Tim Spindle

Both $RTX and Lockheed Martin $LMT are dropping their Q2 earnings today before the opening bell. As major, tier-1 customers for $OSS (especially RTX), I always treat their operational momentum and procurement commentary as a critical leading indicator for One Stop Systems' upcoming results. If defense hardware procurement and aerospace backlog expansion are inflecting positively for the primes this morning, it sets a massive structural tone for pure-play suppliers. In Q1, the results for Primes were strong, and the outcome for OSS was outstanding. Let's see if that happens again.

$ELMT Q1 2026 earnings: Surging Backlog and Expanding Margins Masked by Reorganization Noise Elmet Group delivered a robust Q1 2026, breaking out with a 21% YoY revenue increase to $56.0M. The true story is the operating leverage: Adjusted EBITDA more than doubled to $9.2M as gross margins expanded by 260 bps. While GAAP Net Income reversed to a $0.3M loss, this was entirely driven by a one-time $3.5M deferred tax charge related to its C-Corp conversion and IPO costs. Forward-looking indicators are flashing green, with open order backlog accelerating 52% to a record $113.3M. The subsequent $125.5M IPO provides a fortified balance sheet for future capacity expansion. Full article with charts - link in bio 🐂 𝐁𝐮𝐥𝐥 𝐂𝐚𝐬𝐞 • 𝐄𝐱𝐩𝐥𝐨𝐬𝐢𝐯𝐞 𝐅𝐨𝐫𝐰𝐚𝐫𝐝 𝐃𝐞𝐦𝐚𝐧𝐝 — Open order backlog accelerated to $113.3M, up from $96.3M just a quarter ago and $74.7M last year. This provides immense top-line visibility for the remainder of FY26. • 𝐒𝐞𝐯𝐞𝐫𝐞 𝐌𝐚𝐫𝐠𝐢𝐧 𝐄𝐱𝐩𝐚𝐧𝐬𝐢𝐨𝐧 — The company is demonstrating massive operating leverage. A 21% increase in revenue translated to a 104% increase in Adjusted EBITDA, signaling that fixed costs are well-absorbed at current volumes. 🐻 𝐁𝐞𝐚𝐫 𝐂𝐚𝐬𝐞 • 𝐔𝐠𝐥𝐲 𝐆𝐀𝐀𝐏 𝐀𝐝𝐣𝐮𝐬𝐭𝐦𝐞𝐧𝐭𝐬 — Investors have to look past significant non-GAAP reconciliations to see the bull thesis. GAAP Net Income was negative, weighed down by $3.4M in IPO/corporate costs and a hefty $3.8M Reorganization tax impact. • 𝐄𝐚𝐫𝐧𝐢𝐧𝐠𝐬 𝐏𝐫𝐨𝐩𝐩𝐞𝐝 𝐛𝐲 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭𝐬 — The company recorded a $3.7M pre-tax income bump purely from marking to market its strategic investment in EQ Resources. This non-cash item artificially inflates unadjusted operating health. ⚖️ 𝐕𝐞𝐫𝐝𝐢𝐜𝐭: 🟢 Bullish. Core operational metrics—revenue, margins, and backlog—are all accelerating simultaneously. The GAAP net loss is entirely structural noise from the IPO/reorganization phase, and the fresh $99.4M in post-IPO cash eliminates immediate capital constraints. 𝐊𝐞𝐲 𝐓𝐡𝐞𝐦𝐞𝐬 🟢🟢 𝐀𝐞𝐫𝐨𝐬𝐩𝐚𝐜𝐞, 𝐃𝐞𝐟𝐞𝐧𝐬𝐞 & 𝐆𝐨𝐯𝐞𝐫𝐧𝐦𝐞𝐧𝐭 (𝐀𝐃𝐆) 𝐃𝐞𝐦𝐚𝐧𝐝 𝐀𝐜𝐜𝐞𝐥𝐞𝐫𝐚𝐭𝐢𝐧𝐠 [NEW] The Critical Materials & Components (CMC) division was the undisputed growth engine this quarter. CMC revenue increased by $9.1M YoY, accounting for nearly 95% of the company's total $9.6M revenue growth. Management explicitly cited defense spending and ongoing supply chain realignment as macro tailwinds pushing ADG orders to new highs. 🟢 𝐀𝐠𝐠𝐫𝐞𝐬𝐬𝐢𝐯𝐞 𝐌𝐚𝐫𝐠𝐢𝐧 𝐄𝐱𝐩𝐚𝐧𝐬𝐢𝐨𝐧 𝐏𝐫𝐨𝐟𝐢𝐥𝐞 Elmet is flexing serious pricing power and cost absorption. Gross profit margin accelerated from 18.6% to 21.2% (+260 bps), while Adjusted EBITDA margin surged from 9.6% to 16.4% (+680 bps). This proves that the company's precision-engineered manufacturing model scales highly efficiently once break-even volumes are cleared. 🔴 𝐍𝐨𝐧-𝐎𝐩𝐞𝐫𝐚𝐭𝐢𝐧𝐠 𝐈𝐧𝐜𝐨𝐦𝐞 𝐃𝐢𝐬𝐭𝐨𝐫𝐭𝐢𝐧𝐠 𝐭𝐡𝐞 𝐂𝐨𝐫𝐞 𝐏𝐢𝐜𝐭𝐮𝐫𝐞 [NEW] While Adjusted EBITDA strips this out, it is critical to note that $3.7M of the quarter's income came from a change in the fair value of Elmet's strategic equity investment in EQ Resources Limited (a tungsten mining company). Investors must isolate this non-cash, highly volatile mark-to-market gain when evaluating sequential earnings stability. 🔴 𝐆𝐀𝐀𝐏 𝐯𝐬 𝐍𝐨𝐧-𝐆𝐀𝐀𝐏 𝐃𝐢𝐯𝐞𝐫𝐠𝐞𝐧𝐜𝐞 𝐢𝐬 𝐄𝐱𝐭𝐫𝐞𝐦𝐞 [NEW] The positive narrative relies heavily on Adjusted Net Income ($4.7M vs GAAP loss of $0.3M). The gap is driven by a one-time deferred tax hit ($3.5M) from switching from an S-Corp to a C-Corp on January 2, 2026, alongside $0.8M in IPO preparation costs and $0.6M in stock-based compensation. While management expects a normalized 21% tax rate going forward, execution on clean reporting in Q2 is paramount. 🟢 𝐁𝐚𝐥𝐚𝐧𝐜𝐞 𝐒𝐡𝐞𝐞𝐭 𝐑𝐚𝐝𝐢𝐜𝐚𝐥𝐥𝐲 𝐓𝐫𝐚𝐧𝐬𝐟𝐨𝐫𝐦𝐞𝐝 𝐏𝐨𝐬𝐭-𝐐𝐮𝐚𝐫𝐭𝐞𝐫 [NEW] The Q1 balance sheet printed just $1.8M in cash, but this is already outdated. Following the April IPO, Elmet raised $125.5M in net proceeds. They immediately cleared $17.8M in term debt and settled $8.3M in stock appreciation rights, leaving a formidable $99.4M in net cash. This shifts the company from a capital-constrained operator to a potential acquirer. 𝐎𝐭𝐡𝐞𝐫 𝐊𝐏𝐈𝐬 𝐎𝐩𝐞𝐧 𝐎𝐫𝐝𝐞𝐫 𝐁𝐚𝐜𝐤𝐥𝐨𝐠: $113.3 million Accelerating dramatically. Grew from $74.7M in Q1 2025 to $96.3M in Q4 2025, and now stands at a record $113.3M. This 52% YoY increase provides concrete validation of management's claims regarding strong ADG and high-power system demand. 𝐓𝐫𝐚𝐢𝐥𝐢𝐧𝐠 𝐓𝐰𝐞𝐥𝐯𝐞 𝐌𝐨𝐧𝐭𝐡𝐬 (𝐓𝐓𝐌) 𝐑𝐞𝐯𝐞𝐧𝐮𝐞: $211.2 million Stable but accelerating on the edges. Total FY2025 revenue was $201.6M, meaning Q1's outperformance is successfully bending the TTM revenue curve upward (a 4.8% sequential TTM expansion). 𝐊𝐞𝐲 𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧𝐬 𝐁𝐚𝐜𝐤𝐥𝐨𝐠 𝐂𝐨𝐧𝐯𝐞𝐫𝐬𝐢𝐨𝐧 𝐓𝐢𝐦𝐞𝐥𝐢𝐧𝐞 With backlog hitting a record $113.3 million, what is the expected duration for converting this into recognized revenue? Are there any supply chain bottlenecks constraining conversion pace? 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐀𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐲 Following the IPO, you are sitting on nearly $100 million in fresh cash. What is the explicit hierarchy for deploying this capital between organic capacity expansion, vertical integration (like the EQ Resources investment), and M&A? 𝐄𝐐 𝐑𝐞𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐲 Beyond the $3.7 million mark-to-market financial gain this quarter, how does the strategic investment in EQ Resources practically insulate Elmet from critical materials (tungsten) supply shocks?

$OSS just released its 2026 Shareholder Letter, and the transformation from a legacy hardware provider to a high-margin "Pure-Play" Rugged AI leader is officially in high gear. Here are the key takeaways for investors: 1️⃣ Record-Breaking Financials 📈 2025 was a historic year for One Stop Systems. The company reported: 🔹Record quarterly earnings per share (EPS) and gross margins. 🔹Annual revenue from continuing operations jumped 31.2% to $32.2 million. 🔹Gross margins for continuing operations reached a staggering 49.6%. 🔹Q4 2025 net income hit $2.0 million ($0.08 per diluted share). 2️⃣ The "Pure-Play" Transformation ⚡️ In December 2025, OSS completed the sale of its Bressner subsidiary for $22.4 million—finishing the deal a full year ahead of schedule. This streamlines the business to focus exclusively on high-growth, high-margin rugged Enterprise Class compute for AI and sensor processing at the edge. 3️⃣ Defense Momentum & Commercial Scalability 🛡️ The pipeline is broader and more durable than ever: 🔹Defense: The P-8 Poseidon program remains a cornerstone with $65M+ in total contracted revenue. 🔹Commercial: OSS is displacing incumbents in autonomous mining/construction and has a medical imaging relationship with $25M+ potential over the next five years. 4️⃣ 2026 Outlook: Profitable Growth 🎯 Management is entering 2026 with a strong balance sheet and clear visibility. Their guidance includes: 🔹Revenue growth of 20% to 25%. 🔹Gross margins of approximately 40%. 🔹Expected positive EBITDA and adjusted EBITDA. The Bottom Line: CEO Mike Knowles has fundamentally reshaped $OSS. With a book-to-bill ratio of 1.2x, the company is no longer just "aiming" for the AI boom—it is actively powering it in the world's harshest environments.