One Stop Systems Lifts 2026 Growth Outlook To About 40% But Warns Fourth-Quarter Margin Will Slip
The CFO says lower-margin work will weigh on the fourth quarter, and a $5.6 million collection slid into October.
One Stop Systems, which builds rugged high-performance computers for edge computing, raised its 2026 revenue growth outlook to about 40%, but Chief Financial Officer Dan Geiger said on the company's Wednesday earnings call that fourth-quarter gross margin will fall on lower-margin production and development work.
Revenue up, margin set to dip
Third-quarter revenue from continuing operations rose 35.9% to $12.6 million from $9.3 million a year earlier, the company said. Gross margin was 42.6%, against 45.6% a year ago, which Geiger attributed mainly to product mix.
For the year, the company now expects revenue of about $45 million, or roughly 40% growth, up from prior guidance of 25% to 30%. Gross margin guidance stays at about 40% to 42%, with adjusted EBITDA of $0.5 million to $1 million.
Asked by an analyst at Roth Capital about the weaker implied fourth quarter, Geiger said the full-year guide "contemplates lower Q4 gross margins." He pointed to lower-margin production shipments and what he called a notable pickup in customer-funded development, which carries lower margins. The company targets mid-30s to mid-40s margins over time.
Geiger confirmed the EBITDA outlook includes the third-quarter charges: $544,000 of bad debt from a former customer that entered bankruptcy and $394,000 of legal costs tied to a settlement. Without them, third-quarter adjusted EBITDA would have been $1.2 million instead of $0.3 million. Geiger said the full-year guide would be about $1.4 million higher without those items.
Cash drain and a new stock program
The company used $12.4 million in cash from continuing operations in the first nine months, versus $5.9 million a year earlier. A $6.25 million legal settlement payment and a $7.8 million inventory build, tied to expected sales growth and component constraints including memory, drove it.
Geiger said the working-capital drag in the quarter came from receivables, including about $5.6 million of milestone collections he had hoped to land in the third quarter and now expects in October. He expects full-year operating cash flow to be "slightly negative."
The company ended September with $18.9 million of cash, equivalents and short-term investments and no debt. It has also set up an at-the-market equity program, which Geiger said does not obligate it to issue shares and could support organic investment and possible acquisitions.
Programs behind the growth
CEO Mike Knowles said year-to-date bookings top $43.6 million, a book-to-bill ratio of 1.46. Growth came from a new customer building autonomous energy nodes, in-flight entertainment systems for a commercial aerospace customer, and servers for a medical imaging maker's breast cancer screening application.
Knowles also cited an initial $8.4 million award on an intelligence-related compute platform that he believes could reach about $44 million over four years. He described larger opportunities of $100 million or more over three to four years, none of them in 2026 guidance, which Geiger said is entirely in backlog.
The company sold its German subsidiary Bressner in December 2025 for $22.4 million, and its results now reflect the remaining business.
The company said it will give a detailed 2027 outlook when it reports year-end results.
Sources
- One Stop Systems, Inc. (OSS) Q3 Earnings Meet Estimates — Yahoo Finance
- One Stop Systems Non-GAAP EPS of $0.01 in-line, revenue of $12.58M beats by $1.66M, raises F | Seeking Alpha — seekingalpha.com
- One Stop Systems Reports Q3 2026 Results — globenewswire.com
- One Stop Systems to Report Third Quarter 2026 Financial — globenewswire.com
- One Stop Systems Expands Enterprise AI Market Opportunity — globenewswire.com
