One Stop Systems Reports Challenging Financial Performance, Net Loss Widens in Q3 and Nine Months

One Stop Systems, Inc. (OSS) reported a challenging financial performance for the three and nine months ended September 30, 2024, compared to the same periods in 2023. Revenue for the third quarter decreased to $12.7 million from $13.6 million, while revenue for the nine months fell to $36.7 million from $46.9 million. The decline in revenue was attributed primarily to the loss of a significant media and entertainment customer and economic constraints affecting the Bressner segment, which saw a 12.2% revenue decrease.

The company experienced a gross loss of $1.7 million in the third quarter, a stark contrast to a gross profit of $3.7 million in the prior year. For the nine-month period, gross profit also declined to $5.3 million from $13.5 million. The gross margin percentage for the third quarter was negative 12.5%, significantly impacted by an inventory obsolescence charge of $6.1 million. OSS's cost of revenue surged by 52.7% in the third quarter, primarily due to this charge.

Operating expenses decreased to $5.0 million for the third quarter from $7.6 million in 2023, reflecting management's efforts to control costs. However, the loss from operations widened to $6.7 million from $4.0 million year-over-year. The net loss for the third quarter was $6.8 million, compared to $3.6 million in the same period last year, resulting in a net loss per share of $0.32, up from $0.18.

For the nine months ended September 30, 2024, OSS reported a net loss of $10.5 million, an increase from $6.4 million in the prior year. The company’s accumulated deficit grew to $18.9 million as of September 30, 2024, compared to $8.4 million at the end of 2023.

Strategically, OSS has shifted its focus towards AI Transportables and military applications, which involve longer sales cycles and significant contracting requirements. The company has made leadership changes, appointing Michael Knowles as CEO and Robert Kalebaugh as VP of Sales in mid-2023 to enhance its defense contracting capabilities. Additionally, OSS is addressing supply chain issues and inflationary pressures that have affected its operations.

Cash and cash equivalents increased to $9.4 million as of September 30, 2024, from $4.0 million at the end of 2023, aided by improved cash flow from operating activities. The company reported net cash provided by operating activities of $2.1 million for the nine months, a significant increase from $0.2 million in the prior year. However, OSS continues to face challenges in accurately forecasting revenues due to ongoing global economic issues and market volatility.