One Stop Systems Reports 23.3% Revenue Decline in Q2 2024

One Stop Systems, Inc. (OSS) reported a significant decline in financial performance for the second quarter and first half of 2024, as detailed in its latest 10-Q filing. For the three months ended June 30, 2024, OSS generated total revenue of $13.2 million, a decrease of 23.3% compared to $17.2 million in the same period of 2023. The decline was primarily attributed to the cessation of sales to a former media and entertainment customer, which accounted for approximately $3.2 million in lost revenue. For the six-month period, total revenue also fell by 23.9% to $25.9 million from $34.0 million year-over-year. The company reported a net loss of $2.3 million for the second quarter, slightly improved from a loss of $2.4 million in the prior year, while the loss for the first half of 2024 reached $3.7 million, compared to $2.8 million in 2023.

In terms of operational changes, OSS has shifted its focus towards the development and sale of AI Transportables, particularly targeting military and defense sectors. This strategic pivot has been supported by the hiring of new executives with extensive experience in defense contracting. The company has also faced challenges due to geopolitical tensions, inflation, and supply chain disruptions, particularly affecting its subsidiary Bressner in Germany. As of June 30, 2024, OSS reported total assets of $47.4 million, a decrease from $48.3 million at the end of 2023, with cash and cash equivalents increasing to $6.8 million from $4.0 million.

The company’s operational metrics reflected a mixed performance. OSS's customer-funded development revenue increased significantly to $1.4 million in the second quarter, up from $387,413 in the same period last year. However, product revenue dropped to $11.8 million from $16.8 million year-over-year. The gross profit margin for the second quarter was 25.2%, down from 27.9% in the previous year, primarily due to underutilization of production facilities and increased inventory reserves. OSS's total operating expenses decreased to $5.6 million from $8.2 million, largely due to reduced general and administrative costs following organizational restructuring.

Looking ahead, OSS management has expressed cautious optimism, focusing on acquiring new customer orders to offset lost revenue from its previous media customer. The company plans to continue monitoring economic conditions, including inflation and supply chain issues, while controlling costs and conserving cash. Management anticipates that these strategies will help sustain operations and potentially improve financial performance in the coming quarters. However, the ongoing geopolitical instability and economic uncertainty present significant risks that could impact OSS's future results.