One Stop Systems, Inc. (NASDAQ:OSS) Q3 2023 Earnings Call Transcript

And I guess maybe another example from the defense side had the opportunity to spend a week on the Capitol in D.C. interfacing with Congress Health Appropriations Committee, and the House Armed Services Committee and be able to tell the OSS story. And I was quite enthused to find the – how well our story resonated with the opportunity to bring advanced high-performance compute, artificial intelligence, machine learning to the battlefield. And you can see, given the – given what’s going on in the world today, the opportunity to be able to arm warfighters right, is something that resonates in the Services. It’s resonating through the half and half and being able to tell our story there and see it resonates so well. Again, gives me optimism that we’re on a good track, and we’re going to have support not only from our customers but our government also.

David Williams: Thanks for the color.

Operator: Your next question comes from Joe Gomes with NOBLE Capital. Your line is open.

Joe Gomes: Good evening, thanks for taking my questions.

Mike Knowles: Hi, Joe.

Joe Gomes: So just in your press release, you talked about an overall delay in deployment of the technology. I was wondering if we can get some more color on that statement. Is that more just due to the economy? Or is that potential customers just having concern about applying leading-edge technology? Is there something else going on there? Just wondering if you could add a little more color to that.

Mike Knowles: Yes, Joe. And I think we’ve talked earlier in the statements about the kind of general malaise in the commercial market. We’re seeing the defense market move out short of the continued resolution effects. On the commercial market side, I would say it’s absolutely not the slow adoption of the technology. There is – from the technical engineers and the applications, there is plenty of interest and discussion going on about how to move forward and utilize the benefits of compute and artificial intelligence, machine learning, get it out to the Edge. The malaise really comes along when you try to convert into getting a request for proposal and a funded program out the door to make a purchase and a buy. And what we’ve seen there is the kind of just general tendency to not have a sense of urgency to make it happen this month.

It’s okay if it happens next month or next quarter. We don’t see people or companies or efforts looking to push things out by years. But there is just been kind of a malaise and general ability to wait or delay another month or quarter to put things to a line, if that makes sense.

Joe Gomes: Okay. And then last quarter, you talked about, you thought somewhere in the nature of $5 million to $6 million of defense work had been pushed out into 2024. Has that number grown since then?

Mike Knowles: It will be about that number. We will see how Q4 ends, but we will be in that – it will be that general range.

Joe Gomes: Okay, thank you for that. And congrats on getting the security clearance for the facility. Again, one of the issues that seems to be a repeating is the difficulty in finding and hiring people with security clearances. Just there is a big demand and limited supply, it appears. I’m just wondering how you guys are finding that and if that is an issue at all?

Mike Knowles: Yes, Joe, thanks for the question. So the – I think one of the benefits we have today is the kind of work we’re doing right now doesn’t require us to have the cleared individuals that would – that you might align with the market you’re talking about people with staff or SCI clearances, where we’re operating here in the near-term, we can get our own people cleared and/or the workforce, especially in San Diego or remote, you’ve had to remote, you can find individuals to fill that. And the reason is for right now with the products and the work we’re doing, the use of the clearance for us is really more about being able to get inside the understanding of the mission and the application of the technology, and that allows us to explore the ability to broaden our scope on an effort.

We’ve had two such – actually more than two meetings probably in the last few months where myself, Robert both have clearances, where we’ve been able to explore more broadly what a platform does. And in doing so, we were able to come back and identify broader scope of work or effort that OSS could do and could bring with our technology. And that’s where we’re going to see the benefit here in the near-term over the next couple of quarters. As we build out into the years an established position, the use of a CIF – compute classified information facility and people with the clearance as I discussed, they would come along, but we will have some runway to be able to identify that.

Joe Gomes: Okay. Great. And one more for me, if I may. Historically, you guys have given the quarter end pipeline in terms of the number of opportunities for those $1 million plus. And I think in the last quarter, you were 33 opportunities. Do you have that same number for the end of the third quarter?

Mike Knowles: Yes, we don’t have that number. In part, we’re transitioning from kind of those prior definitions. We’re going to involve our – evolve our pipeline information and data here to start to give you insight into awards and we will be aligning along some of the themes I mentioned earlier in the earnings call, where we’re really key – strategic for us is adding new customers, new primes and then getting on additional platforms and getting multiyear contracts. So we will look to engage across all those elements a way to – to be able to provide enough information to give you maybe even a more in-depth sense of how we’re doing on securing orders.

Joe Gomes: Okay. Great, thank you.

Mike Knowles: Thanks, Joe.

Operator: Your next question comes from Max Michaelis with Lake Street Capital. Your line is open.

Max Michaelis: Hey, guys. Thanks for taking my questions. Just looking at the low looking at the slowing economy in Germany, how has this impacted your outlook on the Bressner business?