One Stop Systems Reports Significant Revenue Decline and Net Loss in Q3 2023

One Stop Systems, Inc. (OSS) reported a significant decline in financial performance for the third quarter and the first nine months of 2023, as detailed in its latest 10-Q filing. For the three months ended September 30, 2023, OSS generated revenue of $13.75 million, a decrease of 26.9% from $18.82 million in the same period of 2022. The nine-month revenue also fell by 11.9%, totaling $47.74 million compared to $54.17 million in the prior year. The company recorded a net loss of $3.64 million for the third quarter, compared to a profit of $132,533 in the same quarter of 2022, and a net loss of $6.44 million for the nine months, down from a profit of $1.03 million in the previous year.

The decline in revenue is attributed primarily to the cessation of shipments to a former media customer, the bankruptcy of an autonomous trucking client, and delays in military orders. OSS's operating expenses surged to $7.63 million for the third quarter, up from $4.91 million a year earlier, driven by a $2.93 million impairment of goodwill and increased general and administrative costs. The company's total assets decreased to $51.51 million as of September 30, 2023, from $56.36 million at the end of 2022, reflecting a reduction in goodwill and accounts receivable.

Strategically, OSS has been focusing on the AI Transportables market and military applications, which has led to organizational changes, including the appointment of Michael Knowles as CEO in June 2023. The company has also expanded its board to include members with military experience to enhance its focus on defense contracts. Despite these efforts, OSS continues to face challenges from global economic conditions, including inflation and supply chain disruptions, which have affected customer spending and order fulfillment.

Operationally, OSS reported a decrease in customer engagement, with significant impacts from the loss of its media customer and delays in military contracts. The company has been carrying higher inventory levels to mitigate supply chain issues, which has resulted in increased costs. As of September 30, 2023, OSS had cash and cash equivalents of $3.74 million and short-term investments of $9.44 million, indicating a cautious liquidity position amid ongoing economic uncertainty.

Looking ahead, OSS management plans to focus on acquiring new customer orders to offset lost revenue and continue to adapt to the changing economic landscape. The company is also exploring potential acquisitions to enhance its product offerings and market reach. However, management acknowledges the challenges posed by the current economic environment, including the risk of recession and ongoing geopolitical tensions, which may further impact operations and financial performance in the near term.