One Stop Systems, Inc. (OSS) Earnings

Management highlights

- Core Strategic Transition Post-Sale: After selling the Bresner subsidiary, OSS is now a pure-play provider of ruggedized AI and high-performance compute platforms for edge applications, focused on defense and commercial end markets. Management states the 2026 first half performance confirms the benefits of this focused strategy, with accelerating revenue growth and rising earnings potential.\n- Record Bookings Performance: Q2 2026 generated $15.1 million in new bookings (expected to ship in 2026 and 2027), with year-to-date bookings exceeding $30 million, for a year-to-date book-to-bill ratio of ~1.7. Both Q2 and year-to-date bookings are all-time company records, with first half 2026 bookings nearly matching full-year 2025 total product revenue. Key Q2 wins include an $8.4 million initial defense contract with $44 million total potential revenue over 4 years, a $14 million potential 5-year commercial robotics program, and growing orders from a renewable energy customer. Since 2023, average order size has nearly tripled, and the company now supports 14 programs with over $42 million in combined multi-year revenue potential, up from just 1 program three years prior.\n- Operational and Personnel Updates: Paul P.K. Averna joined as Vice President of Business Development and Growth, bringing 30 years of defense and commercial tech experience. He will lead pipeline conversion and market expansion, succeeding outgoing Vice President of Sales Robert Kalebaugh, who will retire after a transition period as a part-time consultant. A $6.25 million settlement of a multi-year legacy commercial dispute was completed post-quarter end, with the charge reflected in Q2 results; the settlement resolves all outstanding claims unrelated to current operations and allows management to focus fully on growth strategy.\n- Technology and Pipeline Development: OSS is seeing growing customer interest in its next-generation PCIe Gen 6 architecture, which enables higher data transfer performance for demanding AI, machine learning, and sensor-intensive edge workloads, with initial customer programs expected to launch soon. The pipeline of opportunities continues to expand across defense (U.S. DoD, Army, research labs, classified programs focused on AI and autonomy) and commercial markets, with a 50/50 split between commercial and defense opportunities that has remained stable for over three years. Customer-funded development is a core strategic priority: these early engagements position OSS in next-gen platform development, strengthen customer relationships, and create pathways to future higher-volume production revenue. Most current Q2 revenue and bookings trace back to development work initiated 2-4 years ago that has now matured to production.

Guidance

- Management upwardly revised full-year 2026 revenue growth guidance to a range of 25% to 30%, up from the prior guidance range of 20% to 25%. The upward revision reflects stronger-than-expected first half performance, record bookings, a growing opportunity pipeline, increased customer engagement, higher customer-funded activity, and ongoing transition of development programs to production.\n- Full-year 2026 gross margin guidance is maintained at approximately 40%, consistent with prior expectations, reflecting current product mix and the contribution of customer-funded development.\n- Management continues to expect full-year 2026 positive EBITDA and adjusted EBITDA, inclusive of planned strategic investments in personnel and R&D to support growth and technology leadership.\n- Management maintains a long-term target of 30% annual revenue growth, supported by the current size and composition of the opportunity pipeline.

Segment performance

One Stop Systems reports results for continuing core operations (Bresner subsidiary is classified as discontinued operations after its December 2025 sale). For Q2 2026, total continuing revenue is $9.3 million, a 62.3% year-over-year increase from $5.8 million in Q2 2025. Customer-funded development revenue was approximately $944,000, a 145% year-over-year increase, representing 10.15% of total Q2 2026 revenue. The core business has two end-market segments: 1) Defense: Revenue comes from short-depth servers for military naval vessels and aircraft, plus multiple new defense programs. Defense represented a large share of Q2 bookings, including an $8.4 million initial defense contract, a $1.4 million government systems integrator order, and multiple classified and U.S. Army program opportunities. 2) Commercial: Revenue is driven by liquid-cooled servers for a medical imaging OEM breast cancer screening application, compute platforms for autonomous construction and mining equipment, a renewable energy data center customer, and commercial robotics. Commercial represented 50% of the company's opportunity pipeline as of Q2 2026. Gross margin for continuing operations was 39.1% in Q2 2026, down 220 bps year-over-year, due to a higher mix of lower-margin customer-funded development, early prototypes, and low-rate initial production, partially offset by improved manufacturing absorption from higher volumes.

Risks & headwinds

- Bookings are expected to remain lumpy on a quarterly basis, due to variable timing of large program wins and contract awards.\n- Memory and other key electronic components continue to have extended supply chain lead times, creating execution risk for order fulfillment.\n- U.S. defense program timelines are uncertain and undefined, with no guarantee that current test and evaluation programs will transition to full production contracts.\n- Forward-looking statements are inherently uncertain, and actual results may differ materially from expectations due to market and operational risks disclosed in OSS's SEC filings.

Analyst Q&A

• Q: What is the current procurement lifecycle status of the 360 vision solution programs for Army vehicles, and what is the expected timeline for these competitions? /

  A: Both 360 vision programs are currently in the Army's test and evaluation phase on representative vehicles. The testing timeline is undefined, as the Army assesses requirements, funding, and potential applications for the technology. OSS has a production-ready, rugged solution and is prepared to move forward immediately if the Army selects the program for full deployment.\n\nQ: After two consecutive quarters of $15 million in bookings, what should be expected for bookings over the next 18 months, and will performance remain strong or be lumpy? / A: Management is encouraged by the strong bookings growth, expanded customer base, and ongoing conversion of early development positions to production. The pipeline supports the long-term 30% annual growth target, and trailing 12-month book-to-bill ratios have remained consistent with this target. Bookings will continue to be lumpy quarter-to-quarter based on contract timing, but broader customer diversification reduces reliance on one or two large orders and improves long-term visibility.\n\nQ: What is driving the recent diversification of OSS's customer base across vertical markets? Is this a proactive strategy or organic market demand? / A: Customer diversification is the result of a deliberate, multi-year strategic plan to build a multi-year pipeline of opportunities aligned with market demand for rugged edge AI compute. OSS's product platform is application-agnostic, allowing the company to quickly adapt solutions for different end markets, and word-of-mouth from successful production deployments has created flywheel momentum that expands reach to new customers.\n\nQ: How is OSS positioned for supply chain constraints for key components like memory into FY2027, after the upward revenue guidance? / A: The supply chain strategies OSS used in 2026 will continue to support execution into 2027, with early bookings helping to plan inventory needs. While memory lead times remain long, OSS proactively increased inventory in Q2 2026 to bring memory components in ahead of quoted lead times, de-risking future delivery schedules for existing and future orders. The company is already planning components for the first half of 2027 to support continued growth.