One Stop Systems, Inc. Common Stock 2026 Q3 Earnings Call

Good morning, everyone, and thank you for joining today's call. I am excited to report another strong quarter for OSS. Revenue from our continuing operations increased approximately 36% year-over-year to $12.6 million, bringing revenue for the first nine months of 2026 to $30 million, an increase of approximately 48%. Our third quarter performance exceeded our expectations and as a result, we are increasing our full-year revenue growth outlook to approximately 40%. I am particularly encouraged by what is driving these results. 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. We are seeing broader participation from commercial and defense customers, larger and more strategic engagements, and a growing number of programs progressing from engineering and qualification into production.

In the third quarter, commercial markets were particularly strong, including healthcare, commercial aerospace, and specialized data center applications. While our position across multiple defense markets continues to expand. Before reviewing those opportunities, I want to spend a few minutes on the bigger picture and how OSS has evolved since I joined the company in 2023, why we believe the market is moving in our direction, and why we are increasingly confident in our ability and our opportunity to build a substantially larger, more profitable business. When I joined OSS in 2023, I found an exceptional engineering organization with differentiated technologies and skill sets, a strong legacy of innovation, and products well-suited for some of the most demanding computing environments in the world. What we needed was a more mature commercial engine and an operating model capable of turning that technical advantage into sustained profitable growth.

Our first priority three years ago was to build a proper foundation. We strengthened our leadership, business development, program management, and manufacturing capabilities. We sharpened our focus on defense and commercial applications where the performance advantages of our technology matter most. We built a more disciplined multi-year pipeline around platforms on which we could become a long-term supplier rather than simply competing for individual product orders. That was a transformation and investment phase. In 2024, we began seeing early signs of conversion, exiting the year with a book-to-bill ratio of approximately 1.1. In 2025, that ratio moved to 1.2 as larger opportunities advanced. We also took an important strategic step by divesting Bressner at the end of 2025, simplifying the company and concentrating our people and resources on the higher growth opportunity in rugged enterprise-class computing at the edge.

I am proud to report that throughout 2026, we continue to see the benefits of our strategic actions. Our average order size has nearly tripled since 2023. As we noted last quarter, the number of meaningful multi-year programs we are supporting has grown from one, three years ago, to 14. Year to date, we have generated more than $43.6 million in bookings, producing a book-to-bill of 1.46, even as our sales have grown. As you can see, we have experienced meaningful change in our business over the past three years.

We have moved from building a pipeline to converting it, from competing for individual transactions to becoming part of a customer's platforms, and from investing to establish the business to building the scale that can support attractive, sustained profitability in 2026 and beyond. To appreciate why we believe our growth can continue, it is important to understand what is happening in our markets. For years, much of the investment in AI and high-performance compute has centered on the data center. But increasingly, information has to be processed where it is generated. For example, on an aircraft, a naval vessel, a combat vehicle, an autonomous machine, or medical imaging system. In these environments, customers need to combine data from multiple sensors and run complex AI applications in real time. They cannot always send that information to a distant data center and wait for a response.

They must do it within demanding limits on size, weight, power, cooling, reliability, and latency. Those challenges become more difficult as sensors proliferate, AI models become more capable, and intelligence moves directly onto operating platforms. This is where OSS is differentiated. We take the latest enterprise-class processing, acceleration, interconnect, and storage technologies and engineer them into rugged systems that deliver data center class performance in an environment where traditional equipment cannot operate. Our high bandwidth, low latency architectures, and thermal management expertise help customers process more information, make decisions faster, and integrate more capability into a constrained space. Our capabilities are not limited to one industry. The same fundamental computing architecture can support defense sensor processing, autonomous industrial equipment, advanced medical imaging, or commercial aerospace applications. That gives us the opportunity to leverage our engineering investment across multiple markets while addressing a wider and growing customer base.

We believe this is a durable shift in computing architecture. As customers seek to deploy more AI, autonomy, sensor fusion, and real-time analytics outside traditional data centers, the need for the kind of rugged enterprise-class compute that OSS provides should continue to expand for years to come. We believe we are in the right markets with the right products and capabilities at an especially important time in their adoption. At the same time, the architecture of the data center itself is beginning to evolve. As demand for AI computing power accelerates, constraints around energy availability, cooling, physical infrastructure, and deployment timelines are driving companies to explore entirely new approaches to building and operating data centers. We are seeing well-funded next-generation companies develop innovative computing infrastructure, including autonomous distributed systems and even concepts for data centers operating offshore, underwater, and in space.

While many of these applications remain in the early stage of development, they share several important requirements: high-performance computing, efficient power utilization, advanced thermal management, compact systems architectures, and reliability in challenging operating environments. These are precisely the types of engineering and technology challenges OSS has spent decades solving. We believe the strongest evidence our strategy is working is growing our ability to convert opportunities into bookings, production deployments, and repeat business. A key component of our strategy is to engage with customers early. In many cases, we begin with engineering work or customer-funded development, then move through prototypes, testing, and qualification, initial production, larger scale deployments, and ultimately long-term sustainment and technology refresh. The initial orders can be modest, but they are often the first step towards a much more valuable position within the customer's platform. Our medical imaging relationship is a good example.

Work that began in development and qualification and is now contributing meaningful production revenue as our liquid-cooled computing technology supports a breast cancer screening application. In commercial aerospace, higher production deliveries for in-flight entertainment systems contributed to third-quarter growth. In specialized data centers, we began deliveries to a new customer developing autonomous energy nodes, extending OSS technology into another application where efficient, high-performance computing is critical. We are also advancing in autonomous industrial applications. Earlier this year, a commercial robotics program moved from prototype development into an initial $2.2 million production order. Based on the customer's anticipated deployment plans, we believe that relationship could represent $10 million-$15 million in cumulative orders over five years. That potential is not guaranteed, but the progression from design to production illustrates precisely how our strategy is intended to work.

On the defense side, our long-standing position on the Navy's P-8 Poseidon program demonstrates the value of being designed into a multi-mission critical platform through successive production and sustainment cycles. More recently, we secured an initial $8.4 million award on an intelligence-related compute platform that we believe has approximately $44 million of potential revenue over the next four years. We continue to advance additional opportunities across sensors, autonomy, and situational awareness, including opportunities in demanding classified and tactical environments. Not every development effort will lead to a full-scale production program, and the timing of defense procurement, in particular, can be difficult to predict. The breadth of these engagements matters. We are building an expanding base of opportunities at different stages of maturity rather than relying on any single program to carry our growth.

This is also why we continue to invest in our technology roadmap and pursue customer-funded development programs. Much of the revenue we are recognizing today can be traced to engineering and qualification work begun two, three, or four years ago. Looking ahead, we believe that several programs beginning to contribute in 2026 have the opportunity to become larger production contributors in 2027 and beyond. The work we are performing today is designed to create the next generation of production, sustainment, and technology refresh revenue. Another important development in our strategy is the expansion of our technology into broader enterprise AI market. This week, we announced that our flagship Gen5 4UP-MAX expansion system was qualified for use with a Tier 1 global enterprise computing platform provider. This represents an important milestone for OSS, expanding our access to a much larger ecosystem of enterprise, commercial, and data center customers.