One Stop Systems(OSS) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue grew 28% YoY to a record $17.1 million in Q1 2022, with minimal seasonality impact (4% drop from Q4 to Q1 compared to 30%+ in prior years) [5] - Gross profit increased to$ 5.1 million from $4.4 million, with gross margins exceeding 30% [6] - Operating expenses increased by only 8% despite a 28% revenue growth, leading to improved operating leverage [6] - GAAP net income rose to$ 579,000, non-GAAP net income to nearly $1 million, and adjusted EBITDA to$ 1.4 million, all significant improvements over the previous year [6] - Cash and cash equivalents totaled $2.2 million, with short-term investments of$ 13.6 million, combining for $15.8 million as of March 31, 2022 [18] Business Line Performance - Core OSS revenue increased 23% YoY to$ 10.6 million, representing 62% of total revenue [12] - Bressner, the European subsidiary, saw a 37% revenue increase to $6.5 million, contributing 38% of total revenue [12] - Media and entertainment customer revenue exceeded pre-COVID levels, with expectations for continued growth throughout the year [5] - Autonomous trucking market saw four confirmed program wins in Q1, bringing the total to five, with products being shipped to three market leaders [10] Market Performance - The media and entertainment sector showed strong recovery, with revenues now greater than pre-COVID levels [5] - Bressner's performance in Europe was exceptional, with 37% revenue growth [6] - The AI transportable market, particularly in autonomous trucking, is accelerating, with significant interest in products like Rigel and Centauri [8][9] Strategic Direction and Industry Competition - The company is focusing on the AI transportable market, leveraging its technology to address high-growth verticals like autonomous trucks, military, and maritime applications [8][9] - Introduction of scalable standard products like Rigel and Centauri has been well-received, with Centauri specifically designed for autonomous trucking needs [9][10] - The company is investing in next-generation PCI Express Gen 5 technology, which will double the bandwidth of current Gen 4 products [23][24] Management Commentary on Operating Environment and Future Outlook - Supply chain disruptions, including long lead times, price increases, and higher shipping costs, continue to pose challenges, but the company is leveraging its strong cash position to mitigate these issues [7] - Management is optimistic about the growth potential in the AI transportable market, particularly in autonomous trucking, where the company has secured multiple program wins [10][29] - The company expects Q2 2022 revenue to be$ 17.3 million, representing 15% growth over Q2 2021 [38] Other Important Information - The company has a strong pipeline of pending major programs, with 34 opportunities, 20 of which involve AI transportable applications [19] - The company is actively participating in industry events and panels to position itself as a thought leader in the AI transportable market [26] - Management is focused on improving margins through price increases, manufacturing efficiencies, and the introduction of higher-value standard products [15] Q&A Session Summary Question: Performance of business segments outside media and entertainment and Bressner - All business segments are strong, with no decreases, but military shipments are expected to pick up in Q3 and Q4 [42] Question: Updates on military contracts - The company is working on several military projects, with additional shipments to Raytheon programs [44] Question: Pricing and differences in systems for autonomous trucks - The company is shipping to three customers with multiple products, and expects revenue from additional customers later this year [47] Question: Growth outlook for the media and entertainment customer - Steady growth is expected, driven by both virtual product lines and the return of large gatherings [49] Question: Margin improvement opportunities in media and entertainment - Margins in this segment are not expected to improve significantly, but the business remains profitable [53][56] Question: Integration opportunities with sensor platforms in autonomous vehicles - The company is already exploring deeper integration and potential partnerships in this area [58] Question: Replacement cycle for autonomous truck systems - Replacement cycles could be around three years, depending on technological advancements and application needs [59] Question: Development cycle for autonomous truck customers - The company is already shipping to three customers and expects to see revenue from additional customers later this year [63] Question: Contribution from autonomous trucking wins - Some autonomous trucking customers are expected to be in the top 10 by the end of 2022, with significant growth potential in 2023 and beyond [88] Question: Headcount growth plans - The company plans to add 2-3 employees per quarter, with flexibility to accelerate hiring if needed [92]