One Stop Systems Reports 24.6% Revenue Decline in Q1 2024

One Stop Systems, Inc. (OSS) reported a significant decline in financial performance for the first quarter of 2024, with total revenue of $12.7 million, a decrease of 24.6% compared to $16.8 million in the same period of 2023. The company's product revenue fell to $12.3 million from $16.4 million year-over-year, primarily due to the cessation of sales to a former media and entertainment customer, which accounted for approximately $1.5 million in lost revenue. Additionally, OSS experienced delays in defense contract orders, which further impacted revenue by an estimated $4.4 million. Despite these challenges, OSS noted a $2 million increase in revenue from avionics hardware and other business opportunities.

The company's gross profit also decreased, falling to $3.7 million from $5.1 million, resulting in a gross margin of 29.4%, down from 30.2% in the prior year. The decline in gross margin was attributed to a shift in product mix, particularly the absence of higher-margin data storage units sold to Raytheon in the previous year. Operating expenses decreased slightly to $5 million from $5.3 million, with general and administrative expenses down by 8.4% due to cost-cutting measures following organizational restructuring. However, OSS reported a loss from operations of $1.3 million, compared to a loss of $196,348 in the same quarter of 2023.

In terms of operational metrics, OSS's cash and cash equivalents increased to $6.9 million from $4.0 million at the end of 2023, while short-term investments decreased to $6.0 million. The company’s total current assets remained relatively stable at $42.6 million, compared to $42.4 million at the end of the previous fiscal year. OSS's total liabilities rose to $9.9 million from $8.7 million, primarily due to an increase in accounts payable and accrued expenses. The company’s employee headcount remained consistent, with no significant changes reported.

Looking ahead, OSS management expressed concerns about ongoing economic uncertainties, including inflation, supply chain disruptions, and geopolitical tensions, which could further impact operations and revenue. The company is focusing on acquiring new customer orders to offset lost revenue and is actively pursuing opportunities in the military and defense sectors, which have historically longer sales cycles. Management plans to continue controlling costs and conserving cash while exploring potential acquisitions to enhance growth. The outlook remains cautious, with management acknowledging the challenges posed by the current economic landscape and the need for strategic adjustments to navigate these conditions effectively.