One Stop Systems Revenue Jumps 35.9% to $12.6 Million in Third Quarter
Key Facts
One Stop Systems reported that third-quarter 2026 revenue from continuing operations rose 35.9% year over year to $12.6 million, compared with $9.3 million in the same period last year. Chief Executive Mike Knowles said the quarter's results were "better than expected," though the announcement did not specify analyst estimates for comparison. Sales growth came as the company continued to post a loss from continuing operations, putting its financial performance between revenue expansion and profitability pressures. The company's shares, listed under the ticker OSS, closed at $6.25 on October 28, down 7.5% during the session, according to Simply Wall St. Coverage attributed the stock's decline to the quarterly loss and margin pressure.
Management attributed revenue growth to higher sales to commercial customers in healthcare, commercial aviation and specialized data center applications, while the defense segment remained strong. The company said the increase included initial deliveries to a new customer developing a network of independent power units designed to run computing workloads. Higher production and deliveries to existing customers also contributed, including aircraft entertainment systems and medical imaging equipment for breast cancer screening. Revenue for the first nine months of the year reached $30.0 million, compared with $20.2 million in the same period of 2025, a year-over-year increase of 48.3%. The figures show that growth extended beyond the third quarter, with demand diversified across commercial and defense sectors.
Gross margin was 42.6% in the third quarter, compared with 45.6% a year earlier, and the company said the year-over-year decline was primarily due to product mix, partially offset by improved absorption of manufacturing costs. Despite the decline from the year-earlier period, the quarterly margin exceeded the company's target range for the year of about 40% to 42%. Operating expenses from continuing operations rose 33.7% to $6.2 million. The company attributed part of the increase to $0.5 million for a provision for bad debts, $0.4 million in legal fees and a $0.5 million increase in stock-based compensation, while research and development expenses declined. These items show how margin pressure coincided with higher expenses during the quarter.
The company posted a loss from continuing operations of $0.6 million, or $0.02 per diluted share, in the third quarter. By contrast, net income on a non-GAAP basis was $0.3 million, or $0.01 per diluted share. Adjusted EBITDA was $0.3 million, compared with $0.2 million in the same quarter of 2025. The company said this measure would have been $1.2 million excluding the $0.5 million bad-debt expense and $0.4 million in legal fees. For the first nine months, the loss from continuing operations widened to $8.3 million from $5.1 million a year earlier, while non-GAAP net income turned to $0.4 million from a loss of $3.7 million.
Net cash used in continuing operations during the first nine months was $12.4 million, compared with $5.9 million in the same period of 2025. The company said cash use included a $6.25 million legal settlement and a $7.8 million increase in inventory. As of September 30, cash and cash equivalents and short-term investments totaled $18.9 million, and working capital was $37.9 million. The comparable figures at the end of 2025 were $31.2 million in cash and cash equivalents and short-term investments, plus $2.2 million in restricted cash, and working capital of $45.3 million. Revenue growth therefore came against a backdrop of higher cash consumption and elevated inventory during the year.
Management raised its revenue growth outlook for 2026 to about 40%, compared with a previous range of 25% to 30%. The company expects gross margin of about 40% to 42% and adjusted EBITDA of between $0.5 million and $1 million for the year. It said its year-to-date book-to-bill ratio was 1.46 times, while the level of bookings in the third quarter was affected by the timing of customer orders. It added that it expects to close several large orders worth millions of dollars during the fourth quarter. The higher outlook depends on converting those orders into bookings and deliveries, as the company tracks the effects of inventory and cash use on its financial position.