One Stop Systems, Inc. (NASDAQ:OSS) Q4 2022 Results Conference Call March 23, 2023 5:00 PM ET

Company Participants

David Raun - President and CEO

John Morrison - CFO

Jim Ison - Chief Product Officer

Conference Call Participants

Scott Searle - Roth Capital

Eric Martinuzzi - Lake Street

Joe Gomes - Noble Capital

Operator

Good afternoon, and thank you for joining us today to discuss One Stop Systems Financial Results for the Fourth Quarter and Year Ended December 31, 2022.

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 newly appointed 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 questions 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 Investors 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, Lara, and good afternoon, everyone. It’s good to be here with you.

I’m pleased to report that revenue for OFS in the fourth quarter was up 2.7% over the previous year to $18.2 million and up 16.8% for the year to a record $72.4 million. Our adjusted EBITDA for the year was also a record at $5.2 million driven by increased sales of our continued -- increased sales and our continued controls on spending.

Overall, gross margin for the year was 28.2% due to strong sales of lower margin products, and a midyear temporary reduction in sales to our largest military customer, during a successful re-qualification effort. Having completed this re-certification process, these higher margin shipments have now returned to normal. In 2023, we expect a reduction in low-margin media and entertainment business to be replaced with higher margin military product sales.

If you’ve been following along with us, you are aware of the AI Transportable strategy that we put in place in 2021. For those less familiar, OSS designs and manufactures innovative edge computing modules and systems or AI Transportable applications, including on-location AI data capture, storage, training and large-scale inference. These products include ruggedized servers, compute accelerators, flash storage arrays, and data recording software.

We take the latest high performance, commercially available products normally only used in the state-of-the-art, environmentally controlled data centers and bring them into these challenging, traditionally embedded edge markets. We are pleased with the progress this past year executing on this strategy, which leverages our unique strengths to enable AI and autonomous capabilities in anything that moves, delivering absolute highest performance without compromise in rugged compact form factors in these harsh environments.