Q3 2021 One Stop Systems Inc Earnings Call
Please standby.
Yes.
Good afternoon, and thank you for joining us today to discuss one stop systems' financial results for the third quarter ended September 30th 2021 with US today are the company's President and Chief Executive Officer, David Raun and Chief financial.
Officer, Jon Morrison also joining today is the company's chief sales and marketing officer, Jim iPhone. Following their remarks, we'll open the call to your questions before we conclude today's call I'll provide some important cautions regarding the forward looking statements made by management during the call.
I would also 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 call over to Oss's, President and CEO, David Ron. Please go ahead Sir.
Thank you Justin and good afternoon, everyone. It.
It was another strong quarter for Oss exceeding our earlier stated expectations and closing the quarter with revenue of $16 million.
This represents an increase of 23% over the same year ago quarter, and 7% over our previous quarter.
These results reflect a record for any Oss third quarter with exceptional performance by our European based pricing of our organization and increasing revenue from our large media and entertainment customer.
Our revenue for the first nine months was also a record for the company at $44 $2 million.
Revenue from our largest customer grew to $3 2 million quadrupling from its low of 800 K in the year ago quarter.
Most of this growth was from the sales of their new innovative innovative virtual products and we are seeing indications that revenue from their concert venue products will layer on next year.
As noted previously this business and the breadth of our revenue tends to be lower margin deal.
Decreasing our margin of three three percentage points as compared to the year ago quarter.
But our margins were up over the previous quarter by three three percentage points.
For the first nine months of the year, our margins increased two four percentage points.
This was due in large part to the strong growth in the high margin military business.
Fundamental corporate focus, which is gaining strength and a key emphasis of our newly expanded sales team.
Our core Oss business contributed an additional two nine percentage points of margin and our breadth of our organization was also up by three three percentage points.
While we face increasing supply challenges as do most companies our team continues to minimize the impact during this unusual period working closely with our customers and suppliers and carefully making strategic purchases.
Our strong top line performance in Q3 was accompanied by bottom line improvements with a net income of 981 K.
Looking at our adjusted EBITDA, we generated $1 8 million or 11% of revenue.
In a moment I'll provide some additional operational highlights.
Our outlook for the rest of the year, but first I would like our CFO, John Morrison to take us through our financial details for the quarter.
Following John <unk>, our chief sales and marketing officer, who will provide some insights into our AI transportable strategy and related customer activities John.
Thank you David and good afternoon, everyone.
Thank you for joining us for this call.
Yesterday, we issued a press release with our results for the third quarter and for the nine month period ended September 32021.
The release is available in the Investor Relations section of our website at one stop systems Dot com.
The metrics that that fall or for the three months period ended September 32021, and as compared to the prior year quarter.
Reviewing our statement of operations, we recognized third quarter revenue of $16 million, which was up 23% from the same year ago period, and up 7% from the second quarter of 2021.
Our core Oss business contributed $9 3 million up 3%.
As David mentioned this was attributable in part to a quarterly increase in shipments to our large media and entertainment customer as their new virtual products are gaining momentum.
Russia revenue increased 68% contributing a record $6 $7 million.
This unprecedented growth for <unk> is traceable to its maturity leadership and the implementation of pre planned inventory strategies and aggressive sales efforts, resulting in expansion of our European customer base.
For our combined business gross profit was $5 5 million as compared to $4 9 million an increase of 615000, primarily driven by increased sales.
We had strong gross margins of 34, 5%. This was a decrease of three three percentage points due to the sales mix over the same year ago period, but an increase of three three percentage points over the second quarter of 2021.
Gross margin for our core Oss business was 41%.
Decrease of three 6%.
Percentage points in contrast pressures gross margin increased to 25, 6% as compared to 22 five.
Overall, <unk> operating expenses increased 14% to $4 5 million, although operating expenses as a percentage of revenue decreased to 28% compared to 30%.
The increase in operating expenses was primarily due to increased strategic investments, which included adding personnel to our engineering product marketing and sales teams to drive our strategic plan.
Despite the ongoing supply related challenges income from operations improved to one <unk>.
102 million compared to 979000.
Net income on a GAAP basis was 981000 or <unk> <unk> per share.
This compares to net income of 858000 or <unk> <unk> per share.
This improvement was predominantly contributed by income before taxes and reduce taxes due to a discrete tax benefit received from stock based compensation deduction.
On a non-GAAP basis quarterly net income improved $1 5 million or eight cents per basic and diluted share as compared to $1 2 million or seven cents.
Basic and diluted share.
Adjusted EBITDA and.
Another non-GAAP metric increased to $1 8 million were 11, 3% of quarterly revenue as compared to $1 6 million.
The following met the following metrics are for the first nine months.
For the first nine months period ended September 32021, and are compared to the same year ago period.
Revenue was $44 2 million, a new company record, which was up 16%.
Our core all SaaS business increased 9% and contributed $27 million of revenue as compared to $24 seven.
Million Brezhnev contributed $17 2 million of revenue, an increase of 30% compared to $13 2 million.
Gross profit improved $3 million on a net on incremental revenue of $6 2 million to $14 6 million or 33% of revenue.
This compares to $11 6 million or 36% of revenue.
With the continued focus on gross margins, our core Oss business improved two eight percentage points to 38, 5% as compared to 35, 7%.
Roger It's gross margin increased to $24 four as compared to 21 one.
Our operating expenses increased 2% to $12 8 million.
This increase is again, primarily due to investments we have made in marketing in sales, which costs were partially offset by engineering costs being reclassified to cost of goods sold.
Operating expenses as a percentage of revenue decreased to 29% compared to 33% on increasing revenue and success of our <unk>.
Expense containment efforts and improved efficiencies.
Income from operations improved to $1 8 million.
$2.7 million increase compared to a loss from operations of $938000.
Net income on a GAAP basis was $2 $7 million or 14 cents.
<unk> diluted share.
This is compared to a loss of 250000 or a loss of two cents per share.
These numbers reflect the net income of two of in 2021, which includes a one 5 million.
P P loan and interest forgiveness, which occurred in the second quarter.
Non-GAAP net income was $3 million or <unk> 15 per diluted share as compared to $773000 or $5 <unk> per share.
Adjusted EBITDA was $4 3 million or nine 6% of revenue compared to 682% or one 8%.
This adjusted EBITDA improvement was due to higher margin and cost containment efforts.
Non-GAAP net income and adjusted and adjusted EBITDA, both exclude the $1 5 million PPP loan for an interest forgiveness, which took place in the second quarter of 2021.
Now too.
Turning to our balance sheet.
On September 32021, cash and cash equivalents totaled $4 million with short term investments of $14 5 million totaling $18 5 million and capital resources.
This was flat to our cash and cash equivalents and short term investments on June 32021, but are up by $13 2 million compared to the $6 3 million that we ended at December 31 2020.
Our strategic investment balances increased in response to supply chain constraints and product availability.
We have elected to make additional investments leveraging our strong cash position.
Position on this front to assure steady product shipments, we will likely continue to experience scarcity in some products.
Eliminates supplies.
Protracted delivery dates for component tree, increasing product costs and changes and minimum order quantities to secure product. Additionally.
Additionally work in process and finished goods inventory have been increasing as the timing of availability of certain component tree to the production line has varied from vendors previously committed delivery dates.
As David mentioned, we are managing our way through this unusual period of supply challenges by working closely with our customers and suppliers carefully making strategic purchases purchases and raising prices as needed.
This completes our financial review I would like to now turn the call over to our chief sales and marketing Officer, Jim <unk> Jim.
Yeah.
Thank you John and good afternoon, everyone.
Over the past 18 months as Covid shuttered most in person industry events, we adapted our marketing efforts to virtual outreach and events.
This past July we finally return to in person events at the Sea Aerospace in 2021 conference sponsored by the U S. Navy we.
We were pleased with the attendance and the presence of decision makers Navy leaders and senior management.
In September we participated in our first in person international events and almost two years at the AI summit in London, we showcased our hardware and software solutions for edge AI and presented on the headline stage at the event.
Both third quarter shows yielded several solid AI transportable opportunities, which we're now pursuing.
In Q4 were scheduled to exhibit at four major trade shows three in the U S and one international.
In October we participated in the U S Army, a USA 2021 annual meeting and Exposition in Washington D C.
This event is the largest land power Exposition in North America and was ideal for pursuing AI transportable prospects.
Next week, we're planning to unveil our exciting new flat flagship platform for the AI transportable market at our biggest show of the year SCE 2020, what the International conference for high performance computing in St. Louis Missouri.
We're also looking forward to participating at the apex commercial aerospace show in long Beach, California, and RBC in Amsterdam later this year.
Given our stronger roadmap of products in place and positive feedback from customers on our AI transportable strategy, we have expanded our sales force internally as well as added third party sales representatives.
The new sales representatives are well positioned at target accounts, where we do not yet have a presence.
We expect these steps along with the return to personal interaction and face to face sales will fuel future opportunity wins and revenue.
In the third quarter, we had two new major program wins.
A major program wins are expected to yield at least $1 billion in revenue within the first four years.
These new wins include AI transportable data acquisition systems for military applications and a gen. Four PCI express expansion interconnect for high performance <unk> printer control with a market leading printer company.
These wins bring the total year to date to eight.
With a return to live Tradeshows, plus our focus on AI transportable and the additional key investments in sales personnel and channels. We are seeing increased activity building across the opportunity pipeline.
Pending wins over $1 million increased by five over last quarter to 22, 11 of which are in AI transportable.
With that I'd like to turn the call back over to David for our Q4 outlook.
Thank you John and Jim.
The entire company has worked diligently to exceed expectations with revenue margins adjusted EBITDA and net income in Q3.
For the first nine months of the year, our adjusted EBITDA was nine 6% of revenues as compared to one 8% last year.
We anticipate supply issues will continue throughout 2022.
So we're planning accordingly, strategically managing the business and making critical investments.
This may result in higher inventory levels at the time at times.
But in this environment, we see this as a requirement to continue the growth and progress of the company.
While our supply challenges require significant day to day attention given the positive progress on the balance sheet and overall financial performance, we remain focused on pursuing our AI transportable vision.
In that regard, we anticipate our exciting new standard platform introduction next week at SCE 'twenty, one will be a big step in.
And the continued transform transformation of the company.
Based on customer feedback under NDA, we believe this leading edge solution designed for the AIG transportable space will be a catalyst for additional customer engagement wins and accelerated growth.
As Jim mentioned, our pipeline has expanded to 22 major pending opportunities that we are focused on closing <unk>.
Half of which are in the AI transportable space, which produced higher margins by leveraging our unique capabilities and expertise.
Looking ahead, we are providing revenue guidance of $17 1 million for the fourth quarter.
This would represent a 7% growth over Q3, and 23% growth over Q4 of last year with record revenues record annual revenue of approximately $61 3 million.
Now with that I would like to open up the call to address your questions.
Justin.
Thank you.
We would like to ask a question at this time. Please press star followed by a number one on your telephone keypad if.
If you are calling from a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Again, Please press star.
One to ask a question.
And our first question will come from Eric Martin Newsy with Lake Street.
Congratulations on the strong Q3, not just the revenue, but also that that profitability of the year to date for me is where it really sticks out so that's great.
<unk> had.
Had a question regarding the outlook for Q4, you highlighted in Q3 that the good revenue performance. It was really kind of bressler over achieved or outperformed.
And then you also had your media and entertainment customer doing a little bit better as far as the outlook for Q4 is it going to be more of the same or are you looking for kind of a mix shift as far as well.
What's leading the leading the top line.
Thanks, Eric Yeah, what we're going to do is see a shift more to the traditional kind of percentages in the fourth quarter. So we're shipping a lot of the Oss freshener that will still be strong but.
Again, we will see a higher mix of Oss.
Okay and then.
As far as that typically that would translate into gross margin.
Improvement as well any would you care to color.
Give some color on what your expectations are for Q4 gross margin.
Yeah, we think gross margins will be similar to what we're seeing right now.
And then we should be able to improve next year.
Okay.
As far as next year goes I don't want to get too greedy, but I'm looking at your last two quarters and then your guidance for Q4, and then Q2 you grew 28% in Q3, you grew 23% youre guiding to 23%.
Is this kind of a is this growth the result of a sort of a post COVID-19 snapback and we really shouldnt.
<unk> be thinking about this for the foreseeable future that we will get back to some normalized rate or is it sustainable at this level.
First of all our thoughts on next year recall at 10 and 10, so we're thinking about 10% growth and 10% EBITDA.
So that would say not at the growth rates that we've seen in some of these particular quarters.
What one of the dynamics here that I'll point out is although we've had this growth over the dip we had during the Covid period really the business that we lost and Covid has still not returned so we've made it up in other areas. So that is something we anticipate to layer back on in 2022.
Let me explain that a little bit more got it.
Marshall Aerospace space, where that really weren't dropped significantly in 2021, that's starting to come back alive with quotes and activity in RF queues, not a lot of business yet.
And the other one is our large media and entertainment sky, although they're up they're up on the virtual products.
All of the business we were enjoying in 2019 for example that has not returned yet because large gatherings in general have not returned but theres still a lot of activity on that front.
Gotcha.
Okay and then last question for me I don't want to force you to appeal the curtain back to soon regarding the FC 21 platform launch but.
Been around tech companies, a long time typically there.
There is.
Evolutionary and Theres revolutionary.
I haven't been around the story long how long ago was the most recent sort of platform overhaul and then how meaningful is this and then also I guess the third part to that.
Is there a risk of people waiting till that's out and test it and that is disrupting our pipeline, while we wait for the new rather than by the old.
First of all the highest in.
Kind of designs, we've done in AI transportable, plus space tend to be a lot of our more custom designs.
And this is more of a standard product that we can so we can scale our business.
It's basically putting in a package.
Extremely high performance.
System, that's ideal for the space we're targeting.
So we really think that's a generator of revenue for us we will see a little bit in 'twenty, two but that's a really 'twenty three 'twenty four but that is also that type of product and the activity. We're seeing in the transportable space, where we can get up into the growth rates of 15% to 20%, which we anticipate to do we just don't think it will be there in 'twenty two.
I don't believe it impacts.
Cannibalize, the current pipeline and opportunities.
Gotcha, Okay. Thanks for taking my questions and good luck in Q4.
Thank you Eric Thanks, Eric.
Thank you. Our next question will come from Joe Gomes with noble capital.
Let me add my congratulations to the quarter.
Thank you thanks, Joe.
So just.
You know kind of a follow on to that the.
Question about the strength in the quarter.
Coming from brand generic and the Sky itself.
And if we look.
At it.
You saw significant Rev.
Revenue from the skies.
What.
If anything in the products.
Kind of fell off in the quarter or was that kind of pushed into the fourth quarter. As you just mentioned and you'd think that did.
Yes.
Or the.
The sales will go back to a more normal.
Yeah.
Excuse me here.
A more normal on the OSA side.
And in the in the fourth quarter.
Did you see anything kind of dropping off or being pushed to the right in the third quarter.
Yeah. So good question Joe.
If you first of all if you stripped strip away. The overall growth of 23% that we had for the quarter. When you include pressure on Sky and you start to look at the Q3 by itself what you're really seeing there is some different dynamics.
One is that we had three significant accounts from the previous year.
That were down for the quarter.
And year to date and expect them to be down for the year. So those are three but that's normal turnover and you're going to have the accounts. We have two significant accounts that were down in Q3 versus Q3, but the shipments are taking place in other quarters, but they've either already taken place or they are heavy in the fourth quarter and then we have four significant accounts that are new.
New that have showed up they are starting to show up in the quarter or for the year. So I think Q3 is a little bit of an anomaly on the Oss front.
And I think you have to really look at the year to the year to date and then also how we will close the quarter. We're just going back to a normal thing that you've also got behind the scenes different dynamics with supply, we're managing that really well, but you know we've.
Tried to make sure we hit our numbers and you know for example, if we're short on a product for maybe the Oss product and we had a delay of a month.
We found additional customers in <unk>. So there's a lot of dynamics going on I don't think it's an overall message I think what youll see is the Oss line overall will grow nicely over the year.
Okay. Thanks, Thanks for that.
Just on the Sky has no two.
2019, they signed that five years $60 million.
Contract.
Looking forward here, maybe you can remind us what was their run rate in 2019.
And do you think with all the live.
Thank you get back to you know if we were just to do the easy math $12 million a year type of rate for Matt and then layer on.
The virtual stuff.
Yeah. So you know.
We're up significantly with them. This year, we will close the year up and.
With the return.
Not as high as what we did in 19, but we're approaching it.
If you layer in the.
The large gathering business, which is what all of that was the 14 or $15 million you layer it into 2022.
You can definitely see that that could help us significantly on the revenue.
So we expect to sky to grow this year and grow next year again.
Okay, and one more if I may so I was reading an article this week about Nvidia doing a lot more on self driving.
<unk> are putting a bigger effort into that space.
How competitive.
Is it to what we're.
We're doing here in the AI transportable.
Maybe you can give us a little more color.
You know I know.
Give you guys a lot of product you're a big supplier for stuff for you guys.
Did you see any potential issues with them, making a bigger push into the self driving space.
Well I mean, they're looking for companies like us to be able to take it into those harsh environments cause a complete system. So we see the moves that they're making are all positive to help us in that.
That objective any additional comments anyone wants to add to that Jeff Yeah, I mean, what I see from in videos.
Push into this is in the smaller embedded Uh huh.
High volume automobiles, we tend to have the higher end things.
Things like trucks, and military equipment and vehicles of that capacity. So.
So it's complementary and that fact that were using the high end equipment, rather than with Nvidia is focused on yeah. Just a reminder, Joe that although we've had wins and we've sold business into the you know.
What would be a consumer car we don't.
We anticipate to be in that long term, but in everything kind of outside of that from semi trucks up and to the military space.
Okay, great. Thanks for that thanks for taking the questions and again congratulations.
Thank you. Thank you.
And our next question will come from Sky surely with Roth capital.
Hey, good afternoon, Thanks for taking my questions nice job on the quarter guys.
Hey.
John I apologize I got on the call little bit late but I wanted to dive in on the supply chain issues.
I apologize if you've if if you're repeating this but I was wondering if you could take us through your comfort level in terms of where you guys stand from a supply chain standpoint, you've done a very good job in a difficult environment, particularly when I think about components, such as graphics processors and flash memory being in short supply for lots of other <unk>.
<unk> out there I'm wondering how you're managing that in and then the context then of.
That did you leave any revenue on the table in the third quarter and kind of the outlook on that front for the fourth quarter, but the gross margins were really impressive both in breast or in Standalone core Oss and I'm wondering about the sustainability of that going forward typically theres been some seasonality and I know, it's mixed dependent from customer to customer, but how are you thinking about the future.
The gross margins as we start to look forward, particularly as we get into the first quarter first half of next year.
Yeah, so multiple things here, let me try to tackle them and.
So on the supply issues really we face issues every single day than we did last quarter and the quarter before and we just tackle them, it's very high priority management team Gibson.
I think what what's working for US we are so proactive on it and we're jumping on it and really thinking way ahead, and we're willing to use some of the cash that we have in the bank.
To buy product that we think is safe to purchase to put ourself in a good position to put our customers in good position I think where people get in trouble is they don't have those resource or whatever you don't have inventory you can't build things so.
Leaving a quarter yeah. There is additional business that we could have shipped if we had all of the products.
But it's not like it would be doubling the number or anything like that.
So part of what we're doing is going into the quarter and I look at the backlog and people tell me, what we're going to ship and I go look we get surprised every quarter. So I'm going to assume some of this isn't going to ship and sure enough. It doesn't so we're building that into our expectations and I think that's the proper way to.
Be viewing this in the current environment and I don't see anything changing on our front, we get surprised every day and we're dealing with it.
And then.
Second one of them.
I'm sorry, yes, the sustainability of the gross margins both in <unk> and Oss gross.
Gross margin so the gross margins in general I think our objective is to continue to push the gross margins up year over year.
We will probably always has more of a high margin in the second half than the first but as you notice.
Our gross margin in the first half of the year was much were much better than previous years and that's due to the fact that want our military business has expanded and it's also taking place in the first half of the year number two is that overall, it's the culture I'm adamant about gross margins, it's a powerful thing and so the cultures.
Change and we're looking for ways to bring it up three is <unk>, which is a lower margin business. They were looking for ways to increase their margins through additional services being smarter on inventory charging more for the inventory doing more system level products. So.
I think what Youll see is a constant upward trend, maybe one or two points a year.
Maybe a little different in the first quarter, but nothing like we used to do.
Hopefully that answers your question no thats perfect very helpful. Thanks.
And maybe to follow up on disguise.
It sounds like there was another good quarter with disguise, but again this is being driven really by the virtual product doesn't sound like live events have come back yet and you alluded to next year.
Turning to maybe come back so.
I'm wondering two things first of all Youre, starting to get visibility to live events coming back and then used to be a big number for you guys. So does that end up being additive on top of the virtual or does live events start to cannibalize the virtual product.
No.
Perspective, I don't see cannibalization, so the potential for them to grow significantly.
On paper is pretty good.
I would just say that I remember talking this time last year and we thought the live events are going to come back.
In the second half of the year and sure enough. We are here and they're getting a lot of traction interface, but and we are shipping some units, but it's not big So I think it's just a matter of time to see it happen. What we've learned is that one of the things also be aware of is that the U S. But we've been told is the U S is way ahead of the rest of the world.
Asia is doing nothing on live events and Europe is behind the U S. So what we see is really the leading edge of live events coming back.
I think all in all we're bullish that we're going to see increased revenues next year in the live event. We just don't have it sized at this point.
Got you and lastly, if I could I know you continue to build an active RFP pipeline I think youre still over 20 deals and a couple of them follow positively each quarter I am wondering.
If you could talk a little bit about what's building in the pipeline I think you've mentioned a couple of verticals in terms of where that's going trans portables, and otherwise, but I wonder if you could talk about the magnitude and the size of those deals are we building enough of an opportunity pipeline now that theres a lot of stuff, that's starting to get down towards the lower end of the funnel and what's your win rate is on that front. Thanks.
Yeah. So first of all on the wind front end stuff as Jim alluded to in his speech, we did 18 months the virtual basically.
That took a little bit of a toll on us and with a lack of a clear vision and stuff. We're doing a lot of different things. So since March when we kicked off the air transportable, we've made investments in the team.
We've gone back to live shows what I am really optimistic about is the quality of the very early leads so the 22 in the pipeline looked good but what I'm really excited about is the ones that are behind those.
Because in general I'm seeing higher volume deals I'm seeing more exciting things I think we're seeing a lineup with if you're familiar with our investor presentation. I think we show a different applications for military eight for commercial we're starting to see activity more and more of those so.
I guess, what I'm, saying is the activity we're doing in AIG transportable the success of our new product coming out the investment, we're making I think that controls our growth a little bit for next year, you know in the 10% kind of range, but then we could be at a whole new level in 'twenty three 'twenty four as a result of this stuff because it looks encouraging its early though.
Okay, great. Thanks, so much.
Okay. Thank you.
And our next question will come from Brian <unk> with Alliance Global partners.
Great. Thanks, so much nice quarter.
Thanks.
And then follow up on the new platform you said, if I heard correctly. This is more of a standard product versus the work you do which is now more customized. So is this more of a different type of customer or is it. So that when you have a customer you can more quickly alteration, which makes it quicker.
Installation.
Yeah, it's really the latter so.
And what customers in general what and how could we create.
A very compelling.
Platform, that's almost what they need or what they fully needs. So that we're not starting from scratch.
We're challenged we're taking care of the most challenging things in the standard platform.
And we will sell a lot of them just as it comes out but then some larger customers I'm sure we'll be doing some customization.
That gives us scalability allows us to drive higher profitability and believe over time and that's what we're trying to do and we're going to continue to do that we have a roadmap of products.
Great.
My only other question is.
On the defense side of our business government.
And defense budgets have been very ugly.
Funding the government can't pass it budget were in CR.
I guess I'm curious.
How that business is going as we don't see a lot of new program starts are you seeing any impact to your business and if not what do you think is different about your business on these programs, that's not being impacted by whats going on not higher federal budget side.
Yeah, So I think.
With our current programs, we haven't seen much of an impact there ongoing things with intense of deploying them on the new business AIG transportable space, we have lots of activity in the military and the only way I can explain it because we don't see an impact is the fact that I think what's happening is yes you are.
Not going to build that new balance sheet youre not going to build maybe another tank even buy you might go spend a million dollars to make that thing survive with the triples.
Survivability triple and its ability on an offensive.
<unk> be much better using AI.
Semi autonomous type features so that's what we see in that data in the middle of where we're focused that's why we're excited about this and it lines up with our skill set and so the answer to you is as of now we're not seeing an impact.
Great. Thank you.
Thank you and moving on to David Williams with benchmark.
Hey, guys congrats on the quarter and thanks for letting me ask the question just wanted to touch.
Mainly on the shortages that you spoke of earlier, if you could maybe elaborate a bit on that where youre seeing that or or perhaps maybe what the impact was in the quarter was there anything that was left on the table. Perhaps it is is perishable or do you think that any of that could cover maybe anything around the shortages that would be helpful.
I got distracted from the beginning of the you're talking about on the supply chain and whether or not we.
Uh huh.
Really the impact of that on the given quarter was at it I'm sorry, David Yeah. No I was just asking about the shortages in the quarter.
In terms of components, specifically and then what impact it had on the quarter.
On the revenue.
On Q3.
Yes, so acute fee Q3 definitely had a bunch of them something we knew going into the quarter definitely had ones that surfaced in the quarter that impacted our ability to ship a particular thing.
But again as I mentioned earlier, we go into the quarter without assumption.
And so we make sure that we're in a position to.
Do the best job, we can of meeting what we tell the street.
So, yes, we have business that didn't ship hits.
Hit the number and I expect to be saying the same thing to you next quarter that we're <unk>.
Target of 17.1, we expect to do that and that assumes we're going to see.
<unk>, so we haven't seen yet.
Okay, you got any.
Any particular areas that had been maybe more heavily impacted than others.
It seems to come and go we had a.
The printed circuit board material was one of those things that got really hard to find for a while but now we've got a line on the on the production and that seems to have been dissipated I'd like David said, it's kind of a new thing every day.
But nothing.
You can just point to one particular part yes. It ranges from you know Ics.
<unk>, which we've seen lead times as long as 84 weeks and hence a two year lead times and then we had a situation where we were ready to ship something and we couldnt get phone and protect the server.
So crazy.
50 manufacturers of home and we Couldnt get any phone to put around the thing, but we got it in shifted that's the kind of dynamics, we see every day.
Okay fantastic. Thanks for the color I appreciate that and then maybe just when you think about your ASP between your standard and maybe some of your more custom products, how do those differ and how do you think about maybe the volumes of your newer platform here that are tend to be more standardized what do you think that that AFP is I'm trying to get a sense of that volume and how that impacts.
Or we should think about the revenue if we're modeling the volume numbers there.
Yeah. So first of all the standard products that were developing and we will introduce are still very high end systems. I mean, that's our strategy. We want to have the highest end system in the market for those products and that's exactly what this product does and so these asps are very large they can range.
Tens of thousands of dollars to hundreds of thousands of dollars and approaching $1 million for a system or more.
So it doesn't really change with the standard products versus the custom.
It's going to be at the high end part of the market.
Which plays to our strength.
Okay Fantastic and then just lastly.
Do you think maybe the common aero business picks up a bit and comes back do you think that's a 2023 event or is there anything in particular, there that maybe holding that business from from being able to regain its strength.
Yeah, So it's a little unclear right now there.
The big the big companies that were engaged with which are the market leaders they've come back.
But I'm guessing that 'twenty two we'll see some rebound, but also I would say it's not it's never it's not a huge part of our business I think that segment, we did something under $3 million 19, correct Jon.
We think we can grow that eventually based on the programs that we're working on but that's that's kind of how it size. It. So I don't think it's a big swing factor for us.
So maybe in 'twenty, two we see somewhere between.
<unk>.
One 5 million to $3 million business I've, just kind of looking at that may be more.
Okay, great. Thanks, so much.
Hmm.
Talking to you David Yes.
And at this time, we have no further questions I'll now turn the conference back over to our speakers for closing remarks.
Okay.
He's working on it.
This is kind of my.
This is my specialty.
[laughter].
Anyway. Thank you Justin and thank you everyone for joining us today for being partners on this journey you stay our teams strive to create growth and value, our Oss and our shareholders and we look forward to meeting with you again in March and reporting on our progress as we pursue many opportunities ahead.
Meanwhile, please stay safe healthy and feel free to reach out to John Jim or me at any time.
Justin Please go ahead and wrap up the call.
Thank you.
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