OSS - One Stop Systems (OSS) - Post Call Commentary and Updated Models
Disguise. While we do not want to get ahead of ourselves given the ongoing impact of COVID worldwide, in the non-COVID 2019, disguise generated about $14 million of revenue for live event products. We would expect the majority of this revenue to return over time and will be additive to the current virtual products.New Platform. While management was reserved in talking about the new platform before launch next week, we believe the new platform could be a game changer. A more standardized product than OSS's historic custom products, the new platform should expand the market by enabling customers to go right out of the box. The platform is squarely focused on the AI Transportables market which typically generates higher margins for OSS.Supply Chain. The supply chain remains a concern, although OSS has done an admirable job in managing through the constantly changing issues, in our view. Management has used the strong balance sheet to help, such as pre-buying critical parts when necessary. Although it is uncertain when the supply chain issues ease, we are confident in management's ability to successfully navigate.Updated Projections. We expect OSS to post positive growth as the operating environment continues opening up. For the fourth quarter, we project revenue of $17.1 million, up 7% sequentially and 23% y-o-y. Gross margin is projected to be relatively flat sequentially and y-o-y. We are projecting adjusted EPS of $0.07. For the full year, we are estimating revenues of $61.3 million and adjusted net income of $3.5 million, or an adjusted $0.22 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 2.4x on a EV/estimated 2021 revenue and 2.1 on our 2022 revenue estimate. Read More >>