OSS - One Stop Systems (OSS) - 4Q21: Revenue Beat Miss On Earnings But Bright Future
4Q21 Results. Fourth quarter revenue of $17.8 million, up 28% y-o-y and up 11% sequentially, and above management's $17.1 million guide. We had forecast $17.1 million. GAAP net loss of $386,000, or $0.02 per share, versus net income of $244,000, or $0.01 per share, last year. Adjusted net income of $71,000, or breakeven, versus $636,000, or $0.04 per share in 4Q20. We had forecast $0.04 and $0.07 respectively.Too Much Business? During 4Q21 Disguise revenue rose 247% y-o-y and resulted in gross margin declining to 28.3% in the quarter from 34.5% in the same period last year. Increased operating expenses, driven by Market and Selling costs, with the lower gross margin caused an operating loss for the quarter. We anticipate Disguise business to return to a normal percentage of overall revenue going forward which will result in gross margins improving.Attractive Opportunities. OSS won 14 $1 million + contracts in 2021 and currently has a record 29 such opportunities outstanding, with more than half in the AI Transportables space. Rapid progress is being made in the autonomous truck vertical where economics and driver shortages are spiking demand for autonomous vehicles.Updated Projections. We expect OSS to post positive growth in 2022 as the operating environment continues opening up. For the first quarter, we project revenue of $16.8 million, up 26% y-o-y. Gross margin is projected to be up sequentially but down y-o-y. We are projecting adjusted EPS of $0.04. For the full year, we are estimating revenues of $70.8 million and adjusted net income of $4.8 million, or an adjusted $0.25 per share, with the EPS increase driven by improved gross margins and operating leverage on higher revenue.Maintaining Outperform. We believe OSS presents investors with a favorable risk/reward, especially in light of the Company's exciting growth potential. We are maintaining our Outperform rating and our 12-month price target of $8.00. At our PT, OSS shares would trade at 2.0x on a EV/estimated 2022 revenue and 1.8 on our 2023 revenue estimate. Read More >>