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.