One Stop Systems Q2 Earnings Call Highlights

Key Points

• Strong growth and raised outlook: Second-quarter revenue from continuing operations rose 62.3% to $9.3 million, driven by production programs in medical imaging, defense and autonomous equipment. OSS raised its 2026 revenue-growth forecast to 25%–30% from 20%–25%.
• Record bookings support future demand: Bookings reached $15.1 million in the quarter and topped $30 million for the first half, producing a 1.7 year-to-date book-to-bill ratio. The company is supporting 14 multiyear programs with estimated revenue potential above $42 million.
• Profitability affected by settlement and mix: OSS reported a $7.3 million GAAP loss, including a $6.25 million legal-settlement charge, while its non-GAAP loss narrowed to $0.2 million. The company ended the quarter with $31.4 million in cash and short-term investments, no debt, and maintained its expectation for positive full-year EBITDA.

One Stop Systems NASDAQ: OSS reported second-quarter 2026 revenue growth of 62.3% from continuing operations and raised its full-year revenue growth outlook, citing record bookings, expanding customer relationships and increased demand for ruggedized artificial intelligence and high-performance computing platforms at the edge.

The company said its results now reflect its core OSS business following the December 2025 sale of wholly owned subsidiary Bressner for $22.4 million. Bressner’s historical financial results are reported as discontinued operations.

“Today, OSS is a pure-play provider of ruggedized AI and high-performance compute platforms for edge applications,” President and CEO Mike Knowles said during the company’s earnings call. He said the company entered 2026 as a more focused business serving defense and commercial customers.

Revenue Growth Driven by Production Programs

Revenue from continuing operations totaled $9.3 million in the second quarter, compared with $5.8 million in the year-earlier period. The increase was driven primarily by liquid-cooled server sales to a medical imaging original equipment manufacturer supporting breast cancer screening, short-depth servers for military applications aboard naval vessels and aircraft, and computing products for autonomous construction and mining equipment.

Knowles said these programs originated in development, engineering and qualification efforts conducted over the past several years and have moved into larger-scale production and deployment orders.

Customer-funded development revenue rose 145% year over year to approximately $944,000. The company said such engagements allow it to participate early in the development of customer platforms, though production timing and the ultimate size of subsequent orders can vary.

Chief Financial Officer Dan Gabel said the higher mix of customer-funded development, prototypes and low-rate initial production activity contributed to quarterly gross-margin variability. Gross margin from continuing operations was 39.1%, down from 41.3% a year earlier, primarily due to product mix. OSS continues to target sustainable gross margins in the mid-30% to mid-40% range and expects approximately 40% for full-year 2026.

Record Bookings and New Program Awards

OSS generated $15.1 million in bookings during the quarter and more than $30 million during the first half of 2026, resulting in a year-to-date book-to-bill ratio of approximately 1.7. Knowles said both quarterly and year-to-date bookings were records for the company, and that first-half bookings nearly equaled total 2025 product revenue.

• An $8.4 million initial contract from a defense and technology solutions company, with first shipments expected in 2026. OSS said the platform could contribute approximately $44 million in revenue over four years.
• An initial order of more than $500,000 from a renewable-energy technology company developing clean-energy solutions for data centers. OSS subsequently received an additional order of nearly $1 million and said the opportunity could scale to $10 million over five years.
• A $1.4 million order for short-depth servers from a government systems integrator, following an order of nearly $600,000 in the first quarter.
• A $2.2 million initial production order, announced after quarter-end, from a commercial robotics customer. OSS said the program could produce cumulative orders of roughly $10 million to $15 million over five years.

Knowles said the company is supporting 14 programs with estimated multiyear revenue potential exceeding $42 million, compared with one such program three years earlier. He also said OSS’s average order size has nearly tripled since 2023.

Management cautioned that bookings may remain uneven on a quarterly basis. “Bookings can be very lumpy,” Knowles said, adding that the company primarily monitors year-to-date and trailing-12-month book-to-bill trends.

Profitability, Cash and Legal Settlement

Operating expenses from continuing operations rose 129.8% to $11.3 million, including a $6.25 million legal settlement charge related to a commercial dispute involving a former customer relationship. Excluding the settlement, operating expenses increased 2.9% to $5.1 million.

OSS reported a GAAP net loss from continuing operations of $7.3 million, or $0.29 per share, compared with a loss of $2.5 million, or $0.11 per share, in the prior-year quarter. Its non-GAAP net loss from continuing operations narrowed to $0.2 million, or $0.01 per share, from $2 million, or $0.09 per share. Adjusted EBITDA loss improved to $0.3 million from a loss of $1.8 million.

Knowles said the settlement fully resolves the dispute, does not represent an admission of liability and is unrelated to current operations or growth programs.

At June 30, OSS had $31.4 million in cash equivalents and short-term investments, no debt and working capital of $38.1 million. Cash used in continuing operations during the first six months was $629,000, compared with $2.8 million a year earlier. Gabel said the company invested $7.1 million in inventory during the second quarter to support expected growth and address supply constraints affecting components including memory.

Raised 2026 Outlook

OSS raised its full-year revenue growth forecast to 25% to 30%, from its previous outlook of 20% to 25%. The company maintained expectations for approximately 40% gross margin and positive EBITDA and adjusted EBITDA for the year, including planned investments in personnel and research and development.

Management said it continues to pursue defense opportunities involving AI, sensor processing, autonomy and situational awareness, including work with Department of Defense research laboratories and Army-related programs. Knowles said two Army vehicle opportunities involving the company’s 360-degree vision solution are in testing and evaluation, but he did not provide a timeline for procurement decisions.

The company also said it is seeing interest in its PCIe Gen 6 architecture for AI, machine-learning and sensor-intensive workloads, with initial customer programs expected to emerge in the near future.

OSS added Paul “PK” Averna as vice president of business development and growth during the quarter. He will assume responsibilities previously held by Vice President of Sales Robert Kalebaugh, who plans to retire and remain with the company on a part-time consulting basis during the transition.

About One Stop Systems (NASDAQ:OSS)

One Stop Systems, Inc NASDAQ: OSS develops and manufactures high-performance computing and storage systems tailored for mission-critical and harsh-environment applications. The company's solutions are designed to deliver accelerated processing, high-throughput data handling and reliability in confined or ruggedized form factors. OSS leverages advanced cooling, power management and custom enclosures to support demanding workloads in settings where off-the-shelf hardware may fall short.

The company's product portfolio includes GPU-accelerated servers, embedded single-board computers, high-speed RAID storage arrays and integrated system solutions.

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