One Stop Systems Reports 16.8% Revenue Increase but $2.2 Million Net Loss for Fiscal Year 2022

One Stop Systems, Inc. (OSS) reported a 16.8% increase in revenue for the fiscal year ended December 31, 2022, reaching $72.4 million, compared to $61.9 million in 2021. This increase was driven by a 12.5% rise in revenue at OSS and a 24% increase at its European subsidiary, OSS Europe. However, the company's net income for 2022 was a loss of $2.2 million, a significant decrease from the $2.3 million net income reported in 2021. The decrease in profitability was attributed to increased cost of revenue, partially offset by a decrease in general and administrative expenses.

Cost of revenue increased by 22.9% to $52 million in 2022, primarily due to higher sales of AI Transportable products and increased inventory obsolescence allowances. This resulted in a decrease in gross profit margin from 31.7% in 2021 to 28.2% in 2022. Operating expenses, while showing some decreases in general and administrative expenses, saw increases in marketing and selling, and research and development expenses. The company's other income (expense) net improved significantly in 2022, primarily due to the forgiveness of a Paycheck Protection Program loan in 2021 and other one-time gains.

Significant developments during the year included the formation of a strategic advisory board in the second quarter of 2022, comprised of retired military officials and corporate executives. In the first quarter of 2023, OSS implemented internal organizational changes to focus on the AI Transportables market, particularly the military sector. These changes included the announcement of the chief executive officer's resignation, the appointment of a chief product officer, a reduction in force of 12 employees, and the formation of a Strategic Transition Committee to oversee the CEO transition. The company also noted ongoing challenges related to global supply chain issues, economic uncertainty, and inflation.

As of December 31, 2022, OSS had approximately 112 employees and served over 1,800 customers worldwide. Key customers included Raytheon, the United States Navy, Thales, Liqid, and Alcon/Novartis. The company highlighted its product leadership in PCIe technology, with the introduction of PCIe Gen 5.0 cable adapters in 2022. New product launches included the Rigel Super Edge Computing platform and the Centauri rugged storage expansion product. The company anticipates a decrease in demand for its media and entertainment products in 2023 due to customer shifts towards cloud-based solutions.

Looking ahead, OSS plans to focus on the AI Transportables market, particularly the military sector, aiming to increase revenue and improve margins. The company acknowledges the challenges posed by economic uncertainty, inflation, and supply chain disruptions, and anticipates continued efforts to control costs and conserve cash. The company's outlook remains uncertain due to macroeconomic factors and the potential for a recession.