One Stop Systems, Inc.

Good day and thank you for joining us today to discuss One Stop Systems financial results for the third quarter ended September 30th, 2023. With us today are the company's president and chief executive officer, Mike Knowles, and its chief financial officer, John Morrison. Following their remarks, we will open the call to your questions. Before we conclude this call, I will provide some important information regarding the forward-looking statements made by management during this call. I would like to remind everyone that the call will be recorded and made available for replay in the investor section of the company's website. Now, I would like to turn the call over to OSS President and CEO, Mike Knowles. Sir, please go ahead.

Thank you Morgan and good afternoon everyone. I've successfully completed my first full quarter as CEO and I'm pleased with the building momentum and confidence in the rugged edge processing market. We're well positioned for future growth at OSS. My engagement with customers and participation in global trade shows over this past quarter reaffirmed our unique position in the robust growth markets driven by artificial intelligence and sensor fusion, particularly in rugged high performance compute demand at the edge. In many instances, OSS is recognized as an expert in these markets. And in fact, in October, I participated on a panel at the Aerospace event in Washington, D.C., regarding the technical demand for high-performance compute for artificial intelligence applications in commercial and defense markets. In Q3, we secured several significant wins across commercial defense markets. These successes align with our strategy to broaden the number of prime and customer contracts, increase our presence on more platforms, and pursue multi-year contracts that can boost our pipeline and future revenue. These key wins include a liquid-cooled service solution for sonar processing for a foreign Navy submarine class, a follow-on win in hardware buy for an additional storage system product for the P-8, A new contract with an existing defense prime contractor for a new classified platform. A commercial order and win in the dynamic racing industry encompassing our product at this newest OSS customer. the award from the foreign navy submarine program is special noteworthy and how it exemplifies our key objectives we've successfully established a new military customer a new defense prime and a new international customer while securing a position on a new platform we believe this will lead to a multi-year product and support contracting contract commencing as early as 2024. this sale was cultivated captured and closed by our bresner sales team with support from our oss team validating Bresner as a channel to market for OSS products. In addition to the key awards noted, our teams are actively engaged in multiple proposal and program pursuits. We're currently responding to an exclusive opportunity to design, develop, produce, and support a rugged edge compute solution for the commercial aerospace market. This effort would add a new product through an existing customer and establish a multi-year contract. OSS is engaged in two potential exclusive opportunities in the commercial data center market with our latest PCI Express Gen 5 for UP and internally developed UVM software. These efforts would broaden our customer base and provide for a multi-year hardware and software demand opportunity. The team is working to close a large competitive opportunity for design, development, production, and support for a rugged compute and storage system in autonomous trucking market that would expand our platform, position in the market, and lead to another multi-year demand opportunity. We're responding to a competitive opportunity for a rugged edge processing solution for a military classified program. This capture involves a new prime, a new platform, and provides a multi-year production and support opportunity. Also on the defense side, we are well engaged with the potential sole source opportunity for rugged edge processing and storage for a multi vehicle platform support activity. This opportunity would be with a new organization within a branch of the US Armed Forces. These represent a sample of the increased activity and pursuits our teams are diligently working. For competitive reasons, I haven't provided specific technical information or contract value. Looking ahead, we remain committed to expanding our efforts to secure new prime contractors, vehicle platforms, and multi-year contracts both domestically and internationally. Our broad market activity is already increasing the number of customer engagements and requests for information and proposals. Bolstering our confidence in our strategy and our ability to grow a robust multi year pipeline. Financially, our results in Q3 reflect the continuing transition we embarked upon last year to focus more on rugged edge and defense market opportunities. We successfully shifted away from our former low margin media customer, and we're concentrating resources on growth opportunities and edge computing, driven by sensor processing, sensor fusion, artificial intelligence, and machine learning. Despite the expected challenges, we achieved $13.7 million in revenue in Q3, while effectively executing our cost containment plan. There's more to discuss, but before I go further, I'd like to turn the call over to our CFO, John Morrison, to provide the financial details for the quarter. John?

Good afternoon, everyone. Thank you for joining us today. Earlier today, we issued a press release with our results for the third quarter ended September 30, 2023. A copy of the release is available in the investor relations section of our website at onestopsystems.com. For the third quarter, we reported consolidated revenue of $13.7 million. Of this, OSS contributed $5.5 million and Breschner contributed $8.2 million, inclusive of $377,000 of OSS product. Quarterly revenue reflects a reduction of $5.1 million, or 26.9%, compared to the same period in 2022. Approximately $4.3 million of such reduction was attributable to the loss of our former media customer from whom we do not expect for the revenue. The balance of the revenue reduction was associated with delays in certain customer orders for defense applications, lack of revenue from a bankrupt autonomous truck customer, as well as a slowdown in general model A's in commercial markets.

As most of you are aware, our company is comprised of two segments, OSS, which is located in Munich, Germany, and Breschner, which is located in Munich, Germany.

OSS is involved in the design and manufacture of high-performance, ruggedized edge processing and storage systems and connectivity. Brezhner operates as a system integrator with standard and custom all-in-one hardware systems and components. They also serve as a channel for OSS products to the European and Middle Eastern markets. Gross profit in the third quarter decreased to $3.7 million with overall gross margin percentage decreasing 40 basis points 26.6% due to a higher mix of revenue. The gross margin for OSS business improved 1.7 percentage points to 32.4, which was attributable to the absence of lower margin sales to the customer's former media customer and a higher mix of its rugged edge processing products. However, the improvements in margin were offset by underutilization and absorption of production fixed costs due to excess capacity resulting from lower revenue. Residence growth margin percentage improved 40 basis points to 22.6%, largely due to product mix, the sell of higher margin OSS products, and having thought after product level is available and all the cream. The company reduced operating expenses by 4.3% to $44.7 million through cost containment efforts implemented in the quarter. This is exclusive of a $2.9 million write-down attributable to an impairment of goodwill resulting from the overall financial performance as compared to plan. Our increased focus on the defense industry and revised timing for our forecast of certain revenue opportunities. Lost from operations totaled $4 million compared to income from operations of $163,000 in the same period in 2022. This reduction was predominantly attributable to lower revenue and the write-down associated with the impairment of goodwill. Loss before income taxes in Q3 also included a one-time benefit of $418,000 attributable to the receipt of funds under the government's Employee Retention Credit Program. Net loss on a GAAP basis was 0.1%. with $3.6 million or $0.18 per share as compared to net income of $133,000 or $0.01 per share in the same period in 2022. Non-GAAP net loss was $597 or loss of $0.03 per share as compared to non-GAAP net income of $691,00 or $0.03 in the same period in 2022. Just that even that I'm on that metric with negative 248. I decrease from prop of that it just to be the of one million in the year go quarter. Each of the money that metrics include the 2.9 million impairment of goodwill and the 418,000 for the employee retention credit. Now moving to our year-to-date metrics These highlights are compared to the same period in 2022. They include noting consolidated revenue was down 11.9% from $54.2 million to $47.7 million, predominantly due to a decrease of $10.5 million in median revenue. Gross margins were 28.3% compared to the prior year of 28.5%. Operating expenses, including the charge for goodwill impairment, is up $1.3 million, inclusive of approximately $1.5 million attributable 2023 CEO transition costs. Other income and expense includes $1.7 million for employee retention credit, resulting in net other income of approximately $322,000. This is compared to net other expense of $106,000 from the prior year. Loss before taxes excluding the goodwill impairment charge and the employee retention credit benefit with $1.6 million, in contrast to income before taxes of $1.3 million in the prior year. Non-GAAP net loss was $592,000, or $0.03 per share. Adjusted EBITDA, a non-GAAP metric was $768,000. Now look at the balance sheet. On October 30, 2023, cash and short-term investments equaled $13.2 million. This combined total represents a decrease of $2.2 million as compared to Q2, 2023. This decrease is primarily due to an increase in working capital requirements for inventory. Inventory continues to increase due to non-cancellable, non-returnable inventory orders placed in previous periods, which are now being delivered. We expect this inventory increase to be released in 2024. As the company continues to transition and evolve its business from being largely dependent on media-derived revenue, the company will operationally focus on maximizing growth gross profit contribution. In the near term, this may include accepting lower margin business that incrementally contributes to gross profits, but may be inconsistent with our long-term objective of a decreasing consolidated gross margin percentage. The objective of this effort is to have sustainable cash flow as the company bridges our revenue model. Now, looking forward to the fourth quarter of 2023, we expect revenue of approximately $13 million. We are witnessing some impact from the defense budget continuing resolution manifesting late funding and awards on a full source opportunity. We could experience further impacts going forward if the budget approval continues to be delayed. We also continue to see a commercial slowness or general malaise that has manifested in delayed and or reduced awards. We have not seen signs of overall improvement and do not know when we may be able to see those. This will complete our financial review for the quarter. I would now like to turn the call back over to Mike. Mike?

Thank you, John. Last quarter we announced the departure of two OSS directors as well as the appointment of Vice Admiral Mike DeMont and myself to the Board of Directors. We also reconfirmed our commitment to continue the re-profiling of the Board to align with the strategic path and desired skill sets of directors. As noted in the AK and EARN's release, Joe Manko, Managing Member and Senior Principal at Horton Capital Management, has been selected and appointed to serve on the Board effective November 10th, 2023. Mr. Manko has been serving as a managing member and senior principal of Horton Capital Management and Investment Funds since 2013. His prior asset management and investment banking experience, having served in executive positions at BZ Fund Management, Deutsche Bank, and Merrill Lynch, and also legal experience having served as corporate finance attorney at Skadden, Arps, Slate, Mager, and Klum. Mr. Manko also serves as a director on the board of Safeguard Scientific and Coru Medical Systems and has previously served as a director on the board of Creative Reality and Wireless Telecom Group. The One Stop Systems Board unanimously voted to temporarily increase the size of the board from seven to eight at this time and appoint Mr. Manko to fill the vacancy created by the increase. The board intends to further temporarily increase the size of the board to no more than nine and add one additional board member with relevant defense experience during the Q4 timeframe. There are candidates actively in review to fill this position. The director's slate presented for election by the company's shareholders at its 2024 annual shareholder meeting in May will be a seven person slate. This director's slate will be chosen by the board prior to filing the 2024 annual meeting proxy. We are adding the additional board members at this time to take advantage of the unique skills, expertise, and fresh perspective that these individuals will bring. Aligned with our pursuit of greater defense revenues, which many times include classified programs, I am pleased to announce that we recently received our site facility clearance. This is key to our strategy and now clears the way for us to address additional market opportunities in the classified space. In addition to all the opportunities and engagements I shared earlier on the call, we continue to increase our market engagement exposure through participation in several industry events for both commercial and defense markets as we broadly disseminate OSS unique messaging and move to identify opportunities and expand our pipeline. In mid-September, we showcase our specialized high-performance AI computing solution at Defense and Security Equipment International, also known as DSEI. The Trade Show, held in London, is the world's largest land, sea, and air biennial defense and security exhibition. The team and I attended the event at the Excel London Exhibition Center, where we displayed our full line of rugged edge processing products for AI, sensor processing, and sensor fusion applications. Rigel, our flagship rugged supercomputing edge processor, won Best in Show, while our three USDS servers, Cerny's and Gennady products, received a vast amount of interest. With the largest attendance the show has seen, we were able to engage with military prime contractors and service customers from multiple countries around the world, expanding from our primarily focused U.S. market. In addition to solidifying relationships with current customers, we were able to expand our engagement within countries in Asia, Europe, and the Middle East. We were able to leverage our Bresner team in these engagements to strengthen our channel to market for OSS products in Europe and the Middle East. Bresner continues to do a better job of promoting a higher margin OSS product. Also in September, we exhibited at ADAS, the Autonomous Vehicle Technology Expo and Conference at the Santa Clara Convention Center in California. We showcased our latest solutions in autonomous vehicle technology, including Rigel, as well as rugged edge storage and compute solutions, such as EV4400 and 3USDF. We did notice an increased level of interest in activity in the autonomous trucking space and received some additional requests for information and proposals. We remain vigilant in this market space and continue to monitor it. In October, we showcase our specialized high-performance rugged edge processing solutions at the Association of the United States Army Annual Meeting, AUSA. This show is considered the largest land power exposition in North America and had an excess of 40,000 people in attendance. The event was held at the Walter E. Washington Convention Center in Arlington, Virginia. It was clear across all venues of the show that sensor fusion and artificial intelligence were driving the future of Army weapons systems. Our display of a rugged line of high-performance compute products from Rigel through Cerny's and Donati resonated in relation to the themes and demands presented at the show. As with DSDI, we were able to advance existing efforts and establish new pursuit opportunities with new primes and new divisions within the U.S. Army. For example, we were able to establish a meeting with a new prime and two of their business unit VPs and three directors. Outcome of these efforts has led to receipt of a first RFP and a multi-business unit engagement at the customer site in November. In addition, we established connection with a new major defense prime with key product offerings for the U.S. Army in the armored vehicle market, building off our success on CERNs in the night. While in the D.C. region, we also held an off-site meeting with an armed forces service unit operating a classified mission with focus on high-performance compute at the rugged edge. We're looking forward to attending the Super Computing 23 conference being held in Denver next week. It's the world's largest international conference for high-performance computing. We will be showcasing our latest and greatest with advanced cooling solutions that are ideal for bringing data center class performance to the mobile edge. It will incur a lineup of rugged edge servers, storage accelerators, and innovative flash storage rates, some of which use disruptive technologies such as cold plate, directed chip liquid cooling, and liquid emergent cooling technologies. We expect to release more information about this in our new product release and a press release we're planning to issue next week. Last quarter we introduced Robert Kailbaugh as our new VP of Sales and Business Development and spoke about efforts to increase our market engagement across commercial and defense markets. We also highlighted the efforts to re-image our pipeline to address probability weighting and timing and update our application of Salesforce to align with sales and capture execution. Our efforts have proceeded to date as planned. We are in the final stages of testing and validating Salesforce updates to enhance operations and reporting. We also have been able to complete an initial instantiation of a five-year pipeline. While there's still more work to do to mature our pipeline model, we are pleased to see that we have a robust and growing set of opportunities. At this point, we support an unfactored five-year pipeline in excess of $900 million. Efforts continue to utilize our research to not only expand our pipeline, but to transition opportunity to achievable high-probability awards with accurate timing. We expect that we will continue to see longer defense timelines characteristic of this market, though we are seeing near-term opportunities where we can intersect platform architecture upgrades. We believe there is continued room for expansion more broadly internationally. We also will be looking to identify and address opportunity in the classified space, leveraging our recently granted facility clearance. We encourage that the deep pipeline opportunities across commercial defense markets will go a long way to replace the low margin media business and support growth. Now with that, we'd like to open the call to your questions. Morgan?

Thank you. If you would like to ask a question at this time, please press star then the number one on your telephone keypad now. If you're calling from a speakerphone, please make sure your mute function is off to ensure your signal can reach our equipment. Once again, please press star, then the number one on your telephone keypad now to ask a question. We'll go to Brian Kitzlinger with Alliance Global Partners. Your line is open.

Hi, guys. Thanks for taking my questions. Is there any way, Mike, to quantify the pipeline? I'm not sure if I heard it in defense today compared to either when you joined, which I think was a little bit depleted. or versus a year ago. I'm just trying to gauge how well you're building pipeline since you've joined.

Yes, prior announcements had the pipeline structure of opportunities around 800 million. It's about 850. So with some of the additional work in the last quarter with validation and going through each of those efforts line by line, we're comfortable now that our five-year unfactored pipeline is in excess of $900 million.

How much of that? It's such a big number and it's so far away. How much of that do you think is addressable or biddable, say, through next year?

Yeah, Brian, when I said a 5, when I say a 5 year plan, so what we do is we build out 5 years of pipeline opportunity broken out by year. So the sum of those 5 years is the 900Million. So there are elements of that that are available in as early as 2023, growing through 2024. So that 5 years I discussed was really 24 through 28. Okay, and then maybe you talk pipeline within.

But what about for your AI transportables in commercial? I know you talked about maybe some slower decisions right now on the commercial side, but how do you see that opportunity there in the near term?

So the pipeline that I discussed was across both our commercial and defense markets. So it's all of the AI transportable, rugged edge processing capabilities and products that we're doing. I don't have the percentage mix between commercial and defense here with me. It's probably fairly close to 50-50 based on last time I scanned through. And then the second part of the question, again,

No, that was it. It was going to be just on that. But I guess now you've been there a full quarter. As you evaluated your business, is there any investments you think are necessary to fill visible holes that you think are necessary to help you return to growth?

Yeah, so, as I mentioned earlier with the, uh, the engagement, the number of increased engagements we're going and I also mentioned seeing some more broad opportunity internationally. Uh, 1 of the areas will be, uh, you know, looking to augment and invest. So it will be to kind of continue to build out our, our sales team so we can get to capturing and. Executing against that, the resources against that 900 billion dollar pipeline. And we need the resources to help execute and convert that from pipeline into actual captureable programs and elements that we can, we can get. And then our product lines, as I mentioned, we released Rigel recently, Cernys and Donati has just come on the scene. 3USDS has been strong. So from a product perspective, we're in a good place right now. We will be making investments in 2024 as we look to the next generation of our product line. So we continue to stay at the front end of the market in terms of technology. And then, as I mentioned, I think it was last earnings call, we will be looking to augment the team. We're starting to get more discreet defense contracts now, so we'll look to augment the team with some contract support, probably part-time to start. And then also, you'll hear us talk about adding some additional program management support to support running the programs as we win them, and also to support our capture of these bigger, broader, multi-year contracts.

Okay, last one from me. This one's probably for John. The core OSS gross margin recovered nicely. I assume the T&L without your immediate customer was the major driver there. But then I also heard your comments on potentially taking on some lower priced or lower margin business to improve the cash flow, even if it's just a little bit. So how should we think about where you are today or just reported in the core OSS gross margin, should we expect it'll be softer in the coming quarters, given your comments, or given the mix, it's indicative, or even stronger as you book new business? Just help us from this new point without that immediate customer.

I would, at this point, we're thinking it's going to, we are projecting it's going to be flat. largely because we are dealing with underutilization in our production facility on revenue. We need to get back to more in line of doing about $9 million a quarter from OSS side to be fully utilized. Many of these resources are resources that are involved in the planning, purchasing, and management of inventory as well as obviously the production for people. But we have already gone through a reduction in force back in April of 2023. We believe that as we recover, these resources will be fully utilized. But until then, it's weighing down on the overall margin for all assessed. And obviously then the proportion to the revenue that's increasing is having a significant impact on the consolidated margin percentage.

Sorry, I said I'd be done, but one more. At $9 million fully utilized and just core OSS, does that get you back to approaching 40% gross margin for that segment, or is that a little too optimistic?

Iowa, it's more of the 35% to 40% range. Great.

Thank you, guys.

Thank you, Brian. Thanks, Brian.

Your next question comes from David Williams with Benchmark. Your line is open.

Hey, good afternoon. Thanks for letting me ask a question. I guess maybe, Mike, on just thinking about the defense industry, and it seems to have held in well during this down cycle, and You know, it seems to suggest that spending still remains favorable. I know you touched on this in the script, but outside of the timing of the budgets and some of the approvals, it feels like you're gaining some really good momentum. But could you talk maybe a little bit about the hurdles between here and going into production and just what does that timing look like so we have a better understanding on how we should think these progress through the channel here? Thank you.

Yeah, sure, David. I think if you're in one part, you're referencing the – continue resolution or the CR. We have a couple of sole source awards we've been looking to get and to be able to provide proposals on that have been held up for the CR. So we expect those near term to come across as soon as the CR is resolved. That's an issue it seems every year now that defense companies have to deal with. I think if you look at how is the defense elements come alive. As we, as we build out a lot of the efforts and all we're doing now, we'll see, we'll, we'll find homes on new procurements in late 24, 25 and 2026. However, there are opportunities in there we're finding where if you can intercept a platform upgrade or tech refresh cycle, you have opportunity to make things happen a little bit faster. An example is the foreign Navy submarine program that I talked about. They happen to be in a tech refresh cycle that we caught early and we were able to get in there with our technology. And from the time we identified that opportunity through our resume unit to contract award was less than a year. That's probably usually a lot of times unheard of in the defense market, but it is doable when you catch those timeframes. There are a number of prime contractors and vehicles and platforms that we're talking to and the defense services. Both in the US and globally, where we have in those discussions, seeing where their technology refresh upgrades are. And we positioned ourselves to be in those competitions and then those discussions for the architecture upgrades. And those start to span the years from 24 through 26 and beyond. And then those are ones where we would have identified, put into our pipeline, and now have assigned a resource in to capture those going forward.

Great. Thanks for that. And I intended to just say congrats earlier, but just on the success and acceleration, it seems like you're gaining a lot of interest here, and it's great to hear the enthusiasm and see the progress. I guess on that, Mike, just kind of giving your time in the seat now, You've had some time to settle in and look through things. Is there anything today that you see that's different than previously, either more positive or things that are just different than you had thought? Anything that gives you, I guess, more optimism today than you might have had as you came into the role? Thank you.

Yes, great, David. So probably two things. First is we caught a little bit of the new norm around here. As I mentioned, the number of proposals we're working on, I would say there's a heightened level of energy, excitement, activity, and sense of urgency in the business to grow and address the opportunities. We're seeing them come in the defense market as we've been expected with the addition of Robert Calball and myself as we increase focus in doing so. But we're seeing ample elements inside the commercial market too that are raising some interest and some activity for it. So I'm excited about the new normal, the pace that we're working at here to get after growth, which is why I mentioned that augmenting the team to continue to try to build upon that momentum. And I guess maybe another example from the defense side, I had the opportunity to spend a week on the Capitol in DC, interfacing with Congress, the House Appropriations Committee, the House Armed Services Committee, and be able to tell the OSS story. And I was quite enthused to find how well our story resonated with the opportunity to bring advanced high performance compute, artificial intelligence, machine learning to the battlefield. And you can see, given what's going on in the world today, The opportunity to be able to arm warfighters, right, is something that resonates in the services. It's resonating through the HACC and the HACC. And being able to tell our story there and see it resonate so well, again, gives me optimism that we're on a good track and we're going to have support not only from our customers, but our government also.

Thanks so much for the call.

Your next question comes from Joe Gomez with Noble Capital. Your line is open.

Good evening. Thanks for taking my questions.

Thank you, Joe.

So just, you know, in your press release, you talk about an overall delay in deployment of the technology. I just want to get some more color on that statement. Is that more just due to the economy or is that potential customers just having concern about applying leading-edge technology? Is there something else going on there? I was wondering if you could add a little more color to that. Yeah, Joe, and I think, you know, we talked earlier in the statements about, you know, the kind of general malaise in the commercial market. We're seeing the defense market move out short of the continuing resolution effects on the on the commercial market side. I would say it's absolutely not the slow adoption of the technology. There is from the technical engineers and the applications. There's. Plenty of interest in discussion going on about how to move forward and utilize the benefits of the compute and artificial intelligence machine learning, get it out to the edge. The malaise really comes along when you try to convert into getting a request for proposal and a funded program out the door to make a purchase and a buy. And what we've seen there is the kind of just general tendency to not have the sense of urgency to make it happen this month. It's okay if it happens next month or next quarter. We don't see people or companies or efforts looking to push things out by years, but there's just been kind of a malaise and general ability to wait or delay another month or quarter or two for things to align, if that makes sense.

Okay.

And then last quarter you talked about you thought somewhere in the nature of five to six million of defense work had been pushed out into 2024. Has that number grown since then? It'll be about that number. We'll see how Q4 ends. But we'll be in that. It'll be that general rating. Okay. Thank you for that. And congrats on getting the security clearance for the facility. You know, again, one of the issues that seems to be A repeating is the difficulty in finding and hiring people with security clearances. Just there's a big demand and limited supply, it appears. And just wondering how you guys are finding that and if that is an issue at all. Yeah, Joe, thanks for the question. So, I think one of the benefits we have today is the kind of work we're doing right now doesn't require us to have the cleared individuals that you might align with the market you're talking about, people with SAP or STI clearances. Um, where we're operating here in the, in the near term, uh, we can get our own people, uh, class, uh, um, cleared and or the workforce, especially in San Diego, uh, or remote you guys remote. Uh, you can find, uh, we can find individuals to fill that. And the reason is, for right now with the products and the work we're doing, the use of the clearance for us is really more about being able to get inside the understanding of the mission and the application of the technology. And that allows us to explore the ability to broaden our scope on an effort. We've had 2 such actually more than 2 meetings, probably in the last 2 months where myself, Robert both have clearances where we've been able to explore more broadly what a platform does. And in doing so, we were able to come back and identify broader scope of work or effort. That could do and could bring with our, our technology and that's where we're going to see the benefit here in the near term over the next couple of quarters. As we build out into the years and establish position, use of a SCIF, a computer classified information facility, and people with the clearances I discussed, they would come along, but we'll have some runway to be able to identify that. Okay, great. And one more for me, if I may. Historically, you guys have given the quarter-end pipeline in terms of the number of opportunities for those million-dollar-plus And I think in the last quarter, you were 33 opportunities. Do you have that same number for the end of the third quarter? Joe, we don't have that number. In part, we're transitioning from kind of those prior definitions. We're going to evolve our pipeline information and data here to start to give you insight into awards. And we'll be aligning along some of the themes I mentioned earlier in the earnings call, where we really keep strategic for us is adding new customers, new primes, and then getting on additional platforms and getting multi-year contracts. So, we'll look to engage across all those elements of ways to be able to provide enough information to give you maybe even a more in-depth sense of how we're doing on securing orders.

Okay, great. Thank you. Thank you. Thank you, Joe.

Our next question comes from Max Michaels with Lake Street Capital. Your line is open.

Hey, guys. Thanks for taking my questions. Just looking at the slowing economy in Germany, how has this impacted your outlook on the Bresner business?

So, to date, we haven't seen a major impact of it slowing the business. We're at the end of the quarter, and the move, we're seeing some timing or alignment, but we haven't seen the cancellation of orders or... or a down pick. Their bookings continue to be generally online quarter to quarter. So at this point, we're still seeing them able to work through any slowness in Germany.

Okay. And then last one from me. Just given the push-out in orders in the autonomous trucking space, I want to stick with the commercial market. Maybe what are some areas you can highlight? I know you talked about win in the auto racing industry, but maybe some other areas in the commercial market you're pointing your sales force to that you're seeing maybe pockets of strength. Thanks.

Sure, Matt. Thanks. And I mentioned two of them in the earnings release there on the commercial side that we're quite excited about. Two were in the data center space using our 4UP expansion chassis. With the onslaught of the hyperscalers and others buying large, massive amounts of GPUs, those GPUs need to go somewhere. In areas where And some niche areas in the data centers where they're looking to manage the utilization of those GPUs and amend them into servers. There's some interesting areas with a couple of companies we're finding some good traction with. So we see that as a nice area for us to go and work through. In addition, I mentioned the multi-year contract that we're working to finalize here in the commercial aerospace market, where we'll be able to bring some edge processing into that market. So we'll be looking to provide more insight on both of those efforts. We see those as potentially good ones on the commercial side. And then, as I mentioned, we are working in RFP now for a time as trucking. We're seeing vigil in that market. You know, it's had a lot of promise. It's had some flowing. So I use the cautious optimism on it. We continue to respond. We work through these. Luckily for us design and efforts and. Solutions we use for autonomous trucking are the same ones we use in a lot of the defense work. So we're not having to invest special product development or anything that market. So we can be quick to respond and if anything, we're finding a lot of the work we're doing in defense market creates more. flexibility in our offerings for that autonomous truck market. So, we'll continue to monitor them, but we, like I said, we use cautious optimism on that one.

All right. Thanks, guys. Thank you.

At this time, we have no further questions. I'd like to turn the conference back to our speakers for any closing remarks.

Morgan, thanks for that.

And we look forward to speaking with you again when we report in March. And we hope everybody has a great day.

Thank you. Now, before we conclude today's call, I would like to provide the company's safe harbor statement that includes important cautions regarding forward-looking statements made during today's call. One Stop Systems cautions you that statements in the presentation that are not a description of historical facts are forward-looking statements. These statements are based on the company's current beliefs and expectations. Such forward-looking statements include, for example, those regarding the company's expectations for revenue growth generated by new products, future changes to its business objectives and members of management in the board, design wins and M&A activity, amongst other things. The inclusion of such forward-looking statements and others should not be regarded as a representation by OSS that any of its plans will be achieved. Actual results may differ from those set forth in the presentation due to the risks and uncertainties inherent in our business, including, without limitation, that the market for our products is developing and may not develop as we expect. Military conflicts, global pandemics, or other disasters or public health concerns, and economic instability in regions of the world where we have operations, customers, or source material or sell products may affect such markets. Our operating results could be negatively impacted by inflationary pressures, supply chain constraints, increased interest rates, U.S. government continuing resolution, CR, or other economic conditions. Our operating results may fluctuate significantly, which would make our future operating results difficult to predict and could cause operating results to fall below expectations or guidance. If we are unable to offset anticipated future decreases in revenue in our media and entertainment space with other business, our operating financial results may be adversely affected. Our ability to successfully integrate the operation systems, technologies, Product offerings and personnel with acquired companies, if any, may prove difficult and adversely affect our financial results. Our products are subject to competition, including competition from the customers to whom we may sell and competitive pressures from new and existing companies may harm our business sales, growth rates, and market share. Our future success depends on our abilities to develop and successfully introduce new and enhanced products that meet the needs of our customers. The likelihood of our design proposals becoming design wins is uncertain and revenue may never be realized. Our products fulfill specialized needs and functions within the technology industry, and such needs or functions may become unnecessary or the characteristics of such needs and functions may shift in such a way as to cause our products to no longer fulfill such needs or functions. New entrants into our market may harm our competitive position. We rely on the limited number of suppliers to support a manufacturer design process, and if we cannot protect our proprietary design rights and intellectual property rights, our competitive position could be harmed or we could incur significant expenses to enforce our rights. Our international sales and operations subject us to additional risks that can adversely affect our operating results and financial condition. We may not be able to accurately report our financial results and other risks described in our prior press releases and in our filings with the Securities and Exchange Commission including under the heading Risk Factors in our annual report on Form 10-K and any subsequent filings with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this conference call. And we undertake no obligation to revise or update this information to reflect events or circumstances after this date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement, which is made under the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Before we end today's conference, I would like to remind everyone that this call will be available for a replay starting later this evening through November 23rd. Please refer to the company's press release for dial-in and replay instructions available via the company's website at Thank you for joining us today. This concludes our conference. You may now disconnect.