One Stop Systems, Inc. (OSS) Q1 2023 Earnings Conference Call May 11, 2023 5:00 PM ET

Corporate Participants

David Raun - President and Chief Executive Officer

John Morrison - Chief Financial Officer

Jim Ison - Chief Product Officer

Conference Call Participants

Eric Martinuzzi - Lake Street

Shervin Z - Alliance Global Partners

Joe Gomes - Noble Capital

Operator

Good afternoon and thank you for joining us today to discuss One Stop Systems Financial Results for the First Quarter ended March 31, 2023. With us today are the company's President and Chief Executive Officer, David Raun, and Chief Financial Officer, John Morrison, as well as the company's Chief Product Officer, Jim Ison. Following their remarks we will open the call to your questions, then before we conclude this call, I will provide some important information regarding the forward-looking statements made by management during the call.

I would like to remind everyone that the call will be recorded and made available for replay in the investor section of the company's website.

Now, I would like to turn the conference over to OSS, President and CEO, David Raun. Please go ahead, sir.

David Raun

Thank you, Chris, and good afternoon, everybody.

In the first quarter, our consolidated revenue totaled 16.8 million, slightly above our guidance of 16.6 million, excluding the lower margin media business, our OSS classic revenue increased 17% for the quarter compared to the same period a year ago. OSS Europe also had strong revenue growth increasing 26% that includes 1.2 million of OSS core product sales, as we engage with more industrial and military AI Transportable European customers.

In contrast, we sold approximately 180,000 of OSS products in Europe in the first quarter of 2022. Our overall gross margin was 30.2 in the first quarter, up from 27.3 last quarter, and a slight increase from the year ago. Driven by increased sales of OSS core products in the U.S. and Europe, as well as a planned reduction of low margin sales to our legacy media customer.

As you may recall that in February, we announced the execution of a $1.3 million contract directly with the U.S. Army for the design, development, and prototypes for a rugged 360-degree visualization compute system for land vehicles, including the Stryker, Bradley, and Abrams.

We expect to start to realize revenue from this contract in Q2. The program represents a significant revenue opportunity, while also potentially opening other applications within the Army. We are engaged with several Air Force opportunities both directly and through top 10 prime contractors. Early proof points with Air Force include yesterday's announcement plus we recently learned from another prime they want a contract that includes our flagship compact Supercomputer Rigel. We expect to announce more about this win and ship product later this year. In both cases, these were new prime contractors for OSS providing additional exposure and visibility to other key programs.