OSS Reports First Quarter 2018 Results: Revenue up 12% to $7.1 Million; Reiterates 2018 Guidance

OSS (NASDAQ:OSS), a leading provider of high performance computing systems reported results for the quarter ended March 31, 2018.

The company had a revenue increase of 12 percent to $7.1 million which the company says is a record for its first quarter. OSS had $1.9 million of the product shipped to ongoing video display server customer and $1.5 million of product shipped under a multi-year military flash array program.

As quoted in the press release:

Operational Highlights

• Introduced new flash storage array based on Ion Accelerator 5.0 release. This new product line provides flexible storage capacity while maintaining the high-bandwidth and low-latency pedigree of Ion Accelerator arrays deployed in hundreds of global installations.
• Introduced GPUltima-CI composable infrastructure systems, which facilitate rapid reconfiguration of GPU compute and storage resources in mixed workload datacenters.
• Shipped first-production units of new GPU compute accelerator with eight NVIDIA SXM-2 Volta GPUs. This product represents the first SXM-2-based GPU expansion system on the market today.
• Won new OEM design-in for medical imaging system and shipped first custom servers.
• Received proof-of-concept order for compute accelerator to be used in a military surveillance aircraft.

Q1 2018 Financial Summary
Revenue increased 12.4% to $7.1 million from $6.3 million in the first quarter of 2017. The increase was primarily driven by organic growth of $459,000 or 7.3 percentage points of the 12.4% increase. The acquisition of the Ion business in July 2017 added $204,000 or 3.2 percentage points of the increase. SkyScale, launched in April 2017, contributed $121,000 or 1.9 percentage points of the increase.

Gross margin decreased to 31.1% of revenue, as compared to 32.5% in the year-ago quarter. The decrease in gross margin was primarily attributed to an increase in inventory reserves. Exclusive of the inventory reserve adjustment, gross margin was approximately 35.0% in the first quarter of 2018.

Operating expenses increased to $2.9 million or 41% of revenue as compared to $1.9 million or 30% of revenue in first quarter of 2017. G&A expense increased primarily due to increased third-party service costs associated with being a public company. SkyScale contributed $158,000 of the overall increase in G&A, of which $90,000 was attributed to a reserve for bad debt. Marketing and selling expense primarily increased due to increases in third-party commissions and employee related costs. R&D increased primarily due to inclusion of the Ion software development team costs of $300,000.

Net loss attributable to common stockholders on a GAAP basis was $794,000 or $(0.08) per basic and diluted share, as compared to net income attributable to common stockholders on a GAAP basis of $79,000 or $0.01 per basic and diluted share in in the first quarter of 2017.

On a non-GAAP basis, net loss attributable to common stockholders was $443,000 or $(0.04) per basic and diluted share, as compared to net income attributable to common stockholders of $248,000 or $0.03 per diluted share in the first quarter of 2017.

“We achieved a record quarter for Q1, which is historically our slowest quarter of the year,” said Steve Cooper, OSS president and CEO. “We’re excited about our new product introductions during the quarter, as well as a significant design win for a medical imaging application. We’re also excited with the opportunity to deploy our GPU computing solutions into military aircraft.

“In Q1, we shipped additional ground station and airborne versions of our military flash arrays. This moves us one step closer to full product deployment, with production ramp up beginning in Q3. These developments set the stage for strong revenue growth this year and for years to come.”

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