Q3 2024 One Stop Systems Inc Earnings Call
Good day and welcome to the One Stop Systems, 3rd quarter 2024 Conference Call and Webcast.
At this time, all participants are in a listen-on-leam mode. Later, you will have the opportunity to ask questions during the question and answer session.
As a reminder, this calls being recorded.
As part of the discussion today, the representatives from OSS will be making certain forward-looking statements regarding the company's future financial and operating results, as well as their business plans, objectives and expectations.
Please read that these reports and other future filings that Oss will make with the SEC.
Oss disclaims any duty to update or revise its forward looking statements, except as required by the applicable law.
Speaker Change: It is now my pleasure to turn the conference over to Oss, President and CEO, Mr. Mike knows. Please go ahead Sir.
Mike knows: Thank you Vincent.
Mike: Good afternoon, everyone and thank you for joining today's call.
Mike: The growth strategies, we are pursuing to take advantage of large high growth and higher margin market opportunities are taking hold and positive momentum is growing within our Oss segment.
Higher Oss segment revenue helped offset continued softness in our president or segment, which remain impacted by sluggish economic activity in the European market.
Mike: Year to date orders well in excess of revenue and our Oss segment. We believe that we are well positioned for sustainable revenue growth.
Mike: Remain focused on converting our $1 billion plus pipeline to sales and pursuing a greater number of customer funded development projects.
Mike: Highlights for the 2024 third quarter include positive Oss segment orders that have outpaced quarterly revenue in four of the five last quarters continue.
Mike: Continued sequential revenue growth on a consolidated basis expanded.
Mike: Expanded customer funded development revenue.
Mike: Year over year Oss segment revenue growth of 17, 5%.
Mike: Gross margin in our Oss segment of 43, 2%, excluding the impact of a $6 1 million inventory charge operating cash flow of over $900000 and a return to adjusted EBITDA profitability after backing out the inventory charge.
Mike: We believe these favorable trends are positioning ourselves for continued sequential revenue growth throughout the remainder of 2024 and setting the stage for our transformative 2025.
As we discussed in this morning's press release during the third quarter, we identified obsolete and slow moving inventory associated with the transition of the Companys business model and operating strategies as well as a slower adoption and movement in certain commercial and defense edge compute markets.
As a result, we took a charge of $6 $1 million, which reduced reported gross margin net income and adjusted EBITDA for the three and nine month periods ended September 32020 for this charge had limited impact on our cash position and during the third quarter, we generated positive cash from operating activities further supporting our strong balance sheet.
Mike: We do not currently foreseeing any further inventory changes outside of historical trends.
Mike: With this inventory adjustment now behind Us I am encouraged by the improvement in <unk> segment profitability during the quarter, reflecting our strategic focus on pursuing higher margin revenue opportunities in commercial and defense markets.
Mike: As we've discussed on prior calls throughout 2024, we are focusing on two important objectives to take advantage of favorable market dynamics and the healthy pipeline. We developed last year first we are focused on converting our pipeline to orders in our <unk> segment and second we are pursuing customer funded development opportunities that we will believe establish Oss is an income.
Mike: On platforms driving future multi year production contracts.
Mike: Across our global defense and commercial markets customers are looking for technology partners like Oss to support their expanding needs for rugged enterprise class compute solutions.
Mike: Driving these trends are the emerging requirements for artificial intelligence machine learning autonomy and sensor processing at the edge.
Mike: The company's best in class hardware and software platforms bring the latest data center performance to harsh and challenging applications that we believe will allow us to take advantage of current and future demand trends.
Mike: Our underlying performance during the third quarter and nine months of the year is aligned with our plan. We continue to believe 2024 is creating a strong foundation for sustainable year over year revenue growth and a return to profitability in 2025.
Mike: Even as we navigate continued economic uncertainty in our European markets in 2024, we expected recovery in 2025.
Mike: So with this overview, let's look at the progress we made during the third quarter in more detail starting with our efforts to convert our pipeline to orders.
Mike: Our five year and factored pipeline at the end of the third quarter remained over $1 billion.
Mike: Approximately 70% of our current pipeline is comprised of platform and multi year opportunity, which we believe will help drive predictable multiyear revenue and backlog to Oss I am.
Mike: Pleased with the growth and transformation of our pipeline, reflecting the positive contribution of our sales organization. The strategic investments, we are making in product development and the growing demand for our hardware and software platforms.
Mike: Within our current pipeline there are several multimillion dollar multiyear business opportunities that we're pursuing that we are expecting to close in the coming quarters.
Mike: As we continue pursuing opportunities to grow our pipeline our operating plan in 2024 remains focused on increasing orders within our Oss segment for.
Mike: For the 2020 for third quarter, we saw orders outpaced revenue by 25% for the third quarter in a row.
Mike: Our order growth over the past three months is driven by existing customers in the air and Maritimes <unk> ISR defense markets. In addition, we had new customer awards in the Army Air C. Five ISR market and commercial <unk> infrastructure market. We expect many of these new engagements will evolve into multiyear follow on revenue opportunities in future.
Mike: Periods.
Mike: Interest from companies in the commercial <unk> infrastructure market is growing as data center customers look for faster solutions to support.
Mike: Ml and high performance compute visualization and data science applications, we believe our leading pcie capabilities are well positioned to support this rapidly growing market segment and expect to announce a new multimillion dollar order in the coming weeks.
Mike: The second important objective we are pursuing this year is focused on growing our presence on customer funded development programs.
Mike: During 2024, we started to disclose separate revenue and cost lines in our financial results associated with customer funded development projects to show our potential and track new wins.
Mike: We have defined program related development work as customer funded development on our financial statements.
Mike: Through customer funded development programs, we are typically providing a more integrated solution compared to the company's historic offerings. In addition, it establishes Oss is a platform and comment on what is almost always a follow on production and multi year support contract at even greater profit margins. As a result, we expect our business model the benefit from a higher mix of annual recurring.
Mike: Revenue and contracted multiyear backlogs in the future.
Mike: Development relationships are expected to take one to two years before leading to production orders. So as our business scales, we expect to benefit from steady quarter over quarter revenue growth, while building a solid foundation of potential large scale program opportunities.
Mike: I am pleased to report that the year to date customer funded development revenue increased to $2 8 million.
Mike: Compared to 877000 for the same period last year. This growth has been driven principally by the strategies, we're pursuing to grow customer funded development revenue as well as expansion of an existing relationship with a commercial aerospace customer for the feeling of a new product and follow on production.
Mike: As expected we are seeing increased interest from customers to support their development programs and we have multiple proposals currently submitted as a result, we believe we will continue to experience strong year over year customer funded development revenue growth throughout the remainder of 2024 and into 2025.
Mike: We also expanded our product development efforts this year and currently have five product efforts underdevelopment in the Oss segment focused on edge computing for both defense and commercial applications, we expect to announce and demonstrate these products before the end of the year and throughout the first half of 2025.
Mike: As you May have seen this morning, John Morrison has announced his retirement from Oss as CFO I want to thank John for his commitment and dedication to Oss. John has played a key role in developing our business strategies and ensuring long term financial excellence on behalf of everyone at Oss I wish John the best in his retirement.
Mike: As part of this transition I am pleased to welcome Daniel gable to accompany Daniel has a proven CFO that has led high performing financial and accounting teams at some of the world's top defense contractors, including case and Raytheon.
Mike: Rogers career, Daniel as Leverages industry knowledge, and strategic skill set to improve performance and drive financial excellence, while ensuring strong leadership and financial controls.
Mike: Since joining the company as president and CEO in May of 2023, I have focused on assembling a team of proven leaders with experience managing large fast growing and dynamic organization.
Mike: During the quarter, we also hired Fabrizio Sardo, who brings manufacturing operations and strategic experience, leading industrial defense companies, including <unk> Thermo Fisher scientific and Raytheon is our new VP of operations.
Mike: Over the past 18 months, we have assembled a new leadership team that is aligned with the growth strategies, we are pursuing across large high growth and high margin commercial and defense markets. We have also refined our board of directors to align with our strategic direction and four of our seven current directors have been added since September of 2023 and.
Mike: I'm confident that our enhanced leadership team and refreshed, Ohio Board of directors as the skill set experience and drive the Jake Oss to the next level.
Mike: With our new leadership team now in place we plan to update investors on our new strategic growth plan and long term guidance for the first half of 2025.
Speaker Change: As a result of John's retirement announcement. This morning, I will quickly go through the third quarter financials.
Speaker Change: For the third quarter reported consolidated revenue of $13 7 million, which exceeded our guidance of $13 3 million.
Mike: The slight year over year decrease in consolidated revenue was a result of a $1 million reduction in <unk> revenue associated with slower economic activity in Europe, offset by a $1 million year over year increase in Oss segment revenue.
Mike: As I mentioned earlier during the third quarter ended September 32024, we took a $6 1 million inventory charge, which reduced reported gross margin increased net loss and reduced adjusted EBITDA for the three and nine month periods ended September 32024.
Mike: Consolidated gross margin percentage was negative 12, 5% compared to 26, 6% the year prior the prior year quarter gross margin, excluding the $6 $1 million inventory charge was 32% up from 26, 6% in the same period last year.
Mike: On a segment basis gross margin for the company's Oss segment was negative 51, 2% compared to 32, 4% for the same period a year ago.
Mike: Oss segment gross margin, excluding the inventory charge was 43, 2% a 10 eight percentage point increase from the same period last year, driven by revenue growth and a more profitable mix of revenue.
Mike: The Companys browser segment had a gross margin percentage of 22%.
Mike: <unk> six percentage point decrease from the same period last year, driven by a less profitable mix of revenue and an additional inventory reserve.
Mike: Total third quarter operating expenses decreased 34, 3% to $5 million, which is.
Mike: <unk>, both to a $2 9 million impairment of goodwill that occurred in the third quarter of 2023, partially offset by planned program management investments made during the quarter.
Mike: For the third quarter the company reported a GAAP net loss of $6 8 million or <unk> 32 per share compared to a net loss of $3 $6 million or <unk> 18 per share in the prior year.
Mike: The company reported a non-GAAP net loss of $6 4 million or <unk> 30 per share compared to a non-GAAP net loss of $597000 or <unk> <unk> per share. The 2024 third quarter net loss and non-GAAP net loss included a $6 million inventory charge.
Mike: Adjusted EBITDA, a non-GAAP metric was a loss of $6 million, which included a $6 million of inventory charge compared to an adjusted EBITDA loss of $157000 in the prior year third quarter.
Mike: Looking at the balance sheet in more detail as of September 32020 for Oss had total cash and short term investments of $12 6 million no borrowings outstanding on its $2 million revolving line of credit and a consolidated balance outstanding on its term loans of $1 1 million.
Mike: For the nine months ended September 32024.
Mike: <unk> generated $2 $1 million in cash from operating activities compared to $2 2 million or $200000 for the nine months ended September 32023.
Mike: As we look at the remainder of 2024 I'm excited by the direction. We are headed we continue to execute against our near term transformation plan as we focus on driving orders building backlog growing revenue and improving profitability while.
Mike: While the timing of orders will remain a factor as we get to scale I am confident that we are building a strong foundation to achieve our long term growth objectives.
Mike: Wanted to thank our team for their continued hard work and dedication as we pursue compelling growth strategy aimed at building a greater value for our shareholders.
Mike: Looking forward, we anticipate consolidated revenue of approximately $15 million in the fourth quarter of 2020 for our guidance for the fourth quarter of 2024 includes expected Oss segment revenue of $7 million Rep.
Mike: Representing over 9% year over year growth in our <unk> segment, we expect revenue of $8 million.
Mike: <unk> growth of 17% in Brazil for the fourth quarter of 2024 is primarily driven by an easier year over year comparison as of fourth quarter last year was particularly challenging.
Mike: Overall I am encouraged by the direction, we are headed and I believe our leading enterprise class compute solutions strong balance sheet and committed team are well positioned to take advantage of positive fundamentals across global markets and create long term value for our shareholders.
Mike: This completes my prepared remarks.
Mike: Vincent Please open up the call to questions.
Vincent: Thank you ladies and gentlemen, we will now begin question and answer session should you have a question. Please press star followed by one on your Touchtone phone you will hear from thank you Johan has been raised.
Mike: Should you wish to declines in the polling process. Please press star two.
Mike: If you are using a speaker phone please lift the handset before pressing any keys.
Speaker Change: First question comes from the line of Bryan Keane Slinger with Alliance Global Partners. Please go ahead.
Speaker Change: Great. Congrats on the continued success in bookings in China, There has been great working with you.
Speaker Change: My first question is you've had three consecutive quarters.
Mike: Improving bookings and book to Bill above one and core OSA.
Mike: What's driving the strengthening trends and how much of this is government versus commercial.
Speaker Change: Yes, good morning, Brian and thanks for the question, Yes, we continue to be.
Speaker Change: Positive on the on the growing book to Bill ratios and the bookings over revenue in the OSX segment over the past few quarters.
Mike: We're really seeing it driven both defense and commercial markets.
Mike: Some of the pickup that we're starting to see now has really been the effect of the broadening of the scope of reach of the company since I joined almost 18 months ago. When we brought on the new VP of sales and business development, Robert Kale ball, so as we extended our reach in the defense markets.
Mike: And started to position our products and solutions and in response to more available requests for information or request for proposal that timeframe to move through those acquisition processes is now to the point, where pre work has turned into responses.
Mike: Turning into the point, where now we're able to start receiving.
Mike: Orders based on those actions.
Mike: In addition, we've continued our outreach on the commercial side and in similar fashion, just the broader outreach and application.
Mike: And then I just go to the general underlying trend in the markets today.
Mike: Round autonomy artificial intelligence and machine learning, we've seen just a general pickup in the adoption of those technologies and integration of them and the need for the enterprise compute to deliver on the processing for those capabilities.
Mike: And just ballpark is government as a percentage of the.
Speaker Change: First nine months of bookings, 75% is it 50 50.
Mike: All parking.
Mike: Giving us exact numbers.
Speaker Change: Yes, I would say ballpark, we're probably around 55%, 60% defense to commercial.
Mike: Great.
Speaker Change: And then are.
Speaker Change: Are you continuing to see those trends in the fourth quarter is there any seasonality and with the change in administration is there any impact positive or negative and business development with the federal government.
Mike: Yes, we would expect to see the same.
Mike: Kind of themes in our bookings plan as we go through Q4.
Mike: We're always at the at the behest of government timing and processing Timeframes. There are two two big holidays in the fourth quarter. So we generally try to push on those actions to move orders and to be not affected by the holidays.
Mike: Some still some slight seasonality more so on the government side.
Mike: Throughout the holidays and the beginning of the new year, but.
Mike: We generally plan for those in our assessment of timing bookings, though at times, we can be surprised at how long processing can sometimes take on contract awards the.
Mike: The interesting thing about the company as if you are talking about it in the administration change that will be occurring is.
Mike: In general the markets that we've seen in defense and commercial have generally been a little bit impervious to.
Mike: To administrative or even.
Mike: On the Oss segment, some of the economic impact and it's in part because of the demand for autonomy the increase in the market and for AI ml. So we've been able to weather some storms and be able to find some bookings and continue to drive that performance. Despite those.
Mike: But overall in general I don't think the administration will have a change we'll have should have a big impact if anything I would think it might be more on the positive side with with potentially a greater focus on defense.
Mike: Under the New administration.
Speaker Change: No I would also add maybe we won't have crs that we'd have a full Republican.
Speaker Change: Ticket across the board.
Speaker Change: Yes, Brian and then.
Brian: At a small point you bring up.
Speaker Change: If control of the house and the Senate rolls through.
Brian: Any CR that we wouldn't have or a short CR would clearly have a positive effect on our business because any any new starts would be allowed funding and procurement placement faster. So that would help with the timing of bookings and programs some of which for we have bids in the market already so that would be a positive thing.
Speaker Change: If the current control across the house Senate and presidency would allow for shorter CR.
Speaker Change: Two more for me. The first one is you quantified a $1 billion pipeline a couple of times in the last few quarters.
Speaker Change: Can you quantify at least roughly what the addressable percentage of that is in 2025 and give you breakdown similar to your bookings, 55%, 60% government.
Speaker Change: Yes, I would say if we took the five year pipeline in total it's around that around that same percentage, we're in that $50 50, plus or minus 5% to 10% in any direction.
Speaker Change: In any given year or a total as it as we modify it and we continue processing our pipeline.
Speaker Change: And then.
Speaker Change: It generally breaks out over the years.
Speaker Change: 2025 will be.
Speaker Change: Probably close to a fifth of that maybe in the.
Speaker Change: And on factor.
Speaker Change: So that will have the ability to process against that and have factored approach.
Speaker Change: And in the large element of our pipeline is really all addressable to us.
Speaker Change: As I mentioned in earlier calls the probability weightings, we've put for the probability that a opportunity will happen in the probably that we win helps us prioritize those elements in the pipeline to assign our resources.
Speaker Change: Actively too.
Speaker Change: To drive those bookings and backlog.
Speaker Change: Okay, one last for me and I'll get back in the queue. Thank.
Speaker Change: You touched on the gross margin was abnormally high in the Oss segment, you said due to mix and a focus on higher margin however, low.
Speaker Change: Low margin customer funded development was abnormally high as well.
Speaker Change: So can you give us some more detail on this.
Speaker Change: Based on your bookings what type of gross margin is reasonable to assume for investors over the next 18 months.
Speaker Change: <unk> segment.
Speaker Change: Yes, so in the quarter.
Speaker Change: We generally generally saw a stronger mix of product.
Speaker Change: Development on some higher margins.
Speaker Change: And.
Speaker Change: And our server and our storage systems.
Speaker Change: We saw a.
Speaker Change: Product mix that carried a higher gross margin. So that we had a fairly large amount of those orders in the quarter, which was which is as you just noted good for gross margin.
Speaker Change: On the customer funded.
Speaker Change: Development, depending on the implementation of that we can we can reach our normal company margin oftentimes, there's a little bit less as we secure an incumbent position. So over time, a good way to look at those customer development programs is as.
Speaker Change: As we build the development into what is almost always a production and then support over the lifetime of that product.
Speaker Change: If you take that as a business case, the net of that will be eventually overcome by our product deliveries at our normal margins on our production and and as a business case. There is a whole those efforts achieve our gross margin so the.
Speaker Change: The early developments customer funded development that we're seeing now and growing is really setting the stage for the longer run production contracts. So.
Speaker Change: Example, is our <unk> program, we've been on that program for well over five years started with some early development and we have been in production support and tech refresh over the last three years to four years in that program and our contracted to continue to support that.
Speaker Change: For another five years. So those are the kinds of programs that are early customer front end development is leading up to.
Speaker Change: Our expectation and the Oss segment is that in the next 18 months or so we should be able to continue to drive up to the 35% or better gross margin area as we start to balance out the products and the customer funded development.
Speaker Change: They grow in volume.
Speaker Change: Okay. Thank you.
Speaker Change: Thanks, Brian.
Speaker Change: Next question comes from Scott Searle.
Speaker Change: Roth Capital Partners. Please go ahead.
Scott Searle: Hey, good morning, Thanks for taking the questions.
Scott Searle: Mike maybe just quickly follow up on the prior gross margin question I just wanted to get some clarification. The 43% Oss is net of the customer funded development, which is running more in the 20% range is that correct just wanted to get calibrated on that front.
Speaker Change: Yes, yes.
Speaker Change: 43% would include the.
Speaker Change: Margin gross margin on the customer development work, we've done to date.
Scott Searle: Got you and then the blended gross margin Youre talking about overall was about can you get to 35% depending on mix as we start to get a little bit more.
Scott Searle: I can I'll call it upscale contribution from customer funded and some better contracts like you saw in the current quarter with all access is that correct.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Pretty good.
Scott Searle: Maybe to follow up on the customer funded development front.
Scott Searle: I think you talked about a conversion timeline to production of one to two years is there a rule of thumb to be thinking about the multiplier effect I think you said about 900000.
Speaker Change: In 23 of customer funded development as we starting to get into 25, what does that really.
Speaker Change: Convert into and are fully commercialized setting like what's the revenue run rate, we should think about that on a dollar for dollar basis isn't is at $3 for your $5 per year is.
Speaker Change: Is it a fraction that just just trying to get calibrated in terms of how.
Speaker Change: Mathematically extrapolate that.
Speaker Change: Scott you were talking about how to extrapolate the.
Speaker Change: Customer funded development dollars that would be contracted.
Speaker Change: Yes, exactly once they are into production what should we be thinking about an annualized contribution basis for each one of us and I'm sure. It's kind of a wide range, but just trying to understand a little bit of what does that translate into.
Speaker Change: Yes, it really is a wide range and generally.
Speaker Change: On average those product development cycles are one to two years, depending on the size. If it's a brand new start or a large system solution. That's your kind of your year year and a half two year development cycle.
Speaker Change: Followed by an <unk> or a low rate initial production period of usually about a year and then a full rate production period that depending on the quantity.
Speaker Change: Could run an additional two to three years and then you generally look at a tech refresh cycle every two to three years after that and Sustainment support there the whole time.
Speaker Change: Pending again that could be shorter timeframes on the development.
Speaker Change: Scope of development.
Speaker Change: And then.
Speaker Change: Really the back end of production, how much and how long that goes compared to the development is really tied more to the number of platforms that are available. So if it's a aircraft solution. What are the number of aircraft and inventory if its a vehicle solution what are the number of vehicles in inventory and in that.
Speaker Change: Case.
Speaker Change: Right.
Speaker Change: Those amounts have been spread out over the years.
Speaker Change: As a general general rule of thumb, usually the development amount is.
Speaker Change: Usually on the order of 10% to 20% of.
Speaker Change: Of our whole program as it rolls through L Rip and in production.
Speaker Change: Then after that right is just additional tech refresh and logistics support.
Speaker Change: Oftentimes for a decade or more on the platform.
Speaker Change: Got you very helpful.
Scott Searle: And maybe just to dive in on the pipeline I know, it's a big number it sounds like maybe there's a fitment that's addressable then.
Scott Searle: On an annualized basis.
Speaker Change: What is getting you guys to the table and position and use of the window a lot of different core capabilities that you guys have and even bring cooling systems to bear now and these applications, whether it's autonomy AI ml, but where.
Speaker Change: Are you guys really excelling in terms of what's getting you to the table and what's going to get you across the finish line with a win.
Speaker Change: Yes, great question Scott.
Speaker Change: At the top level really what's driving it is a lot of the architectures in commercial and defense applications today, where theyre trying to run artificial intelligence or autonomy basically AI algorithms, if I simplify it.
Speaker Change: Using an embedded technology that's derived in a.
Speaker Change: Architecture form factor that is really limited to running one to two AI algorithms in a given volume say on a given card or in a given chassis and what we've seen in the last two to three years, though and coming on even stronger is the demand for artificial intelligence machine learning and what we're seeing.
Speaker Change: He is on platforms autonomous.
Speaker Change: Trucking or autonomous vehicles or <unk>.
Speaker Change: The defense market sensor aircraft is that even given a single one or two centers on our platform, we're finding that using more and more AI algorithms or entrances can pull more information and data out of those sensors fuse it in a more effective manner and drive implementation to autonomy or <unk>.
Speaker Change: <unk> and <unk>.
Speaker Change: Defense applications.
Speaker Change: That means as customers are trying to put more AI entrances on the same computing solution inside their platform and instead of running one to two AI algorithms. They want to run 10 to 12 or 13% to 15.
Speaker Change: And you can't do that with the current embedded technology today.
Speaker Change: What we offer through the enterprise class computing for what we're taking out of the data centers is the ability in that same volume and essentially at the same price point as the ability to do 20% to 25, AI algorithms and that same volume and that gives massive potential for growth and capability inside those applications.
Speaker Change: And then second to that is.
Speaker Change: Our ability and how we use our back plane and fabrics that tied together.
Speaker Change: Compute inside of a chassis or a solution is through PCI Express and some other technologies, we're able to perform that.
Speaker Change: Generally close to a thousand times.
Speaker Change: Less latency or faster than those current solutions. So generally what's bringing us the table is the ability at similar prices to give significant performance advantage and AI and autonomy applications to customers and we're generally competing against the new capability versus old architectures and solutions and Thats what it is.
Speaker Change: Our positioning and then what has been driving the increased interest in the company and why we are starting to see the early returns on the bookings over revenue.
Scott Searle: Great very very helpful. Thank you and lastly, if I could then taking that and shifting the outlook to 2025.
Scott Searle: <unk> had some headwinds I think just general macroeconomic softness in Europe, but it seems like that Oss pipeline and your book to Bill This year. It sounds like it's north of one two over the last three quarters, what does that translate into kind of the range of outcomes in 2025, Youre talking about growth, but could you help us frame what youre thinking about in the early.
Scott Searle: Going now from 20% to 25, and the swing factors to the upside or downside.
Speaker Change: Yes, Scott no I appreciate that and.
Speaker Change: Yes, with the last three quarters running kind of on the Oss segment, a book to bill ratio of around 125.
Speaker Change: We anticipate that will carry into 2025, so on the Oss side, we're contemplating annual revenue growth on the order of 25%.
Speaker Change: We're starting to see slowly slowly some initial indicators that maybe some economic turnaround in Europe and Germany.
Speaker Change: On the on the presenters segment that turnaround it will take a while to capture if it emerges as we as we hope as some economists are predicting because of supply chain will have to catch up to it and the supply chain.
Speaker Change: In the six to six to 12 week range. So it will likely be more into Q2 Q3 before I think we would start to see that but.
Speaker Change: But we've got some.
Speaker Change: Optimistic views on Brexit or that we could have that present or segment.
Speaker Change: Back on the growth scale, maybe in the upper single digits.
Speaker Change: So 2025, we were really looking to see that turn we'll probably see some seasonality maybe early in Q1.
Speaker Change: As a as a U S defense market rollout of the holidays. This.
Speaker Change: This is generally a little bit slow period.
Speaker Change: And then we've got the Chinese new year, and some others seasonally a little bit lower quarter for <unk> for <unk>, but as we back into Q2, three and Q4 is where I think we would start to see the impacts of these book to bill ratios and the and the performance here at the end of the year.
Speaker Change: Okay, great. Thanks, so much ill get back in the queue.
Speaker Change: Thanks, Scott I appreciate it.
Speaker Change: Next question comes from Eric Martin.
Speaker Change: With Lake Street. Please go ahead.
Eric Martin: Hey, I wanted to follow up on the.
Eric Martin: Reznor question just to ask just to put a finer point on it. So the expectation here is that we could anticipate potentially anticipate growth in <unk> segment.
Speaker Change: As soon as Q2 is that correct.
Speaker Change: Yes, we're looking at a rebound for <unk> in 2025 likely to see that around the Q2 timeframe at the earliest as some of these factors if they can continue to hold in the European economy.
Speaker Change: And then that can convert into.
Speaker Change: Delivery of our supply chain, then we could start to see some stuff potentially as early as Q2.
Speaker Change: Okay, Alright, and then just on the guide for Q4, you've got our outlook anticipates a step up in revenue here given that we were kind of net of the inventory adjustment.
Speaker Change: Essentially breakeven for the adjusted EBITDA in Q3 is it fair to assume that we have a step up in adjusted EBITDA in Q4 or are there investments.
Speaker Change: The expenses that you're planning on in Q4 that might take the wind out of that.
Speaker Change: No Eric no additional investments planned in.
Speaker Change: Q4 that I think would.
Speaker Change: It would have a negative impact on that.
Speaker Change: Okay.
Speaker Change: And then my last.
Speaker Change: Questions and comments I wanted to wish my best to John and his retirement as well enjoyed working with you John.
Speaker Change: Best wishes to Daniel and his new role.
Speaker Change: Thanks, so much for that Eric.
Speaker Change: Okay, operator, I think.
Speaker Change: With the end of the question is there we can bring the call to a close.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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