One Stop Systems CEO and Chairman Issue Letter to Shareholders

Rhea-AI Summary

One Stop Systems (OSS) has released a shareholder letter highlighting its achievements in 2024 and outlook for 2025. The company reported significant transformation in its high-performance edge compute (HPeC) business for AI and ML applications.

Key 2024 achievements include:

• 118% growth in customer funded development revenue to $3.7 million
• Sequential revenue growth every quarter
• Expanded order volumes and strengthened sales pipeline to over $1 billion

For 2025, OSS projects:

• Consolidated revenue of $59-61 million
• OSS segment revenue of approximately $30 million (20% YoY growth)
• Expected book-to-bill ratio of 1.2x
• EBITDA break-even target

The company is pursuing two major opportunities: a potential $200 million U.S. Army Situational Awareness system contract and a $200 million multi-year pipeline in the composable infrastructure/datacenter market.

Positive

• Sequential revenue growth every quarter in 2024
• 118% growth in customer funded development revenue to $3.7 million
• Sales pipeline expanded to over $1 billion
• Potential $200M U.S. Army contract opportunity
• Additional $200M pipeline opportunity in datacenter market
• Projected 20% YoY growth in OSS segment for 2025
• Expected book-to-bill ratio of 1.2x for 2025

Negative

• Company not yet EBITDA positive
• Potential supply chain impacts from tariffs
• Weaker economy in Europe affecting Bressner segment in 2024
• Development programs take 1-2 years before converting to production orders

Insights

Financial Analyst

OSS projects 20% revenue growth in core segment for 2025, targeting EBITDA breakeven with $200M+ pipeline opportunities in defense and datacenter markets.

One Stop Systems' shareholder letter reveals a strategic transformation that appears to be gaining momentum. The company projects $59-61 million in consolidated revenue for 2025, with their core OSS segment expected to reach $30 million - representing over 20% year-over-year growth. Most significantly, management expects to achieve EBITDA breakeven for full-year 2025, with stronger performance weighted toward H2.

The financial trajectory shows promising indicators. Customer-funded development revenue, which establishes OSS as an incumbent on multi-year programs, grew 118% to $3.7 million in 2024. While still modest, this represents a strategic shift toward more predictable, recurring revenue streams. The projected book-to-bill ratio of 1.2x for 2025 suggests accelerating demand.

Two potential high-value opportunities stand out: a U.S. Army Situational Awareness system potentially worth $200+ million over 3-5 years, and a similar-sized opportunity in the datacenter/composable infrastructure market. The company has already secured an initial 100-unit contract with a datacenter customer, demonstrating proof-of-concept in this vertical.

While these opportunities remain subject to fielding and funding decisions, securing even a portion would be transformative for a company with OSS's current revenue scale. The sequential quarterly revenue growth throughout 2024 provides credibility to management's growth narrative, though investors should note profitability remains a work in progress with EBITDA breakeven targeted for 2025.

Defense Technology Specialist

OSS's strategic pivot toward higher-margin defense applications is showing concrete progress. Their development work for the U.S. Army on a rugged 360-degree Situational Awareness system represents a potential $200+ million opportunity if funded and fielded across combat vehicles. The multi-year nature of these defense programs creates valuable revenue visibility beyond just the initial contracts.

The company's defense market diversification is particularly noteworthy. Beyond the Army opportunity, OSS mentions programs with the U.S. Navy (P-8 program renewal), intelligence agencies (new HPeC solution), and international defense expansion through a design win with an Asian defense contractor for autonomous maritime applications. This defense portfolio diversification reduces program-specific risk.

The development-to-production model OSS is pursuing typically creates 1-2 year lags between initial work and production orders. Their 118% growth in development revenue ($3.7M in 2024) suggests production order flow should accelerate in 2025-2026 if these programs advance as expected. The company appears to be successfully positioning its edge computing capabilities at the intersection of AI/ML and rugged environments - critical for modern defense applications requiring real-time processing in adverse conditions.

The mention of potential opportunities for "follow-on logistics, support and tech refresh options" beyond initial production orders demonstrates understanding of the full defense program lifecycle, where long-term support often exceeds the value of initial deployments. This approach could transform OSS's revenue model toward more predictable, service-oriented income streams typical of established defense contractors.

ESCONDIDO, Calif., April 17, 2025 (GLOBE NEWSWIRE) -- One Stop Systems, Inc. (“We”, “OSS” or the "Company") (Nasdaq: OSS), a leader in rugged Enterprise Class compute for artificial intelligence (AI), machine learning (ML) and sensor processing at the edge, today issued a shareholder letter, which reviews the progress it made in 2024 and the Company’s expectations for 2025.

Dear Fellow Shareholders

We are excited to share the progress we made in 2024 and the opportunities ahead to profitably grow our business and create significant value for our shareholders. 2024 was a transformative year for OSS. We successfully executed a strategic transition that not only reshaped our business, but we also believe positioned us at the forefront of one of the most dynamic and rapidly growing markets—high-performance edge compute (HPeC) for AI, machine learning (ML), autonomy, and sensor fusion at the edge.

Our ability to adapt and innovate fueled sequential revenue growth for every quarter of 2024, expanded our order volumes, and strengthened our sales pipeline. As demand for intelligent, real-time processing continues to grow across industries—from defense to aerospace to industrial and commercial applications—OSS is well positioned to capitalize on these powerful market trends.

Since joining in June 2023, I have talked about a multi-year strategy aimed at producing significant growth within our OSS segment. Our efforts have been focused on three phases. During 2023 we successfully executed our first phase and strengthened our foundation by adding new management and board talent, and pivoting our strategy to pursue higher-margin, higher-growth opportunities across defense and commercial markets. These efforts developed a comprehensive go-to-market strategy, rebuilt our sales pipeline to over $1 billion, and reduced our exposure to legacy low margin, non-core markets.

With a proper foundation in place to support a larger business, throughout 2024 we executed against our second phase of transformation aimed at converting our pipeline to orders and increasing our competitive position more broadly across defense markets.

Looking at the progress of our second phase, during 2024 we created a new customer funded development revenue stream to provide more integrated solutions to our customers and establish OSS as a platform incumbent on large, multi-year programs. We believe these efforts will provide meaningful benefits to our business over the long term by contributing a higher mix of predictable recurring revenue and multi-year backlogs.  

Customer funded development revenue grew by 118% in 2024 to $3.7 million. While still small numbers, this growth highlights our initial efforts to pursue programs that establish OSS in an incumbent position on key military and commercial applications. Development relationships are expected to take one to two years before leading to production orders. As a result, we expect certain development programs that we worked on during 2024 to transition to orders and sales in 2025. This includes commercial applications in datacenter, healthcare, and aerospace markets, combined with multiple opportunities across the U.S. Department of Defense.

Throughout 2024, we also experienced greater adoption within our OSS segment from both defense and commercial end markets. We continue to experience high levels of interest in our solutions and increasing requests for information, proposals and white papers, as customers look for technology partners like OSS to support their expanding and highly specialized needs. These trends helped grow our customer base and broaden our customer concentration during the year.

OSS segment growth in our defense market was from new and existing programs. We experienced demand from several programs within the U.S. Army, a renewal for the U.S. Navy P-8 program, a new HPeC solution for a U.S. intelligence agency and a new design win with a leading defense contractor in Asia for an autonomous maritime application.

Within the defense market, we continue to work on a rugged 360-degree Situational Awareness system for the U.S. Army. If the Army chooses to fund and field this system across one or multiple combat vehicles, we estimate the value of such an opportunity could exceed $200 million in production orders over a three-to-five-year period with additional opportunities for follow on logistics, support and tech refresh options

In our commercial end market, we experienced customer demand for our solutions from several sectors, including motorsport, autonomous trucking, commercial aerospace, and, importantly, the datacenter markets. We are pursuing a potential $200 million multi-year pipeline opportunity to provide our solutions within the composable infrastructure/datacenter market. In 2024, we announced an initial contract for 100 units with a datacenter customer. We expect our best-in-class solution will expand to multiple customers in 2025, leading to increased revenue potential for 2025 and beyond.

While the U.S. Army Situational Awareness or composable infrastructure/datacenter opportunities remain subject to fielding and funding decisions, they represent transformative opportunities that we are pursuing to significantly transform our OSS segment

Finally, after a weaker economy in Europe in 2024, our Bressner segment is off to a good start in 2025 with anticipated rising demand throughout the year. Our embedded position remains strong with our customers, and the programs we have pursued are aligned with our customers’ priorities. As a result, we currently expect the 2025 annual book-to-bill ratio for our OSS segment to be on the order of 1.2x. We believe a higher expected book-to-bill for 2025, on a base of higher annual revenue, showcases accelerating momentum underway for our HPeC and enterprise class compute solutions.

We anticipate consolidated revenue of $59 to $61 million for the full year of 2025. This includes expected OSS segment revenue of approximately $30 million, representing over 20% year-over-year growth in the OSS segment. In addition, the Company expects to be EBITDA break-even for the full year of 2025. It is important to note that we expect revenue and profitability to improve at a higher rate in the second half of 2025 based on current trends and our expanding sales pipeline.

Our solutions remain in demand and our opportunities across our commercial and defense markets are only increasing, despite recent economic and trade policies that have increased the level of global economic uncertainty over the near term. We are monitoring the potential impact tariffs may have on our supply chain. In addition, we are beginning to see opportunities emerge as certain of our product lines, specifically in our commercial markets, have the potential to be more competitive against foreign competition.

As we enter the third year of our transformation, we are proud of our team and what we have accomplished so far and are excited to enter this next phase of accelerating growth and improving profitability.

We believe the investments we made in 2023 and 2024 have established a solid foundation for scaling our business and capturing transformative revenue opportunities. We believe we have the right products, the right team, and the right strategy to meet the increasing demand for rugged, enterprise-class computing solutions across defense and commercial markets.

On behalf of the OSS team and Board of Directors, we extend my sincere appreciation to our employees for their dedication, our customers for their trust, and our shareholders for their continued support. Our commitment remains steadfast: to deliver innovative solutions, drive sustainable growth, and enhance shareholder value.

Respectfully,

Mike Knowles
President and CEO

Ken Potashner
Chairman

About One Stop Systems
One Stop Systems, Inc. (Nasdaq: OSS) is a leader in AI enabled solutions for the demanding 'edge'. OSS designs and manufactures Enterprise Class compute and storage products that enable rugged AI, sensor fusion and autonomous capabilities without compromise. These hardware and software platforms bring the latest data center performance to harsh and challenging applications, whether they are on land, sea or in the air.

OSS products include ruggedized servers, compute accelerators, flash storage arrays, and storage acceleration software. These specialized compact products are used across multiple industries and applications, including autonomous trucking and farming, as well as aircraft, drones, ships and vehicles within the defense industry.

OSS solutions address the entire AI workflow, from high-speed data acquisition to deep learning, training and large-scale inference, and have delivered many industry firsts for industrial OEM and government customers.

As the fastest growing segment of the multi-billion-dollar edge computing market, AI enabled solutions require-and OSS delivers-the highest level of performance in the most challenging environments without compromise.

OSS products are available directly or through global distributors. For more information, go to www.onestopsystems.com. You can also follow OSS on X, YouTube, and LinkedIn.

Forward-Looking Statements
OSS cautions you that statements in this press release that are not a description of historical facts are forward-looking statements. Forward-looking statements include statements regarding OSS’ expectations, beliefs, intentions or strategies regarding the future, and can be identified by forward-looking words such as “anticipate,” “believe,” “could,” “continue,” “estimate,” “expect,” “intend,” “may,” “should,” “will” and “would” or similar words. Forward-looking statements include, without limitation, statements regarding future financial and operating results, OSS’ plans, objectives, expectations and intentions, and other statements that are not historical facts. These statements are based on OSS’ current beliefs and expectations. The inclusion of forward-looking statements should not be regarded as a representation by OSS or its partners that any of our plans or expectations will be achieved, including but not limited to, our ability to expand our product offerings and further penetrate our target markets, future demand for AI/ML integrations, and our business strategies. Actual results may differ from those set forth in this press release due to the risk and uncertainties inherent in our business, including risks described in our prior press releases and in our filings with the Securities and Exchange Commission (SEC), including under the heading "Risk Factors" in our latest 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 hereof, and the company undertakes no obligation to revise or update this press release to reflect events or circumstances after the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement, which is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Media Contacts:
Robert Kalebaugh
One Stop Systems, Inc.
Tel (858) 518-6154
Email contact

Investor Relations:
Andrew Berger
Managing Director
SM Berger & Company, Inc.
Tel (216) 464-6400
Email contact

FAQ

What is OSS's projected revenue for 2025?

OSS projects consolidated revenue of $59-61 million for 2025, with the OSS segment expected to generate approximately $30 million, representing over 20% year-over-year growth.

How much did OSS's customer funded development revenue grow in 2024?

OSS's customer funded development revenue grew by 118% to $3.7 million in 2024.

What are the major contract opportunities OSS is pursuing in 2025?

OSS is pursuing a $200 million U.S. Army Situational Awareness system contract and a $200 million multi-year pipeline opportunity in the composable infrastructure/datacenter market.

What is OSS's expected book-to-bill ratio for 2025?

OSS expects a book-to-bill ratio of approximately 1.2x for their OSS segment in 2025.

When does OSS expect to achieve EBITDA break-even?

OSS expects to achieve EBITDA break-even for the full year of 2025, with improved profitability in the second half of the year.