Please standby. Good afternoon. And thank you for joining us today to discuss One Stop Systems’ Financial Results for the Third Quarter ended September 30, 2022. With us today are the company’s President and Chief Executive Officer, David Raun; and Chief Financial Officer, John Morrison. Following their remarks, we will open the call to your questions. And before we conclude this call, I will provide some important cautions regarding the forward-looking statements made by management during the call. I would like to remind everyone that the call will be recorded and made available for replay in the Investors section of the company’s website. Now I’d like to turn the conference over to OSS President and CEO, David Raun. Please go ahead, sir.

Thank you, James, and good afternoon, everyone. Q3 was another solid quarter at $18.8 million in revenue, setting a record for any quarter in company history. Growth was 18% over the same year ago quarter and our year-to-date revenue of $54.2 million was also a record for the first nine months of any year, with growth over the same period of last year, up 23%. Our strong performance in Q3 was primarily attributable to the continued strength of our European unit Bressner, increased business in the media and entertainment space, as well as solid growth on the commercial side of our AI Transportable business. Shipments to customers in the autonomous trucking space, a strategic target of ours was a key contributor for the AI Transportable growth in Q3. In fact, two of our autonomous trucking customers now rank in our top 10 customer list. While the autonomous truck market has continued to progress, including hundreds of thousands of miles driven to-date using our products, it still must deliver a driverless solution to realize the full potential of the strong economics of this disruptive technology. We believe the market leaders in the best position to get to market first are those intent and utilize as much compute storage performance as possible at the challenge. During the past quarter, we invested considerable time focused on the compute storage needs of the autonomous trucks in production. Although there is some commonality between the various market leaders on the roadmap to production, they continue to search for the ideal solution. To this end, we have been developing and sharing a proposed production roadmap that we believe provides a superior cost-effective path. We believe we are uniquely well positioned to deliver solutions that can leverage our innovative PCIe, NVLink, ruggedization and cooling technologies for use in the space. In addition to the potential for the great growth in the autonomous truck market, we believe the products, the skills and proficiency we are building will also open up other AI Transportable was critical to us. Now before I provide additional insight into our program wins, sales pipeline, as well as an outlook for the remainder of the year, I’d like to turn the call over to our CFO, John Morrison, who will take you through the financial details of the quarter. John?

Thank you, David, and good afternoon, everyone. Thank you for joining us today. Today, we issued a press release with our results for the third quarter and nine months ended September 30, 2022. The release is available in the Investor Relations section of our website at onestopsystems.com. The following our results for the third quarter ended September 30, 2022, as compared to the same year ago quarter. During the third quarter, OSS recognized revenue of $18.8 million, which was up 18% over the prior year quarter. Core OSS revenue was up 15%, contributing $10.7 million. This was largely due to the growth of our AI Transportable business, including autonomous trucks, as well as our media and entertainment business. Revenue from our European subsidiary Bressner increased 21%, contributing a record $8.1 million, which was marginalized by a quarterly year-over-year devaluation of the euro of 14%. This exceptional growth for Bressner was attributable to increased market share that was made possible by strong sales efforts, customer expansion and strategic inventory buys. Gross profit decreased $439,000 to $5.1 million. Overall, our aggregate gross margin was 27% for the third quarter, a decrease of 7.5 percentage points. This was due to strong lower margin revenue from Bressner and our media and entertainment business, as well as a temporary decrease in our high margin military business. We experienced a deferral of military customer shipments due to a transition to a new storage product version. However, these products are now being shipped. Gross margin for our core OSS business decreased 10.3 percentage points from the same year ago quarter to 30.7%. This decrease was attributable to the concentration of lower margin product sales to our media and entertainment customer and the delayed shipments of military storage products. For the fourth quarter of 2022, we expect a…

Thank you, John. As we have stated previously, sales to our largest media and entertainment customer have challenging margins under 20% and this is not aligned with our long-term objectives of 35% to 40% overall. Price pressure within the media and entertainment market is accelerating investment by our customer into cloud technology and a drive towards less intelligent compute capability at the edge to reduce the cost of their system. This is particularly true of the virtual products, which tend to be fixed installed and do not require the same level of ruggedization as a live event systems, which typically operate in a harsh environment. These less intelligent computers will have a higher reliance on our customer’s IT software, which is in development and is expected to eventually enable this real-time cloud solution. We anticipate this technology transition may start to impact our revenues as soon as the second half of 2023 as our customer transitions to lower cost, commodity type equipment and a cloud-based -- cloud software solution. We do anticipate -- we do not anticipate any financial exposure with inventory on hand. Based upon the strategies integral to our business plan and projected revenue from our sales pipeline and new programs we are pursuing, we foresee being able to backfill potential declining revenue from this customer. Based on our strategic and sales planning, over time, we will see the mix of our product sales move upward from the lower margin products towards higher margin products on which we are focused and expect that our aggregate margin will improve as a result. To this end, we have added six new program wins in the third quarter, with five in the AI Transportable space. The wins include two in autonomous trucks, two medical designs and two mobile 5G AI applications.…

Thank you. [Operator Instructions] Our first question comes from Brian Kinstlinger with Alliance Global Partners.

Good evening. Thank you for taking my question. This is Aaron [ph] on for Brian. Can you talk about how the testing is going with autonomous trucking companies as it relates to your technology? Has it been a smooth process where trucks are being tested or are there some challenges that are in OSS control?

For the most part, the software that’s involved with this is all of theirs. It’s the hardware we are providing and they continue to progress. These trucks have been on the road. They are driving with somebody in the seat, but the person for the most part, is not touched on the steering wheel or the pedals and they are successfully traveling hundreds of thousands of miles in these trucks. What -- now the big thing which I mentioned is to be able to eventually get that guy out of the truck, because that’s where the economics kick in. And I think the company is a little ways away from that. But I would anticipate that will take place sometime next year or the following year.

Great. And one more question. You were talking a lot about the government pipeline. It seems like it’s going to be a catalyst for the future revenue growth. But do you know what the time line might be like for this revenue to make -- for revenue from the military mix segment impact?

Yeah. I mean, so first of all, fortunately, we are involved with some of the biggest most premier seat after programs. So that’s good. But like in the military program, they take some time and so the big revenue comes at multiple years out. But what we are seeing in parallel is people working on funding to get it going with us. And those can be fairly sizable, some of them might be $0.5 million or $1 million or $1.5 million at a time at least that gets it going, where they are bringing in Rigel’s into the lab and doing work on it. So that will help our revenue, but the big part of it will be more probably in the last part of 2023, into 2024 and beyond.

Thank you. That’s all I have.

Thank you.

Thank you.

Our next question comes from Joe Gomes with Noble Capital.

Good evening. Thanks for taking the questions.

Hi, Joe.

Hi, Joe.

I just kind of want to follow up on the last question. You are talking about the autonomous trucks and the big revenue opportunity there is once the driver is out of the truck and that probably won’t happen to 2025 or later and you are talking about the revenue impact on the military side, and you said that’s years out. And then we have got Disguise that appears sounds like that revenue stream is at least a significant part of it is going to be coming to an end. I am just trying to figure out maybe you can walk us through how you are going to be bridging this gap on the revenue side?

Well, I think, overall, in AI Transportable space and some of the other wins we have that don’t fit that category. They will help a lot. Also, we have -- we are expecting a nice strong rebound with our current military business next year and that’s already starting to take place, as John mentioned. So -- and then on top of that, we are aggressively working on closing some other deals on top of all of that, including some conversations between me and other CEOs where we could bring in some additional revenue in the short-term. So we have a lot of fronts that we are working on to address that. And I would say that the autonomous truck thing, let’s put that in perspective, first of all, we have two guys now in this prototyping phase or whatever you want to call it and they are in our top 10 list. They will be -- they will get larger next year. There will be an inflection point at some point, it won’t be 2025, it will be before that and so you are going to see quite a bit of revenue from these guys and then these military guys can also add up.

Okay. Thanks for that. And on the gross margin, pardon me, in the first half of the year, you had little in the way of the high margin military revenue in -- the first quarter gross margin was 30.1%. Second quarter was 28.6%. This quarter, it’s 27%. Just trying to get a better handle on what’s going on there in the Disguise and the Bressner business that is driving those margins even down further sequentially?

Well, I mean, I will let John add to this. But bottomline is military disappeared for those two quarters for the most part and now it’s coming back strong. Primarily, the biggest program because of the position change that got put on hold, but now again we are getting the orders plus other programs are starting to layer in also. So that’s the biggest contributor on the margins. What else would you like to add, John?

I would agree that with -- on the government side, on our data storage units were down about $5 million year-over-year and that was just as a result of we are transitioning on a revision change and we are now shipping that new revision starting in the fourth quarter. So that is our strongest revenue driver and contributor to margins. So that’s really what contributed to the difference there layered on with the improvement, significant increase from Bressner in their revenue and the predominance revenue from our media and entertainment space.

Okay. And one last one…

In other words that number should not go down further. We are expecting a reversal of that starting in the fourth quarter.

Okay. Thank you for that. You have mentioned some of the previous calls about the supply chain, some of it going out 52 weeks for parts, inflation. Just wondering how that environment is looking today for parts and passing along costs from inflation increases.

Yeah. So, in general, on the supply thing, I think, what I am hearing from a lot of people is it seems to be getting somewhat better. We haven’t seen it get a whole lot better, frankly. But we continue to buy what we need. Our intent is to bring down the inventory levels over time. The vast majority of the inventory we have is secured by POs and so we think it will slowly improve over the coming year.

Okay. Great. Thanks for taking the question. I will get back in queue.

Thank you, Joe.

Thanks.

[Operator Instructions] We will hear from David Williams with Benchmark.

John, thanks for taking the questions. I appreciate. I guess, quickly, I wanted to ask about the mobile 5G AI opportunity. That’s been very interesting, and I think you said, it’s expected to roll out to 100 other cities. Can you tell us if you have the design there for those other 100 cities and what do you think this opportunity could mean for the business overall?

Yeah. Basically, so if we figured on only one vehicle per city, which is not necessarily the case, that would require at least 100 of our systems. These are expensive systems. So this is a multimillion dollar opportunity for the company. Probably it will yield over several years $10 million or more.

Okay. It is still up, it is not a...

In other words -- so in other words, we don’t have to go win those other 100. That’s what they are doing. They are planning to put these in these vehicles and trucks to cover those 100 cities with our product

Okay. Thanks. And then maybe just kind of thinking about on the gross margin side, you have got a lot of moving pieces here. Bressner is still a headwind, but you have got some tailwinds from the military and then also the media and entertainment falling off. What should we think about in terms of margin next year? Can you snap back to where you were previously or should we still expect it to kind of stay around this range with a steady plotting kind of improvement next year?

Yeah. We expect it to snap back to what you have seen in the past and we will build off of that.

Any thoughts on cadence, that improvement.

Yeah. First quarter, we are looking at pretty good -- it will look good as we ship more military product, but I think it will be pretty consistent with what 2022 looks like.

Okay. All right. Very good. That’s helpful. And then one just last one for me real quick is, I know there’s a lot of activity in China on the autonomous trucking side and you saw some high-end components in your products. But just kind of curious if you are seeing or thinking about anything from the China restrictions. Just kind of on the fringe on the edges with the subsidiaries located there, are you seeing any pushback, I guess, or is there any ties or any relationship that we should be thinking about here in terms of the restrictions going into China?

So, first of all, definitely, there’s worldwide activity on this primarily in the U.S. and China, but all our three customers that we are engaged with today are U.S.-based companies. So no issue there. And we are talking to other companies, which is a mixture of international. But for the most part, we don’t see the China situation impacting us on that front.

Okay. Thanks much. I appreciate the time and the help, guys.

Thank you.

Thank you.

[Operator Instructions] We will hear from Max Michaelis with Lake Street Capital Market.

Hey, guys. Congrats on the quarter and thank you for taking my question. So just given the solid opportunities you guys are seeing in the military space, as well as the advisory board. Are these -- are some of these opportunities, maybe some you wouldn’t have gotten in the past without the advisory board or how they impacted some of these opportunities?

Great question. They have been very helpful. It’s really the combination of the three things we have done. Rigel is just a great product, nothing like it out there and it’s doing extremely well. But they have made introductions for us in place especially directly with the DoD that we did not have before and so that’s helped. And they have been great team to work with.

All right. Thank you. And then, just if you may, can you quantify the amount of military shipments that were deferred until Q4?

Could you repeat that, you broke up a little.

Oh! Sorry about that. The amount of shipments that you guys deferred to Q4 that are not being shipped. I was wondering if you could quantify that in fourth quarter [Technical Difficult]

Well, I would -- John made the comment that we are off about $5 million on military year-to-date. We are not implying that that’s all going to catch up in the fourth quarter. Q2 -- I mean 2022 overall will be a down year for the military, but it starts to recover in the fourth quarter and we expect the solid 2023. So we will…

Thanks. Thanks, guys.

We will double or triple what -- like, for example, we will double or triple what we are shipping this past quarter and we just again step up.

All right. Thanks, guys. Congrats on the quarter.

Thank you.

We have no more questions. I’d like to turn the conference back to our speakers for closing remarks.

Thank you. And thank you everyone for joining us today. We continue to believe the best is yet to come and we look forward to meeting with you again in March and reporting our progress as we pursue the many opportunities ahead. Meanwhile, as always, please continue to stay safe, healthy and feel free to reach out to John and myself anytime. And let’s go ahead and wrap up the call.

Thank you. Now before we conclude today’s call, I would like to provide the company’s Safe Harbor statement that includes important cautions regarding forward-looking statements made during today’s call. One Stop Systems cautions you that statements in the presentation are not a description of historical facts are forward-looking statements. These statements are based on company’s current beliefs and expectations. Such forward-looking statements include those regarding the company’s expectations for revenue growth generated by new products, future changes to its business objectives, design wins and M&A activity amongst other things. The inclusion of such forward-looking statements and others should not be regarded as a representation by OSS that any of its plans will be achieved. Actual results may differ from those set forth in the presentation due to the risks and uncertainties inherent in our business, including, without limitation, that the market for our products is developing and may not develop as we expect, military conflicts, global pandemics and other disasters or public health concerns, including COVID-19 in regions of the world where we have operations, customers or source material or sell products may affect such market. Our operating results could be negatively impacted by inflationary pressures, supply chain constraints, increase interest rates or other economic conditions. Our operating results may fluctuate significantly, which would make our future operating results differ to predict -- difficult to predict and could cause operating results to fall below expectations or guidance. If we are unable to offset anticipated future decreases in revenue in our media and entertainment space with other business. Our operating financial results may adversely -- may be adversely affected. Our ability to successfully integrate the operation systems, technologies, product offerings and personnel with acquired companies, if any, may prove difficult and adversely affect our financial results. Our products are subject to…