What One Stop Systems (OSS) Said on Its Q3 Earnings Call

Key Points

• OSS reported strong growth, with third-quarter continuing-operations revenue rising nearly 36% to $12.6 million and first-nine-month revenue increasing approximately 48% to $30 million.
• The company raised its full-year revenue outlook to about $45 million, or roughly 40% year-over-year growth, supported by bookings exceeding revenue in every 2026 quarter and a year-to-date book-to-bill ratio of 1.46.
• Growth is being driven by commercial aerospace, medical imaging, robotics and autonomous-energy customers, while OSS also cited potential multimillion-dollar fourth-quarter orders and longer-term opportunities that could exceed $100 million over three to four years.

One Stop Systems NASDAQ: OSS reported third-quarter revenue growth of nearly 36% from continuing operations and raised its full-year outlook, citing broader demand across commercial and defense markets, increased bookings and a growing number of programs moving from development into production.

Revenue from continuing operations reached $12.6 million in the third quarter, up from $9.3 million a year earlier. For the first nine months of 2026, revenue totaled $30 million, an increase of approximately 48%, President and CEO Mike Knowles said.

The company sold its former wholly owned Bressner subsidiary in December 2025 for $22.4 million. Bressner’s historical results are now classified as discontinued operations, with the company’s reported results focused on its core rugged enterprise-class computing business.

Outlook Raised as Bookings Outpace Revenue

OSS raised its full-year revenue expectation to approximately $45 million, representing about 40% year-over-year growth. That outlook was raised from prior guidance for 25% to 30% growth and from the company’s initial expectation of 20% to 25% growth at the start of the year.

Chief Financial Officer Dan Gabel said bookings exceeded revenue during the third quarter and in every quarter so far in 2026. Year-to-date bookings exceeded $43.6 million, producing a book-to-bill ratio of 1.46.

Knowles said the company’s average order size has nearly tripled since 2023, while the number of meaningful multiyear programs it supports has expanded to 14 from one three years ago. He said OSS is pursuing a strategy of engaging customers early in product development and qualification, with the aim of securing larger production, sustainment and technology-refresh opportunities over time.

“Our growth is increasingly supported by a broader set of applications and customers rather than being driven solely by the timing of one large order,” Knowles said.

The company expects full-year gross margin of approximately 40% to 42% and positive adjusted EBITDA of $500,000 to $1 million. Gabel said the adjusted EBITDA guidance includes the third-quarter effects of bad-debt and legal-settlement expenses. Without those items, the annual adjusted EBITDA guidance would be roughly $1.4 million higher, he said.

Commercial Customers Drive Third-Quarter Growth

Gabel said the revenue increase was primarily driven by new customers and higher production volumes with existing customers. Key contributors included initial deliveries to a customer developing autonomous energy nodes designed to power computing payloads, increased deliveries of compute products for commercial aerospace in-flight entertainment systems, and higher sales of servers to a medical-imaging original equipment manufacturer supporting breast-cancer screening.

Knowles said the medical-imaging relationship had progressed from development and qualification work into production revenue. He also cited an earlier $2.2 million initial production order for a commercial robotics program. Based on the customer’s anticipated deployment plans, OSS believes that relationship could generate $10 million to $15 million in cumulative orders over five years, although Knowles said that potential is not guaranteed.

The company also announced that its Gen5 4UP-MAX expansion system had been qualified for use with a Tier 1 global enterprise computing platform provider. According to Knowles, the product can enable users to add as many as eight AI accelerators to existing server environments. He characterized the qualification as an early-stage opportunity to reach a broader enterprise, commercial and data-center ecosystem.

Margins and Expenses

Gabel reported third-quarter gross margin from continuing operations of 40.6%, compared with 45.6% in the prior-year quarter. The decline was attributed primarily to product mix, partially offset by more favorable manufacturing absorption. The company said it expects lower gross margins in the fourth quarter because of lower-margin production shipments and an anticipated increase in customer-funded development work.

Third-quarter operating expenses from continuing operations rose 33.7% to $6.2 million. The increase included $544,000 of bad-debt expense associated primarily with a former customer that entered bankruptcy, $394,000 in legal expenses related to a previously disclosed settlement with another former customer, and $470,000 in higher stock-based compensation.

OSS reported a GAAP net loss from continuing operations of $600,000, or $0.02 per share, compared with a loss of $400,000, or $0.02 per share, a year earlier. Non-GAAP net income from continuing operations was $300,000, or $0.01 per share, versus $31,000 in the prior-year period. Adjusted EBITDA was $300,000, up from $200,000 a year earlier. Excluding the bad-debt and legal expenses, adjusted EBITDA would have been approximately $1.2 million, according to management.

Cash, Supply Chain and Longer-Term Opportunities

At Sept. 30, OSS had $18.9 million in cash equivalents and short-term investments and no debt. Working capital was $37.9 million, down from $45.3 million at the end of 2025. The company used $12.4 million of cash from continuing operations during the first nine months, including a $6.25 million legal-settlement payment and a $7.8 million inventory investment intended to support expected growth and address supply constraints.

Gabel said the company continues to face long lead times for memory, switch chips and graphics processing units. OSS built inventory that it expects will support deliveries through the fourth quarter and into the first part of 2027. He added that the company expects some fourth-quarter working-capital benefit from approximately $5.6 million in milestone collections that were expected in the third quarter but shifted into October. Full-year operating cash flow is still expected to be slightly negative.

Management said it anticipates several large multimillion-dollar orders could close during the fourth quarter. Knowles said potentially transformative opportunities are not included in 2026 guidance and are longer-term prospects across both defense and commercial markets. He described such opportunities as potentially representing $100 million or more over three to four years if they progress into funded production.

OSS also established an at-the-market equity offering program, which Gabel said does not require the company to issue shares but provides financial flexibility for organic investments and potential acquisitions.

About One Stop Systems (NASDAQ:OSS)

One Stop Systems, Inc NASDAQ: OSS designs and manufactures high-performance computing systems for demanding applications at the edge. Its solutions are built to process large volumes of data close to where that data is generated, supporting artificial intelligence, machine learning, sensor processing, and other compute-intensive workloads.

The company's product portfolio includes ruggedized servers, GPU-accelerated computing platforms, high-speed PCI Express expansion systems, data-storage solutions, and related computing components.

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