One Stop Systems, Inc.

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Good day and welcome to the One Stop Systems, Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will have the opportunity to ask questions during the question and answer session. As a reminder, this call is being recorded. As part of the discussion today, the representatives from OSS will be making certain forward-looking statements regarding the company's future financial and operating results including those relating to revenue growth, as well as business plans, booking, the company's multi-year strategy, business objectives, and expectations. These statements are based on the company's current beliefs and expectations and should not be regarded as a representation by OSF that any of its plans or expectations will be achieved. Please be advised that these forward-looking statements are covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and that OSS desires to avail itself of the protections of the safe harbor for these statements. Please also be advised that actual results could differ materially from those stated or implied by the forward-looking statements due to certain risks and uncertainties, including those described in the company's most recent annual report on Form 10-K, subsequent quarterly reports on Form 10Q, current reports on Form 8K, and recent press releases. Please read these reports and other future filings that OSS will make with the SEC. OSS disclaims any duty to update or revise its forward-looking statements except as required by applicable law. It is now my pleasure to turn the conference over to OSS President and CEO, Mr. Mike Knowles. Please go ahead, sir.

Thank you, Sylvie. Good morning, everyone, and thank you for joining today's call. 2025 was a defining year for one-stop systems and reflects a successful execution of a multi-year strategy to reposition the company around high-performance, ruggedized compute platforms that enable artificial intelligence, machine learning, and sensor processing at the edge. During the year, we saw that strategy translate into meaningful financial and operational progress. The strength of our performance throughout 2025 also created an opportunity to take an important strategic step for the company. In December, we completed the opportunistic sale of our wholly owned subsidiary, Bresner, and received proceeds of $22.4 million, subject to final closing working capital balances. OSS acquired Bresner on October 31, 2018, for approximately $5.6 million, and we believe this transaction unlocked significant value for OSS's shareholders. While Bresner had been an important part of our history, the progress we made across OSS's core business positioned us to evaluate this asset from a position of strength. When we received an attractive offer for the business, we viewed it as a compelling opportunity to unlock that value, simplify our operating structure, strengthen our balance sheet, and concentrate our resources on the higher margin, higher growth, rugged enterprise class compute opportunities that are driving the next phase of OSS's growth. As a reminder, following the transaction, Bresner's historical financial results are now reported as discontinued operations, and the results we are discussing today reflect the performance of the core OSS business. This transition effectively positions OSS today as a pure play provider of ruggedized AI compute platforms for edge applications. As a result, OSS enters 2026 as a more focused company centered entirely on delivering high-performance compute solutions for both defense and commercial markets. With that strategic foundation in place, we exited 2025 with a strong fourth quarter performance, including revenue growth of more than 70% year over year, record quarterly gross margins of 58.5%, and positive net income from continuing operations of $2 million. These results reflect growing demand for our technology across both defense and commercial markets. as well as the benefits of operational improvements and product focus we have implemented over the past several years. So with that context, I'd like to walk through several of the key developments that drove our performance in 2025 and discuss why we are excited about the opportunities ahead in 2026 and beyond. Turning to the operational progress we've made during the year, we continue to see strong momentum as customers increasingly adopt our rugged enterprise-class compute platforms. As a result of our strong fourth quarter performance, full year 2025 revenue came in above the high end of our previously communicated guidance range of $30 to $32 million. The quarter benefited from favorable customer demand and strong operational execution, which allowed us to complete several shipments earlier than originally anticipated, contributing to a stronger than expected finish to the year. Overall demand for high performance computing at the edge continues to expand. as AI, ML, autonomy, and sensor fusion become central to next-generation defense and commercial systems. OSS is uniquely positioned at the intersection of these trends, where customers require powerful compute solutions that can operate reliably in demanding environments outside of traditional data centers. One example of this is the continued development of our solutions on the P-8 Poseidon aircraft, a long-range, multi-mission maritime patrol aircraft used for anti-submarine warfare surveillance and reconnaissance operations. To date, OSS has secured more than $65 million in total contract revenue associated with the PA program, including over $23 million awarded since the beginning of 2025. These awards reflect the continued expansion of the platform and the growing role of our rugged storage solutions play in enabling the aircraft's critical mission systems. Most recently, we announced $10.5 million in new awards from the U.S. Navy and a leading U.S. defense prime. which represent the largest aggregate orders we have received to date tied to the P8 program. Importantly, these awards are expected to contribute to revenue in 2026 and continue into 2027, providing continued visibility into future program revenue. The P8 remains one of several multiyear programs that demonstrate the durability of OSS's platform strategy and the increasing demand for rugged high performance compute infrastructure supporting next generation defense systems. Another example of our expanding defense relationships is our growing partnership with Safran Federal Systems, one of the world's leading high-technology defense contractors. During the fourth quarter, we received a $1.2 million follow-on production order from Safran for rugged 4U short-depth servers supporting naval and aircraft military applications. This order followed an earlier award in 2025 and brought the current aggregate order value to approximately $1.9 million. Based on the early success of the program and expanding platform requirements, we now expect this relationship to generate more than $7 million in cumulative production orders over the next five years, highlighting the potential for continued growth as the program scales. More importantly, we believe there are additional opportunities to deploy our solutions within Saffron as the requirement for compute power grows across their defense system. The last defense program I want to highlight today involves next-generation enhanced vision and sensor processing systems for U.S. Army combat vehicles. In January 2026, we announced a new agreement with a leading U.S. defense prime contractor to design and develop ruggedized, integrated compute and visualization systems to deliver an enhanced vision system to augment vehicle driving and maneuverability. This program involves GPU-accelerated sensor processing systems designed to ingest and process real-time video and sensor data, enabling improved situational awareness and object recognition for vehicle crews operating and maneuvering in complex environments. Importantly, this engagement deepens our relationship not only with the U.S. Army's research and development labs, but also with a defense prime contractor that we believe further validates our capabilities. Our existing 360-degree situation awareness system remains under testing and evaluation with the U.S. Army, while this enhanced vision system represents a separate development initiative expected to undergo initial testing at the Army Ground Vehicle System Center late 2026. While both programs are in the early stages, we believe they represent two potentially transformative opportunities as the Army continues to modernize its vehicle fleet with AI-enabled sensor fusion and autonomous capabilities. We believe our work supporting both the U.S. Army's Innovation Lab and a leading defense prime to support next-generation vision and sensor processing systems showcases our best-in-class technologies and strong position on this emerging platform. These programs highlight the company's growing role at the intersection of several key trends shaping next-generation defense systems. Modern military platforms are rapidly integrating artificial intelligence, sensor fusion, and real-time data processing to accelerate decision-making on the battlefield. Enabling these capabilities requires powerful, rugged computing infrastructure designed to operate at the tactical edge, often in highly constrained, mission-critical environments. As global defense opportunities continue to emphasize situational awareness, autonomy, and data-driven operations, we believe OSS is well-positioned to support these evolving requirements. Our rugged and scalable enterprise class compute platforms are designed specifically for these demanding environments, and we believe the growing adoption of AI-enabled systems across defense platforms creates a significant opportunity for OSS in the years ahead. Beyond defense, we are also seeing increasing adoption of our rugged enterprise-class compute platforms across a growing number of commercial applications that require the types of powerful capabilities that we provide. In February 2026, we announced a new engagement with a commercial robotics customer manufacturing autonomous construction and mining equipment. For this application, OSS was selected to support advanced robotic systems designed to operate in complex real-world environments. Importantly, we were able to win this program by displacing an incumbent solution, highlighting the strength of our technology and the value customers place in our ability to deliver high-performance compute capabilities in demanding edge environments. Robotics platforms increasingly rely on powerful compute infrastructure to process large volumes of sensor data, enable real-time decision-making, and support autonomous operations. These systems require reliable high bandwidth and low latency compute solutions capable of operating outside of traditional data center environments. We believe this engagement highlights a broader trend we are seeing across the commercial market where emerging autonomous use cases are creating real and growing demand for rugged high performance compute infrastructure at the edge. Another example of our expanding commercial opportunities is our engagement with a Canadian based integrator of passenger cabin systems for the commercial aerospace industry. During the year, we announced an initial $1.5 million order to supply lighting control units and column integration controller units designed for deployment across commercial aircraft platforms. These systems are DO-160 qualified, meaning the stringent environmental and reliability standards required for aviation applications and are expected to support passenger cabin control systems across multiple aircraft deployments. We expect this program to generate approximately $6 million in revenue over the next three years with recurring production orders as the platform continues to scale. Programs like this demonstrate how OSS technologies are increasingly being adopted across regulated commercial platforms where reliability, performance, and long product life cycles are critical. Finally, we continue to expand our relationship with a leading medical imaging, OEM, where our compute platforms support advanced breast imaging systems designed to enable noninvasive cancer detection. During the year, we received a $2 million follow-on production order for our next-generation liquid-cooled compute systems, which have become the standard platform supporting this customer's breast scanning devices. This award represents the transition of the program from a successful development phase into volume production. Based on current production ramp, we expect this engagement to generate more than $25 million in cumulative revenue over the next five years, highlighting the potential for OSS technologies to support next-generation medical devices. Programs like this demonstrate how the same high-performance compute capabilities we've developed for demanding defense applications are increasingly enabling innovation across commercial sectors such as healthcare. New and expanding relationships support the strong demand we experienced throughout 2025 and set the stage for continued growth in 2026. Despite the year-long continuing resolution, delays in defense awards, and extended lead times for certain components, OSS generated a book-to-bill ratio of approximately 1.2x, reflecting continued growth in defense and commercial customer orders. This level of demand provides an important indicator of the momentum we are seeing across our pipeline and supports our expectations for continued revenue growth in 2026 and beyond. Importantly, as we expand our presence across multi-year platform programs, we believe we have greater visibility into future revenue opportunities than we have historically had as a company. Alongside the momentum, we continue to invest in advancing our technology platform to support the next generation of AI-enabled systems operating at the edge. As a result, research and development remains a critical component of our strategy, and we can continue to work closely with customers on customer-funded development programs that allow us to design and deploy new compute architectures tailored to emerging applications. These engagements not only strengthen our relationships with key customers, but also create opportunities for future production programs as those technologies move from development into deployment. Many of the programs we discussed earlier today began as development efforts where we worked alongside customers to design highly specialized compute solutions for demanding applications. As those systems mature and transition into production platforms, they can create multi-year revenue opportunities for USS. We expect higher levels of customer-funded development to occur in 2026, supported by new defense and commercial development efforts. At the same time, we can continue to advance our core technology roadmap. During the fourth quarter, we led the way in our market with the introduction of our next-generation PCIe Gen 6 product portfolio, which is designed to address the rapidly increasing demand for native processing requirements associated with artificial intelligence and machine learning. PCIe Gen 6 is a middle-aged and new-age group of educators who have a capability to promote and develop a role in enabling the next generation of AI accelerators and GPUs. high-speed support systems, and compute architectures required for AI applications at the edge. We believe these technology investments position OSS well to support the growing demand for high-performance compute infrastructures as AI-enabled systems continue to expand across both defense and commercial platforms. As we look ahead to 2026, we believe OSS is entering the year with strong momentum. Demand for high-performance compute at the edge continues to expand as AI, ML, autonomy, and sensor-driven applications become increasingly central to next-generation systems. These trends are creating growing demand for rugged high-performance compute infrastructure capable of operating in challenging environments outside of traditional data centers. Across our defense markets, we're seeing increased interest from government organizations and defense primes as military platforms continue to incorporate AI-enabled sensor processing, autonomy, and real-time decision-making capabilities. At the same time, we are beginning to see similar requirements emerge across commercial industries, such as robotics, aerospace, and healthcare. The platform programs and customer engagements we have discussed today give us confidence that OSS is well-positioned to benefit from these trends as we continue to expand our presence across both defense and commercial markets. As we plan for 2026, we are also closely managing several operational factors, including supply chain dynamics. In particular, we are seeing longer lead times for certain components, including memory, which may impact the timing of certain shipments throughout the year. For 2026, we expect continued revenue growth in the range of 20% to 25%, supported by our growing pipeline of platform opportunities, increasing customer engagements, higher customer-funded development activities, and a continued transition of development programs into production deployment. We expect gross margins of approximately 40%, reflecting product mix and an increasing contribution from customer-funded development programs, which is an important component of our strategy to advance new technologies alongside our customers. At the same time, we expect to generate positive EBITDA and adjusted EBITDA, while continuing to invest in key areas of business, including sales expansion and customer support resources, that support growing pipelines and deepening relations with strategic customers. In closing, 2025 represented an important milestone in the evolution of OSS. We delivered strong financial performance, executed on our strategic plan to sharpen our focus on the OSS platform, and continued to expand our presence across a growing number of defense and commercial platforms that rely on high-performance computing at the edge. With a strong balance sheet, expanding customer relationships, and a growing pipeline of opportunities driven by the adoption of AI-enabled systems, we believe OSS is well-positioned to continue building momentum and delivering long-term value for our shareholders. We also believe our strengthened balance sheet provides the flexibility to pursue selective strategic acquisitions that could complement our technology platform, expand our customer base, and enhance our capabilities over time. Finally, I want to thank our entire team for their dedication, innovation, and relentless focus on delivering results for our customers and shareholders. So with this overview, I'd like to now turn the call over to Dan.