One Stop Systems Reports 17.7% Revenue Growth but Declines in Net Income for Q3 2022

One Stop Systems, Inc. (OSS) reported its financial results for the third quarter and the first nine months of 2022, revealing a revenue increase of 17.7% to $18.8 million for the three-month period ending September 30, compared to $16.0 million in the same period of 2021. For the nine-month period, revenue rose by 22.6% to $54.2 million, up from $44.2 million year-over-year. However, the company experienced a decline in net income, which fell to $132,533 for the third quarter, down from $980,696 in the prior year, and to $1,034,589 for the nine months, compared to $2,719,016 in 2021. The decrease in profitability was attributed to increased costs of revenue, which rose by 31.2% in the third quarter and 30.9% for the nine-month period, primarily due to higher material costs and labor charges associated with increased sales.

The company’s balance sheet as of September 30, 2022, showed total assets of $59.6 million, an increase from $51.6 million at the end of 2021. Current assets rose to $45.2 million, driven by a significant increase in accounts receivable, which jumped to $11.4 million from $5.1 million, and inventories, which increased to $20.1 million from $12.3 million. Current liabilities also increased, reaching $12.2 million, up from $9.6 million, largely due to higher accounts payable and the current portion of notes payable. The company’s stockholders' equity improved to $46.3 million, compared to $42.0 million at the end of 2021.

Strategically, OSS has been focusing on expanding its product offerings and enhancing operational efficiency. The company is responding to global supply chain challenges and inflationary pressures by increasing inventory levels to secure necessary components and stabilize pricing. OSS is also investing in new product lines aimed at autonomous truck driving and artificial intelligence computing capabilities for military and industrial applications. The company has not made any acquisitions recently but continues to evaluate potential opportunities for growth.

Operationally, OSS reported a significant increase in customer engagement, with a notable rise in revenue from its media and entertainment sector. The company’s international presence remains strong, with approximately 69% of revenue during the third quarter coming from customers with non-U.S. billing addresses. However, OSS is facing challenges due to geopolitical instability and economic uncertainty, which have led to longer lead times and increased costs. The company is also experiencing a higher risk of recession, which could impact customer spending and overall demand for its products.

Looking ahead, OSS management has indicated that they will continue to monitor economic conditions and adjust their strategies accordingly. The company plans to focus on cost control, cash conservation, and improving margins through new product introductions. While management believes they have sufficient liquidity to meet operational needs over the next twelve months, they acknowledge the potential for further economic volatility and its impact on future performance. The company remains committed to navigating these challenges while pursuing growth opportunities in the high-performance computing market.