard for performance, functionality, scalability and security. "This highly valued NVIDIA certification for Rigel advances our sales process with key prospects by providing our customers with piece of mind that their AI applications that are based on any NVIDIA-supported framework will operate at the edge-inside land, sea and air vehicles-with similar results to what they expect in the data center," noted OSS chief product officer, Jim Ison. "It reaffirms our exceptional AI workflow performance and the unmatched value we deliver for our customers who demand 'performance without compromise' in rugged applications."
Alliance Global Partners lowered the firm's price target on One Stop Systems to $5 from $6 and keeps a Buy rating on the shares post the "disappointing" Q4 results. The revenue miss was due to a faster than expected wind-down of disguise revenue, the analyst tells investors in a research note. Military is slow to adopt new technology and has long sales cycles, which has been a challenging market for One Stop, says the firm.
Lake Street analyst Eric Martinuzzi lowered the firm's price target on One Stop Systems to $4 from $6 and keeps a Buy rating on the shares. Revenue from M&E customer disguise will decline at a faster rate than the firm had originally modeled as this customer is going from 26% of revenue in 2022 to less than 10% of revenue in 2023. While the net effect is 0% revenue growth this year and this "is a bitter pill for OSS investors to swallow," the firm says it is important to note "the rest of the business is actually doing okay" and growing. While the firm believe One Stop is taking the right steps to reposition the business, it has lowered estimates and price target based on guidance for a 3% revenue decline in Q1 and a flat outlook for 2023.
Reports Q revenue $18.2M, consensus $19.14M. Reports Adjusted EBITDA, a non-GAAP metric, was $1.6 million or 8.9% of quarterly revenue, an increase from $996,000 in the same year-ago quarter.
One Stop Systems (OSS) has received a $1.3M order from the U.S. Army for the design, development and prototypes for a ruggedized compute visualization system using OSS PCIe Gen 4 switched fabric technology and NVIDIA (NVDA) Jetson AGX Orin system-on-modules, SoMs. OSS will design and build this system to support 360-degree visualization for U.S. Army ground vehicles. There are more than 14,000 different Army vehicles, many with large blind spots, that may utilize this technology, including the Stryker, Abrams and Bradley. This technology is expected to make vehicles more effective in times of crisis and save service member lives. "The U.S. Army chose OSS for its years of experience ruggedizing compute accelerators and powering them with the latest generation of PCIe technology and embedded GPU processors," stated David Raun, CEO of OSS. "Our superior high-speed PCIe Switch technology provides unmatched low latency compared to traditional fabric connections, with such speed being paramount for mission-critical government applications." The company will work closely with the Army to deliver prototypes later this year.
