One Stop Systems Reports 22.8% Revenue Growth in Q2 2022, Faces Profitability Challenges

One Stop Systems, Inc. (OSS) reported its financial results for the second quarter and first half of 2022, revealing a revenue increase of 22.8% to $18.3 million for the three months ended June 30, 2022, compared to $14.9 million in the same period of 2021. For the six-month period, revenue rose 25.3% to $35.4 million, up from $28.2 million year-over-year. The company attributed this growth primarily to increased shipments to its media and entertainment customers, alongside a significant contribution from its subsidiary, Bressner Technology GmbH, which experienced a 30.8% revenue increase in the second quarter.

Despite the revenue growth, OSS faced challenges with profitability. The company reported a net income of $322,822 for the second quarter, a decline from $1.7 million in the prior year, and a net income of $902,056 for the first half of 2022, down from $1.7 million in the same period of 2021. The decrease in net income was influenced by higher costs of revenue, which increased by 27.8% in the second quarter, primarily due to increased material costs associated with higher sales volumes. The overall gross margin also decreased from 31.2% in Q2 2021 to 28.4% in Q2 2022.

Operationally, OSS has seen significant changes in its balance sheet. As of June 30, 2022, total current assets increased to $45.96 million from $37.59 million at the end of 2021, driven by a rise in accounts receivable and inventories. The company’s cash and cash equivalents decreased to $2.87 million from $5.10 million, while total liabilities rose to $14.48 million from $9.63 million, reflecting increased accounts payable and notes payable. The company’s stockholders' equity also grew to $45.98 million, up from $41.96 million, indicating a strengthening financial position despite the challenges.

In terms of strategic developments, OSS has been actively managing its supply chain amid ongoing global disruptions, including inflation and geopolitical tensions. The company has increased its inventory levels to mitigate supply shortages and ensure product availability. Additionally, OSS has implemented cost control measures and is focused on improving operational efficiency. The company has also secured a $2 million revolving line of credit to enhance its liquidity position, although it has not yet drawn on this facility.

Looking ahead, OSS management expressed caution regarding the economic landscape, anticipating continued challenges from inflation and potential recession risks. The company plans to maintain its focus on cost management and operational execution while exploring opportunities for growth through potential acquisitions and new product developments. However, management acknowledged the uncertainty in forecasting revenues and financial results due to the current economic conditions and supply chain issues.