One Stop Systems, Inc.

Q4 2022 Earnings Conference Call


spk_0: maybe even gentlemen please be on standby the call will begin in one minute again ladies and gentlemen please be on standby the call will begin in one minute thank you good afternoon and thank you for joining us today to discuss one stop systems financial results for the fourth quarter and year ended december thirty first twenty twenty two with us today i the company's president and chief a get executive officer david rise and chief financial officer john my city as well as the company's newly appointed chief product officer gym icing following their remarks he will open the call few questions than before we concluded 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 car all will be recorded and made available for replay in the investors section of the company's website now i would like to the conference over to with us president and ceo david one please go ahead sir
spk_1: but you were it
spk_2: a good afternoon of them it's good to be with you and please report the revenue so except for the fifth close up to that seven percent of the a pretty sure to between two million and up sixty eight percent for you to record seventy two william or just to be bit off for the year is a record of five that two million driven by a pre sales or continued interesting fill our continued patrols and spending it was gross margin for was twenty point to do too strong sales of little more to products and major temporary reduction failed to or largest military customer during a successful we qualification effort having completed the three certification process is higher belgian shepherds have now returned to normal and twenty three we expect a reduction in low margin media obtain a business to be replaced with higher belgian military product sales have you been following along with as you're aware of the yard transportable strategy that we put in place and twenty twenty one for those was familiar with us designs and manufactures innovative edge computing modules cam systems are ai transportable applications including on location a i data capture storage training and large scale and brooks these products include rugged i searched computer accelerators flash storage array and data recording software we take their latest high performance commercially available products normally only use and a state of the are environmentally to told data centers and bring them into these challenging traditionally embedded at markets
spk_3: we are pleased with the progress this past year executing on the strategy which leverage is are unique strengths to enable a i and eponymous capabilities and anything that moves delivering absolute high performance without compromise and rugged contact them factors to these harsh environments
spk_2: oh you're in the year we announced that we partnered with three key autonomy drug companies utilizing or centauri and guess the as protocol this resulted in to these drug companies rising into the top ten lists for the year later on twenty twenty two we announced additional wins including the development of stuart and do the deployment of are storage products and be a at of one of the nation's largest cellular carriers
spk_3: and parallel to these quicker to market industrial applications or primary pursuit is that of the i transportable opportunities within the military theater
spk_2: the army navy marine down the airforce are all deploying autonomous and or a i capabilities although pledges might go off although budgets might hold off on finding another ten billion dollar aircraft carrier we've been advised that demand for the absolute high performance and computer systems and computer has become storage and systems to assure technical and analytical sip fury already is a top priority for the pentagon pretty new opportunities and tailwind process every started twenty twenty two were just a few significant military customers we're now and gazed at various levels with eight of the top ten largest military plan contractors in the us several of these expand engagements have led to multiple bed by the primed to the deity using our products during this process he also worked directly with several branches of the military
spk_3: providing us more visibility the programme developing relationships with decision makers and in several cases we are now in the enviable position of having influence on products specifications or or accuse writing this process is are innovative product called rigel
spk_2: our new well positioned sales representatives our military advisory board added and twenty twenty two and the strengthening of our internal team we initially and reduced our flagship product rigel the most compact supercomputer in the world we received pushback from the deity as it did not conform to the entrenched slower bps standard that the military have embraced for years recognize for innovation and market disruptive solutions we eventually gain traction as decision makers realize they could not achieve elevated performance levels staying with the old standard although most would have followed the bps crowd we stuck to our strategy and it is now paying off
spk_3: and with the valid barn armed with a validation of her military i transfer strategy we elected to make some strategic changes to accelerate growth and increase your all about it
spk_2: in february of this year we announced a reorganization relocating resources to higher margin opportunities which previously supported low margin business we also made some changes and senior management or example i have gems on the call the day to assume the role of cheap product officer jim is extremely talented and innovative in this regard and he's responsible the make sure we can to use design and develop markedly and products were a target customers and drive clear market leadership a did additionally we have initiated a search for new be pure fails as well as two additional sales people from military markets consistent with our military product strategy and to accelerate company growth around is expanding opportunities the board and i decided it was time to begin the search for my successor for the them we hired a well known national search firm and we have we have some very talented candidates with solid experience and deep connections throughout the deity day and the ecosystems as apartment as a member the board and a significant shareholder myself i plan to stay fully engaged driving are exciting vision with a team and facilitating a smooth truck smooth transition and the border we're taking the necessary time to make sure we hire the best candidate and we currently expect that this transition will be complete by mid year i have told the board until i'm i will be flexible on the timing and they have my full support by and this and the see a role and on the board i am proud of what we've accomplished over the past three years particularly in financial stability product leadership and customer development my role as ceo i was an independent director on the board of assess in february twenty twenty eight summit public technology company ceo background and just just prior covert outbreak i accepted the ceo job on an interim basis upon release of the founder ceo although was not my initial intend to see the full time ceo role after see a great opportunity taking shape and working on a team i put my had in the ring to take assessed the next level in june of twenty twenty be removed and room part of my ceo title i believe the company position well to improve shareholder value the company's future is bright and the company is poised to accelerate growth and valuation under the right leadership i look for to supporting the team and my successor as a member of the a sport i'm john to comment on the financials and gym to remark on customer wins and opportunities after which oprah provide additional color thought about twenty twenty three and the future the company john
spk_3: thank you david and good afternoon everyone thank you for joining joining us today today we issued a press release with our result for the fourth quarter and the year ended december thirty one twenty twenty two the release is available in the investor relations section of our website a one stop system dot com the following results are for the fourth quarter and are compared to the same year ago quarter as david mentioned are consolidated revenue in queue for was up two point seven percent to eighteen point two million during the quarter which entertainment customer fall short of their projections resulting in a properly one million dollars less revenue than anticipated this customer is projected to account for less than ten percent of are consolidated revenue in and twenty three our core aura of our car or less revenue decrease one point eight percent to eleven point three million representing sixty two percent of our total quarterly revenue conversely revenue from a western europe increase ten point eight percent to six point nine million which raw
spk_4: for those thirty eight percent of total quarterly revenue however excluding are lower margin media and entertainment business our core our tax revenue increased sixteen point eight percent for the quarter overall gross profit decreased fifty eight thousand dollars to five million despite the company realize and improve margins over thirty percent with as a result of starting to ship a greater mix of ai transportable products however a fourth quarter increase in are allowed loud for realization of inventory associate with the customers associated with the company's friend excuse me allowance for realization of inventory associated with the company's transition to higher margin edge ai transportable military products resulted in general overall gross margin of twenty seven point three percent compared to twenty eight point three percent in the same year ago quarter the gross margin for the core our says business decrease one point eight percentage points to thirty one point four due to the recognition of additional houses for inventory realization oh it's europe's gross margin percentage improved one point one percentage point to twenty point five percent compared to nineteen point four percent overall quarterly operating expenses decreased nine point four percent to four point six million with operating expenses as the percentage of revenue decreasing to twenty five point three percent compared to twenty eight point seven percent this secrets and operating expense was primarily due to decreases of a hundred thirty eight thousand in general and administrative expenses two hundred and thirty nine thousand and marketing selling expenses hundred and five thousand in our the expense income from operations increased four hundred and twenty four thousand to three hundred fifty three thousand compared to a lot from operations of seventy one thousand in the fourth quarter of twenty twenty one net loss on a gap basis was three point three million or sixteen cents per share increasing from a net loss of three hundred eighty six thousand or a loss of two cents per share in the same year ago period the loss in the fourth quarter of twenty twenty two included or right down of the net deferred tax outset of three point nine million which is which was attributable to allow says for the milk for the company's ability to benefit from cumulative effect losses and rd tax credit i am not gap basis inclusive of the a former for mentioned right down the net loss was two point seven million or fourteen cents per share for the quarter down from non gap net income of seventy one thousand or zero cents per share adjusted ebitda and nine get metric was one point six million were a point nine percent of cordially revenue and increase from nine hundred ninety six thousand dollars the following result or for the twelve month period ended december thirty one twenty twenty two as compared to the results for the for the year twenty twenty one revenue increased sixteen point eight percent were referred seventy two point four million this increase was primarily due to the growth of the as a i transportable an autonomous applications as well as our media and entertainment business core over such business increase twelve point five percent contributing forty three point three million abrupt do with our us europe increasing twenty four percent contributing twenty nine point one million of revenue oh assess aggregate gross profit to prove seven hundred and fifty thousand twenty point four million overall gross margin was twenty eight point two percent of revenue and twenty twenty two compared to thirty one point seven and twenty twenty one the reduction in march was primarily attributable two for factors of factors are a higher proportion of cells to are low low margin media hundred entertainment customer to ferment of approximately three point three million of higher margin cells of data storage equipment and third an increase in our lounge for realization of inventory and for an increase in a good portion of revenue derived from our says europe which generally operates at a larger corporate flint twenty two percent gross margin for the core our of to this decrease thirty two point seven decrease thirty two point seven percent as compared to thirty six point nine percent in two thousand and twenty one oh us as europe's gross margin decrease the twenty one point five percent due to hire transportation material path as compared to twenty three point one percent and twenty twenty one operating expenses decrease by increased by point two percent to eighteen point eight million this increase is primarily due to an increase of six hundred five thousand and marketing and so inexpensive resulting from additional marketing pray shows and for trouble and there was also an increase in hard the expenses of seven hundred and eleven thousand for the development of new standard products for the ai transportable market these two and creatures were partially offset by decrease of three hundred and seventy nine thousand in general and administrative expenses operating expense at the percentage of revenue improved twenty six percent compared to twenty eight point nine percent in twenty twenty one income from operations decrease the hundred and seventy nine thousand to one point six million do to reduce gross margins with and with income before taxes decrease in southern hundred and forty four thousand compared to the prior year however after giving effect to the prior year one time ppp load and interests forgiveness on a pro forma basis there was a year over year increase of seven hundred and seventy thousand in income before taxes now law on a gap basis was two point two million worried what a lot of eleven cents per basic and diluted share this was inclusive of the right down of the net deferred outset of three point nine million which is a explained earlier was attributable to allowances for the company's ability
spk_5: to benefit from the cumulative tic tacs losses and aren't the tax credit this was compared to two thousand twenty one when they're with net income of two point three million or twelve cents per diluted shirt which included the one time benefit of one point five million or eight shows per diluted share do
spk_4: to the forgiveness of the companies ppp loan and related interest bottom line gap now last total one hundred seventy five thousand or a loss of one percent per basic and deluded sure which included the right down for the to for taxes to for tax outset as compared to non gaap net income up three point one million or succinct cents per diluted share and twenty twenty one adjusted ebitda a knife gap measure told five point two million or seven point one percent of revenue compared to four point nine percent nine million or seven point nine percent of revenue and twenty twenty one for both for twenty twenty one both my gap that income and adjusted ebitda excluded that ppp alone and interest forgiveness now us to do our balance sheet thirty one twenty twenty two cash cash equivalents totaled three point one million with short term investments of ten point one million for a combined total of thirteen point two million
spk_3: this represents an increase of approximately half a million dollars compared to our balances out of september thirty twenty twenty two
spk_4: we believe the current financial resources available to our just provides us with the stability and flexibility to be responsive to responsive to changes in business the males and particularly those the required documents and working capital to be successful
spk_6: this can play for financial appeal for the quarter and the year i would now i could turn the call over to our cheap product officer graduation
spk_3: to chew my son good job and good afternoon everyone
spk_4: in queue for we added three new major program when across three market segments military commercial aerospace and autonomous commercial vehicles
spk_3: the military when was for a new compact airborne storage server for the navy quickly and easily transports mission data to ground stations than to the club
spk_7: the commercial aerospace when involves an upgrade to aircraft network systems used and satellite communication and inflamed entertaining the autonomous vehicle when with a tier one away i'm in germany continued for highlight over strength and commercial data logging in storage applications in the us and europe
spk_3: these wins brought our total new major program wins for the year to nineteen which tops are fourteen wins from twenty twenty one of the nineteen wins thirteen word in the ai transportable space including seven autonomous vehicles for vehicles storage systems and to military ai programs
spk_7: we expect these new and generate approximately ten million dollars and twenty twenty three and more in the following years we added three new pending major program during the fourth quarter to of the three opportunities or ai transportable programs that include an agriculture ai solution and an autonomous vehicle data logger system
spk_3: the third opportunity is for our latest june five acceleration systems
spk_7: our current pipeline pending major programs totals thirty one with fourteen of these involving a i transportable application and eight of those in military application turning to products and certifications or rigel it's supercomputer recently attained and video certified systems endorsement simplifying or sales process
spk_3: it is the only as certified ai system using for of the most powerful pizza express jan four h each tx a one hundred gp is
spk_7: and video certified systems are tested and evaluated by and video engineers for peak performance functionality kill ability and security providing extra confidence in our a i work flow performance in addition last year we received a us ninety one hundred certification for aerospace level quality system as well as cyber security maturity model certification otherwise known as the m m c two point no allowing us to qualify for a larger number of military a program and preparing us to potentially participate as a prime contractor to the us government in the future
spk_3: we anticipate additional wins with the deity coming soon due to our unique high performance product mix and corporate the product certification
spk_4: as many of you know military contracts often move more slowly and cautiously but the diligence and expertise of our teams are starting to pay off
spk_3: so far and you wanted this year we have already won two of these military application
spk_7: this includes an anti electronic warfare system for fighter jet and the recently announced one point three million dollar army contract to deliver a rugged visualization solution
spk_3: the visualization solution will be based on in video gp is that are interconnected with analysis design pizza express fabric with this enabling in vehicle three hundred and sixty degree situational awareness on the marketing from in queue for we've defeated at the association of the united states army annual conference in washington dc and and fc twenty two which is the annual international conference for high performance computing networking storage and analysis that was held in down
spk_7: we also attended the west see services conference in san diego and que one of the sheer
spk_3: at both se twenty two and west we teamed up with our partner tmz core to demonstrate a technologically disruptive to face liquid immersion cooled version of our rigel a supercomputer
spk_6: as the world's first to face liquid immersion cool super computer for ai transportable rigel can now offer breakthrough levels of operating fisher thing compactness and ruggedness in the tmz core edge box and as we like to say it delivers performance without compromise
spk_8: the duty as expressed interest in the technology as it will allow for a higher density arrival systems deployed into government transportable allowing rigel to address more harsh environments such as outside of a pressurized area of an aircraft and reduce their noise signature use and sensitive application
spk_2: with my recent transition from to sell the marketing officer to cheap product officer i look forward to leading strategic direction of our technology products and customer adoption now with that i'd like to turn the call back over today
spk_3: i could jump
spk_2: twenty twenty three will be a transitional year for herself on many fronts ranging from bring her mentor levels down reducing the low margin business while increasing the high margin ai transportable business delivering more military precise and the addition of new talent with ability i anticipate that the revenue will likely be consistent with a partier but we expect to see a multiple points improvement and margins driving higher margin dollars due to stronger max we're projecting growth from our industrial portion of business including a trucks so you a carrier tracks agricultural equipment and autonomy baggage kremlin or we expect the military ai transportable to leave the growth and are targeting a forty percent increase in twenty twenty three this portion of the growth will be driven by the return of our largest military customer after the certification delays express last year as well as new doesn't fly i am oh over the past several months your seen or says announced several a compliments complishments in the defense malkin including a three million dollar defense order the extension or stored contract with the navy and a breakthrough announcement for we one the program working directly with the army oh thats has been contracted design and deliver a much needed capability for harvey ground vehicles which may get deployed and thousands of strikers bradley's and abrams tanks this exposure had led to multiple additional opportunities with the army as well as with a large defense prime contractor
spk_3: and the case for the plan which we have not previously worked with they reached out to send them does that they have also dead on this program and our interest in working with us on some other opportunities leveraging our technology and expertise
spk_9: for years or so has provided storage product shipments to the navy for the p eight aircraft today is shipped product totaling more than thirty million dollars
spk_3: based on unemployment we believe the contract extensions and the future business with your similar values
spk_2: our extended exclusive supplier agreement highlights or technology and leadership and long history of delivering rugged storage solutions including all the software for transport web case in and small lightweight and portable form factors particularly those involving secure high speed data recording this program letter several other opportunities within the same prime contractor unfortunately the most part until recently we've not been able to duplicate this widespread engagement add another top ten prime contractor as shared and my opening remarks based on several factors related to our strategy implemented and twenty twenty one we have made significant progress or broader scale with the defense industry and expect to share more proof points with investors route twenty twenty three officers proud that we are now working with multiple military organizations to modernize our country's defenses are deploying strategic a i and autonomy capabilities as recent as a year ago we have no position at one of the other top ten point contractors since that time we have had multiple meetings and put as many eighty people in as many as eighty people in attendance and the contractor and the dia de i have personally attended three of these meetings and have been pleased with a sincere interest our capabilities and products although it's that formally one a contract at this prospect yep they are proposing to use rigel or guess the us servers and our stores platform spanning multiple air force aircraft if we close just different opportunities they could generate more revenue than oakland largest military customer they have lot of the performance and compactness of rigel as well as constructive road map disruptive road map leverage is next generation products from partners like video as well as a path to to face emerging technology
spk_3: in another case after overcoming the ppf to military standard requirement as i mentioned earlier in the paul the prospect included rigel include could rigel as the computer system been proposed to the marines in a major program upgrade again this is it nother top crimes
spk_2: the contractor later
spk_10: senior management from the customer is it up here and escondida and said they are looking to leverage rigel and a road map is potentially a skeletal solution to use on all their aircraft proposals
spk_2: where they will be retrofitting current aircraft as well as for use in next generation aircraft we believe our products technology actors expertise and skills are like well with a i a times applications for up a deity programs we're working on that have been and that have not been announced span many applications including different types of aircraft including surveillance tankers fighter jets drones and helicopters on the land it includes manned and unmanned vehicles detection systems battlefield communications command centers and los signature remote supercomputers at see we've seen opportunities for a time shifts submarines and amphibious ships other nazis are countries that i'd mention have not been awarded we believe were an excellent addition to close a number of them while also securing new programs in the process i often get asked what makes almost as different from others in the market what prevent others from entering
spk_3: unlike many other many and is fragmented space it all starts with performance without compromise
spk_11: rather than bringing lower performance a better solutions to this market we bring the latest technology normally used only the most of about the data centers are engineering development and manufacturing expertise provides the company the flexibility start from ground up to optimize for this market using the latest products
spk_2: capabilities the push the limits on burma dynamics power density and rugged ization as well as switch fabric skills to tie everything together with the latest high speed he said spread and and that his license and the link protocols we layer on top of that software and man his products and take pride in building followed malicious for their customers now looking ahead
spk_3: but the first quarter of twenty twenty three we expect revenue of approximately sixteen point six million with a higher mix of ai transportable products as revenue from are lower margin media entertainment customer continues to decline
spk_0: we expect revenues increased throughout the year as additional programs layer in especially with the military business increasing margins are modeling and our pipeline and opportunities suggests that our says macy revenue growth in the twenty five to thirty two separate starting and twenty twenty four we appreciate your continued support and the country contributions from allergies without of now like to open up the call to questions
spk_12: barack thank you same ladies and gentlemen you will now begin the question and answer session should you have a question please star followed by the number one on your touchstone son if you would like to add value request please press star followed by the number two one moment please the first question
spk_4: your first question comes from the line of scott silly some of us capitol please go ahead a good as new thanks for taking the questions on guys are personal the color or lot of color in there so all on cut through to couple things quickly but first on the mundane friends just gross margin simply john i wanna i want to go back and clarify couple things in the fourth quarter of even with to decline in disguise contribution
spk_3: it sounds like the we didn't have a lot of the higher end military product revenue those go to research stations i corrected to quantify the allowances and then as we look into the first quarter here
spk_4: how much of recovery and gross margin do we see where because a seasonality absorption issues it's still little bit the headlines into a ramp up to the course of this year
spk_3: so we saw a little over two and a half percent margin erosion as resulted the additional so that we recorded
spk_2: we had basically tied directly to our
spk_10: media more of our business that we are a lot or leaving leaving pictures are lower margins business would move into the more profitable military business so we get a detailed analysis alarm and tory and have to look at the realization of that and based upon that would but not adjusted for
spk_3: slow moving or are obsolete inventory
spk_13: i think it to the office guy just that that during the fourth quarter of the we have seen the military at start to rebound it has not rebounded as far as well as far as like the current quarter
spk_12: in addition to that whole though our media team a customer was down and lower than expected
spk_14: the was far
spk_12: it was still significant number and you'll see quite a bit further drop movie for which is built into the sixty six number godwin you want me to the frigid meal as be to see a yeah we should continue to see march and improvements
spk_3: duchess a sequential margin improvement into the march cooler the correct and the david it simply disguise rolling off pretty quickly i think the number that you said was less than ten percent of revenue contribution and twenty twenty three just want to clarify that and then also i did you talked about the military i transportable school and forty percent this year zone as he can calibrate us what it was twenty two
spk_2: i guess or including some the raytheon into that as well as not clear to me i just want to know what numbers i'm working with us
spk_3: yeah raytheon as part of our common and basically military portion the business you know going from a from the overall company it's going from about twenty percent to thirty percent year to year
spk_12: if you look at the officers classic it's going from some like in the thirties to over half the about thirty five percent of business during that period of time on the the media and entertainment custer customer crime yeah it's fallen off faster than we projected when we were busy back in november
spk_15: and so we're just stop moving forward and fortunately the hard work with been to run the military gonna start a pay off for us
spk_2: not to in and and into died in on the out with the pipeline is really building on the military front in in a very short time it seems like it's exhilarating
spk_13: i'm i'm surprised to see that you so comfortable talking about twenty five to thirty percent growth in twenty twenty four i just want to confirm that in terms of total revenues because it implies you're basically that you know talking about ninety million in sales and this as the sherpa brezhnev us to ship out disguise it looks like you're growing into twenty twenty four sixty
spk_3: seventy percent on the core always has been some i do not currently i looking at it from the proper sampling
spk_2: you know so you know what would be sluggish
spk_12: communicate what we're trying to communicate is that twenty twenty three as far as overall revenue as twenty one is approximately flattish but call it on but we're replacing the low margin media business with military i transportable the first so i mean that and and we're seeing growth that freshener alan that i answer your question if not we know of times i give i was i was talking about twenty four and you said one thing so of twenty three revenue is comparable to twenty two or as a comparable to twenty one when he choose carpet to i'm sorry twenty three is comparable to twenty two sorry that's of the talks and twenty two ignore her face of the the i'm twenty four on you know it's have you know exactly but that is what we've been striving for and the activity is so broad on the military specter right now
spk_3: if we do what we think we're going to do in addition the things we've already closed that's our expectation will update and more on that as the year progresses
spk_7: i'm a big numbers are just two more questions on the back in the queue so then looking at that goes into twenty twenty four obviously there's a tremendous as of for long design activity in discussions he talked a little bit about the pipeline's he talked about some contracts but as woodard these teams there's some sort of number of the ones that he clarifies help us understand the magnitude of on this opportunity as who look at two or three years and it also on the watch your side as wondered who you bidding against who's on the shortlist in terms of the competition that you're coming up against with roger thanks
spk_3: well work i know we've been replacing people to some design so far an advisory customers i've been involved we're not hearing competitors common up because we're being told that only gotta have some at this level of performance gym having any the out to some mom so typically what we're doing is a
spk_12: did the military comes over the traditional we kind of mentioned in the car
spk_0: an opportunity that they think is good for their bp and bladed architecture and and everything the way they've been doing it before when we get us back and we show them what we can do with rigel it's totally changes their philosophy on how they approach the problem so instead of a bladed architecture they use rigel in it
spk_16: it's ten the forty times more powerful than what they were considering before and their eyes light up and they get the forward body lean they've likes to say and and the customers are like okay we're we want to change or spec to be like would you have and that's really the the momentum that we're building in the
spk_2: in his account so we're not really we take ourselves away from getting at the head with the px when we bring these it
spk_17: i'll get back the tuesday to not really excited to hear what's going on as we were down to two and twenty four thanks
spk_18: thank you your next question cause it's on the line of erica my to nothing suddenly tea please go ahead
spk_16: it's just a clarification they when you said the in the military the thirty percent to fifty five percent with at twenty twenty two to twenty twenty three just per hour so is classic excluding browser
spk_19: ah yeah of the i gave it to such numbers when you have the whole thing with including i'm aware of europe and were gone from twenty to about thirty percent when you pull that out to put it was a classic are gone from the mid thirties to like fifty five percent up from twenty two to twenty three
spk_4: that's for sure the clarification
spk_20: the
spk_4: the median entertain a cause for what was that customer and twenty twenty two as a present a total revenue
spk_16: look it up here
spk_21: it was what by top ten
spk_7: over twenty percent of
spk_16: look at number twenty three
spk_2: twenty
spk_3: can't i think twenty five percent twenty
spk_16: and that twenty five percent you're saying that becomes less than ten percent and twenty twenty three
spk_17: that is correct correct
spk_2: right and then as i look out to eat you've given us a couple of numbers here for twenty twenty three the revenue come for kill one you're talking about and sixteen six appear a minus three percent revenue comp you're talking about roughly zero percent for the year so how do we think about it the
spk_16: quarters is it you know they're they're roughly you know can a zero to two percent the our quarters or as the front half of the year
spk_4: we're taking a contraction and then really kind of growth in the back ask a better way to think about i just kind of the size of a ton of a steady upward upward to get to approximate flat and get a little more tolerant you want for example if we were still doing the same kind of business levels to higher business levels the media came and customer we would have set a new record all time record for now
spk_16: encore quarter and it would have been for a few was forty one would be done we've never ever had a big two one five tickets car tells you that rest with a pretty strong because i was pretty small or them into one the number as much loved wasn't you're bored or lower three
spk_2: the that's and i asked about the end of the first question or know i guess is my second question were the kind of fighting at least fifteen percent headwind and so come on a flat is how i was
spk_22: another way to frame that twenty five the flat across him
spk_0: you know us
spk_23: assuming you know those things materialize were you not see an additional margin points in march and dollars should be up to the here
spk_24: yeah and then i love you're willing to comment on it but gross margin dollars up for the year what about adjusted it either does say he finished out twenty twenty two or suggested either the done by point two million
spk_23: and a seven percent adjusted even on march and what are we thinking about for twenty twenty three
spk_25: oh be very consistent with i watch that which we reported and twenty twenty two as a result the sluggish additional extensive that we'll be encouraged
spk_3: again it's gonna be flat ride around five million
spk_23: gotcha and then nuns davies said the ceo searches is underway got some good candidates and you know we should think about kind of a major hires and crack
spk_2: yeah me happen sooner because we've gotten really good candidates are talking to right now but that's what internally we're targeting and i'm just a flexible so if it's quicker find the takes longer i'm here okay let's all the questions and thanks thank you your next question comes on the line as joe gomez some noble capital please go ahead good afternoon thanks for taking the questions what wanted to start
spk_3: you know if you could just kind of walker still live limit more
spk_2: i understand the military opportunity but you're a year ago dead wrong about an autonomous trucks and how about market was the real one that we're going after and we kind of made a big switch year now to the military are just you know trying to get a better handle as to you know what what caused that you know in in what what is now the plan on the eponymous truck side you know where where do you see that business grow and a you talked about the two of the clients were the top ten in revenues for for twenty twenty two
spk_23: to your how you see that going into twenty twenty three yeah said joe thanks for this question is a great question i understand why are our get on what am i don't fix a apparent to some people
spk_3: that because of that caught great contrast is that we launched a i transportable and twenty twenty one ah we said we were going after the military and industrial myself i could even share with your fact and originally we thought only doing the military market prices for the opportunity but then we said you know if anything industrious can be quicker
spk_2: or i'm so let's put the heaviest focus on military but were discarded and talk about much for wants of things start to develop good as takes longer so that's really what happened and year with we pitched a i transportable we're making some progress the truck guys came alive we sure that you know with the marketplace as group point on and you know now that we feel good about what's going on a military for like we can talk more about that
spk_3: oh in that brings okay where are the trucks we still believe the trucks the same place that the the last couple calls and you know how i communicate that it's a good business it ends up being in our in our top ten park customers we expect to grow touted as am done it it is something that at some point in time could be a very strong inflection point
spk_2: on revenue as things go into production and our intent is to stay in that market be a production solution by the same time as we said before we did not wanna bet the farm on it because of the higher risk reward aspect of it
spk_3: the so it be great if it happens we're going to try to make it out that i think we will but i think the building blocks of the company as we layer and you know just on dependable businesses that argus build year after year high margin
spk_2: rack and back them is gonna be on the military side and ugly that would drive a lot of the value the company in my opinion
spk_23: okay great thank you for that i'm in and just wanted to clarify you you talk that now gates with eat the top ten largest prime contractors in the military side you mentioned something about it's if one of these programs head he could be equivalent to the p a program which is north caught thirty million over five year period
spk_26: did i hear that and is using still talking about that same type of time frame for that the revenue
spk_23: a yeah i was really was saying if you know that are just one of those primes have some the stuff because so broad
spk_2: if we just close or we had it would be a larger town so for example the why picked one i made that comment on that we have more activity today and the short period of time on mortar rounds and we had a that our biggest customer
spk_0: the so it's just a broader
spk_17: we're hitting on more cylinder of cylinders there and and we do and our our biggest account
spk_27: but i'm in a giant i don't want to mislead or eight and take some time to turn that into revenue and everything you see some of it in twenty twenty three as they do to funding or the by a couple deaths or whatever and hi to you know higher speeds and i that part of the the revenue growth to the here in addition five okay
spk_3: and then one last one for me out you know you guys always stay that the long term margin objective was in that thirty five to forty percent range
spk_4: given kind of your the skies now falling off and
spk_3: it is be hope for significant growth on the military side which carries you know mars is up for that sixty percent levels and i is he still targeting that thirty five to forty percent novel is that something that maybe you'll see creep up ah overtime here
spk_28: we don't really believe it's very doable
spk_3: a part of the reason is the assessed classic business today when you're reload the median entertainment is in that on a range
spk_2: but
spk_10: next take the taxes yeah no it's a classic business fluctuate you know when you pull out the media entertainment somewhere between thirty five and forty five percent on average and we have contributors from customers anything from know the five seventy percent of the other ones that are slower
spk_20: thank you
spk_3: thank you for your next question can send a line as brian canceling some alliance global titans please go ahead
spk_29: good afternoon on this shirt is serving on for brian
spk_2: ha ha my questions
spk_3: on suspects could you i'll also a question about taught in this truck games on last quarter you mentioned about multiple times in the prototype things i wonder is over the last quarter have any more entered the prototype stage and when world what is next says look like land use the if you have any sort of visibly of when customers will move into it in the impact will have on your business or revenue by of you
spk_2: yeah so horrified phases of you know
spk_30: it's a one three to five fortunately the his feet high
spk_13: we may see and to say another account and is quarter and right now and for this more opportunities there as far as you know a production part in a depending on who you talk to strange anywhere from people believe that twenty four that people believe that twenty thirty
spk_3: and how they look at it
spk_31: five what i believe will happen is that the only by a twenty five i'm at a time
spk_32: they do all their work i believe what's going out and not the fed access the amazons always got a plan planet use autonomy trucks wanna start work on the logistics of the answer they'll say hey we want to buy twenty five we might get twenty five trucks or even know me i'm still have to be in there because we need to start
spk_7: work in the logistics of it
spk_3: and or maybe a limited to the have to another or something like that and we believe that could generate business to increase the size of these accounts over time it wouldn't be that inflection point type revenue but it would be nice growth us
spk_29: thank you
spk_27: up next question in regards to rigel i remember last quarter you mention that you're in the task video the to integrate rigel into large airframe drones and land vehicles for combat
spk_3: what has has there been any progress no specific instances and in a bridal in general when can we start to see meaningful when you start to ramped do as a disability there well we could to the to get more activity on right to a new opportunities and the ones you mentioned are progressing
spk_27: as far as rub and i will ship revenue and twenty twenty three
spk_7: i'll by you know it's it's you know either the numbers on talk about stuff you've got a current customer another one way or another it's not tens of millions of dollars right or anything for the sheer
spk_33: it's likely single digits or millions the show
spk_2: i think human one last question again just add onto that about as where these things start to go you know and and deployment to multiple vehicles and everything that's where the numbers don't add up really quick and and as well as the possibility that grow and fuel that kind of growth rate and twenty twenty four we're talking about
spk_3: and it's also if you take were rigel brought it into several of these opportunity that we've actually close with other programs so the autonomous trucks a lot of people saw rigel first out and said that will be want and we gave him that capability maybe with something like the sdf server and even the the army opportunity that way
spk_34: he had announced
spk_3: less i guess was score was
spk_29: something that started off because of the capabilities inside rigel that they wanted
spk_0: slightly different on and we're doing to design based on that so so rivals opening a lot of doors even if it's not producing it's own read the new in those range of the day was talking about yet as we close the deal
spk_35: that's that's really good to him
spk_2: i'm one last question in regards to your guidance on her q line close to down three percent year over year is what i'm seeing is is just due to the sastre drop off from disguise or is are also a slower rant of military demand that are working together to causes drop us and then moving on from there if there's a steeper drop off now from disguise
spk_3: which will mean a less steep drop on later on the year shouldn't you shouldn't we expect revenue to be down for the first couple quarters and be flattened second and then
spk_0: gross in the back half ah so first of all if you if you well i try to munich to me but i try to communicate earlier have you looked at first quarter of twenty twenty two first quarter twenty twenty three and he pulled out the media and entertainment business you would see very solid growth of our other core business so because the media antenna the numbers dropped so much and that's not a big part of our number anymore though what we said as we think this quarter is where it's at and we think the next you know several course stuff up quarter after quarter i am i answer your question yes but so i was just to confirm in terms of military demand ramping that gop is he going down as you expected are you still seemed longer like delays and i know you said that is typically a cautionary business but you know the past three quarters and in the fourth quarter now had been relatively weaker and i know there's gonna be more strength but you don't see that was ranked teetering on the four hundred were really good que one and military great awesome thank you so much as i have thank you and get there are no further questions at this time i'd now like trying to call over back in to david vaughan for closing the midlands thank you and everybody for joining us today with enjoy sharing the latest progress process with you today and believe the company's strategy a solid and it's future is bright we look forward to speaking with you again and may if not sooner in the meantime as always feel free to reach out to jar myself at any time and with that would say go ahead and wrap up the call thank you same now before we can today's call i would like to provide a company safe have statement includes important questions regarding forward looking statements made during today's calm once that systems carson's you that statements and the presentation that i'm not a description of his type of facts are forward looking statements

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