One Stop Systems — Q3 2026 Earnings Summary

Financial Performance:

• Total revenue from continuing operations for Q3 2026 was $12.6 million, a 35.9% year-over-year increase from $9.3 million in Q3 2025.
• Total revenue from continuing operations for the nine months ended September 30, 2026, was $30.0 million, a 48.3% year-over-year increase from $20.2 million in the prior year period.
• Gross margin from continuing operations was 42.6% for Q3 2026, down from 45.6% in the prior year quarter; for the nine months, gross margin was 43.9%, down slightly from 44.4% in the prior year.
• Total operating expenses from continuing operations increased 33.7% to $6.2 million in Q3 2026 (from $4.6 million in Q3 2025) and increased 56.5% to $22.4 million for the nine months (from $14.3 million in the prior year).
• The nine-month operating expense increase included a $6.25 million legal settlement charge, $0.5 million in bad debt expense, $0.7 million in legal fees, and $0.9 million in higher stock-based compensation.
• Loss from continuing operations was $0.6 million ($0.02 per diluted share) for Q3 2026, compared to a $0.4 million loss ($0.02 per share) in the prior year.
• Loss from continuing operations was $8.3 million ($0.33 per share) for the nine months ended September 30, 2026, compared to a $5.1 million loss ($0.24 per share) in the prior year.
• Non-GAAP net income from continuing operations was $0.3 million ($0.01 per share) for Q3 2026, compared to $31,000 ($0.00 per share) in the prior year.
• Non-GAAP net income from continuing operations was $0.4 million ($0.02 per share) for the nine months, compared to a non-GAAP net loss of $3.7 million ($0.17 per share) in the prior year.
• Adjusted EBITDA from continuing operations was $0.3 million for Q3 2026, up from $0.2 million in the prior year.
• Adjusted EBITDA from continuing operations was $0.1 million for the nine months, compared to a loss of $3.2 million in the prior year.
• Adjusted EBITDA for Q3 2026 excluding $0.5 million in bad debt expense and $0.4 million in legal fees would have been approximately $1.2 million.
• Adjusted EBITDA for the nine months excluding $0.5 million in bad debt expense and $0.7 million in legal fees would have been $1.4 million.
• Net cash used in continuing operations was $12.4 million for the nine months ended September 30, 2026, compared to $5.9 million in the prior year period.
• As of September 30, 2026, the Company reported cash, cash equivalents, and short-term investments of $18.9 million and total working capital of $37.9 million.
• Inventory increased by $7.8 million year-to-date to support expected revenue growth.

Guidance and Future Outlook:

• Management increased full-year 2026 revenue growth guidance to approximately 40%, up from the prior guidance of 25% to 30%.
• Full-year 2026 gross margin is expected to be approximately 40% to 42%.
• Full-year 2026 Adjusted EBITDA is expected to be between $0.5 million and $1.0 million.
• The Company expects several large, multimillion-dollar orders to close during the fourth quarter.
• The strategic plan aims to increase predictable, recurring revenue and build a strong, multi-year backlog.
• The Company monitors potential supply chain constraints affecting components including memory and the outlook for the federal government budget.

Business Segments and Product Lines:

• Revenue growth in Q3 2026 was driven by an expanding commercial customer base across healthcare, aerospace, and data center markets, complementing established defense market strength.
• Key revenue drivers included initial deliveries to a new customer developing autonomous energy nodes, higher production deliveries to a commercial aerospace customer for in-flight entertainment systems, and higher sales to a medical imaging OEM for breast cancer screening applications.
• Nine-month revenue drivers included higher sales for the P-8A Poseidon reconnaissance aircraft, higher sales for military applications onboard naval vessels and aircraft, and higher revenue from customer-funded development programs.
• The Company sold all assets and operations of Bressner Technology GmbH on December 30, 2025, classified as discontinued operations.

Market and Competitive Landscape:

• The year-to-date book-to-bill ratio was 1.46x, reflecting strong underlying demand and a robust pipeline across defense and commercial markets.
• The Company believes its opportunities reflect a strengthening competitive position in core defense and commercial markets.
• The Company targets large, multi-year programs to establish itself as a platform incumbent.

Risks and Challenges:

• Risks include potential supply chain constraints affecting certain components, specifically memory.
• Risks include the current outlook for the federal government budget.
• Risks include customer concentration and the ability to successfully scale production, manage program execution, and meet customer delivery schedules.
• Risks include geopolitical conditions and changes in defense spending.

Management Commentary and Tone:

• President and CEO Mike Knowles stated third-quarter results were better than expected, reflecting accelerating momentum and growing demand for Enterprise Class compute solutions.
• Management expressed encouragement regarding the composition of revenue growth driven by higher sales to commercial customers and higher average order values.
• Management noted a robust pipeline with expectations for several large orders to close in Q4.
• Management remains confident in the ability to drive sustainable, profitable growth and long-term shareholder value.

Other Key Points:

• The Company recognized $0.5 million of bad debt expense related to the bankruptcy filing of a former customer in Q3 2026.
• The Company recognized $0.4 million of legal expenses in Q3 2026 related to a previously disclosed settlement with a former customer.
• A $6.25 million legal settlement charge occurred in the second quarter of 2026.
• Stock-based compensation expense increased due to a higher grant date fair value of RSUs expensed in the current year period.
• A loss of $0.2 million from discontinued operations for the nine months was due to post-transaction adjustments to the gain on sale of the Bressner business.
• The Company held a conference call on October 28, 2026, to discuss results.