Kelso Technologies Inc. (“Kelso” or the “Company”), (TSX: KLS),
reports that it has released its unaudited consolidated interim
financial statements and Management Discussion and Analysis for the
three months ended September 30 2024.
The unaudited consolidated interim financial
statements were prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (“IASB”). All amounts herein are
expressed in United States dollars (the Company’s functional
currency) unless otherwise indicated.
The Company’s unaudited consolidated financial
statements and MD&A for the three months ended September 30,
2024 were approved by the Board of Directors on October 16,
2024.
HIGHLIGHTS:
- In Q3-2024, revenue decreased by
20% to $2.52 million compared to $3.14 million in Q3-2023,
resulting in a net loss of $361,800. However, this net loss
represents an improvement from Q2-2024, where the net loss was
$544,927, primarily due to new management's focus on expense
reduction strategies.
- Kelso continues to maintain above
industry average gross profit margin of 44% due to the maintenance
of production effectiveness and efficiencies stemming from per
order-based pricing models.
- The third quarter of 2024 was a
challenging period for the Company, due to ongoing market weakness
in tank car demand. The Company’s focus remains towards sustainable
revenue growth.
- Kelso remains focused on management
of its operations to align with reductions in revenue.
Quarter-over-quarter improvement in expenses relative to revenue
showed three months ending September 30, 2024 relative expenses to
revenue was 58% versus the prior quarter of 65%. Management remains
committed to cost controls to effectively work within its means for
efficient operations.
- Frank Busch was appointed interim
Chief Executive Officer. As well as the appointments of Sameer
Uplenchwar as the Chief Financial Officer, and Maureen O’Hanley
Doucette as Corporate Secretary.
- Management is continuing to focus
its attention on increasing shareholder value by reducing expenses
associated with the KXI HD system (KXI) and will continue with the
previously announced KXI strategic review to maximize shareholder
value.
- Subsequent event to the
quarter-end, Kelso's US subsidiary secured a line of credit
amounting to $500,000 from Texas Capital Bank.
SUMMARY OF FINANCIAL RESULTS FOR THE THIRD QUARTER ENDED
SEPTEMBER 30, 2024 |
|
Three months ended September 30 |
|
2024 |
|
|
2023 |
|
Revenues |
$ |
2,523,282 |
|
$ |
3,138,137 |
|
Gross profit |
$ |
1,113,199 |
|
$ |
1,421,248 |
|
Gross profit margin |
|
44 |
% |
|
45 |
% |
Adjusted EBITDA (loss) |
$ |
(297,751 |
) |
$ |
(36,142 |
) |
Net income (loss) |
$ |
(361,800 |
) |
$ |
(102,723 |
) |
|
|
|
Nine months ended September 30 |
|
2024 |
|
|
2023 |
|
Revenues |
$ |
8,067,477 |
|
$ |
7,750,557 |
|
Gross Profit |
$ |
3,582,797 |
|
$ |
3,300,370 |
|
Gross profit margin |
|
44 |
% |
|
43 |
% |
Adjusted EBITDA (loss) |
$ |
(1,051,657 |
) |
$ |
(1,216,008 |
) |
Non-cash expenses |
$ |
253,016 |
|
$ |
26,676 |
|
Taxes |
$ |
(236,923 |
) |
$ |
(104,898 |
) |
Net income (loss) |
$ |
(1,605,482 |
) |
$ |
(1,936,518 |
) |
Basic earnings (loss) per
share |
$ |
(0.03 |
) |
$ |
(0.04 |
) |
|
|
|
Liquidity and Capital Resources |
September 30, 2024 |
December 31, 2023 |
Working capital |
$ |
3,133,530 |
|
$ |
5,026,580 |
|
Cash |
$ |
410,416 |
|
$ |
1,433,838 |
|
Accounts receivable |
$ |
1,124,535 |
|
$ |
1,065,411 |
|
Net Equity |
$ |
7,114,767 |
|
$ |
8,720,248 |
|
Total assets |
$ |
9,620,226 |
|
$ |
9,703,271 |
|
Common shares outstanding |
|
54,443,422 |
|
|
54,443,422 |
|
|
|
|
* 2023 Includes termination settlement of $465,360 which was a
cash expense. If excluded then Adjusted EBITDA would be
$(674,771)
LIQUIDITY AND
CAPITAL RESOURCES
As at September 30, 2024 the Company had cash on deposit in the
amount of $410,416, accounts receivable of $1,124,535 prepaid
expenses of $66,887 and inventory of $3,953,178 compared to cash on
deposit in the amount of $1,433,838, accounts receivable of
$1,065,411 prepaid expenses of $134,349 and inventory of $3,376,005
at December 31, 2023.
The Company had income tax payable of $68,024 at September 30,
2024 compared to $10,024 at December 31, 2023.
The working capital position of the Company as at September 30,
2024 was $3,153,530 compared to $5,026,580 as at December 31, 2023.
Capital resources and operations are to be expected to continue the
Company’s ability to conduct ongoing business as planned for the
foreseeable future.
Total assets of the Company were $9,620,226 as at September 30,
2024 compared to $9,703,271 as at December 31, 2023. Net assets of
the Company were $7,114,767 as at September 30, 2024 compared to
$8,720,248 as at December 31, 2023. The Company had no
interest-bearing long-term liabilities or debt as at September 30,
2024 or December 31, 2023.
The Company’s revenue was down 20% to $2,523,477 in Q3-2024
compared to $3,138,137 in Q3-2023. The third quarter of 2024 was a
challenging period for the Company, marked by challenging market
conditions related to tank car demand.
Management takes all necessary precautions to minimize risks,
however additional risks could affect the future performance of the
Company. Business risks are detailed in the Risks and Uncertainties
section of this MD&A.
OUTLOOK
During the third quarter of 2024, Kelso continued to strengthen
the portfolio of its rail products by closely monitoring those
products near completion of the required AAR service trial period.
The strategic focus is to obtain full AAR approvals in 2024 to
complete our entire portfolio of rail pressure car products. This
has been the Company’s core branding ambition over the past
fourteen years and it is expected in 2025.
The Company is undertaking a strategic reorganization with a
focus on improving its financial outlook without impacting
production capability. The Company has now reduced its workforce
and R&D costs associated with the KXI entity and will continue
its strategic review for KXI into 2025 to hopefully unlock
additional value for shareholders. There is a shift toward rail
pressure cars and the Company is completing the last stages of an
AAR regulatory approved rail pressure car kit in 2024 to drive new
sources of sales growth. The Company has fully developed production
systems including supply chain, inventory levels, reliable costs,
selling prices and predictable profitability that Management
expects to remain stable in 2024.
The level of activity for tank car orders and deliveries puts
the segment on track for the lower end of replacement demand for
2024 and 2025. The current forecast has 2024 tank car deliveries is
approximately 8,400 units (FTR, 2024 Q3 Rail Equipment Outlook
“FTR”), The published FTR rail car delivery forecast for 2025 is
expected to remain approximately 8,000 units. The outlook in 2026
looks positive with FTR forecast of 9,350 units (+17% y/y) growing
to 13,000 units (+39% y/y) in 2027. Despite current macroeconomic
challenges the Company is in a good position to service all product
orders from the rail tank car industry for the foreseeable
future.
The Company is addressing previous challenges and restructuring
to enhance profitability while pursuing strategic growth
opportunities that leverage its competitive advantages in the rail
industry. Our goal is to become the primary, high quality products
featuring our 100% “Made in USA” product line fully servicing the
rail tank car market.
Key to the development of the Company’s rail revenue growth
ambitions in 2025 is the full AAR approval of our pressure car
package. This package sells at a much higher tank car unit value.
Our specialized angle valves for the pressure car package have
completed their service trial and are in the final stages of the
full AAR approval process. The AAR approvals are the key milestone
to establish new revenue growth from rail related products.
SUMMARY
The Company believes it is positioned for new value creation and
anticipates further success in established rail markets. With no
interest-bearing long-term debt and improved sales prospects from
larger, diverse markets, Kelso can concentrate on enhancing its
equity value through financial performance driven by a broader
range of new proprietary products.
About Kelso
Technologies
Kelso is a diverse transportation equipment
company that specializes in the creation, production, sales and
distribution of proprietary products used in rail and automotive
transportation. The Company’s rail equipment business has been
developed as a designer and reliable domestic supplier of unique
high- quality rail tank car valves that provide for the safe
handling and containment of commodities during rail transport. The
automotive division of the Company has created the first proven
automated suspension-based Advanced Driver Assistance System for
commercial mission-critical wilderness operations. All Kelso
products are specifically designed to address the challenging
issues of public safety, worker well-being and potential
environmental harm while providing effective and efficient
operational advantages to customers. Kelso’s innovation objectives
are to create products that diminish the potentially dangerous
effects of human and technology error through the use of the
Company’s portfolio of proprietary products.
For a more complete business and financial
profile of the Company, please view the Company's website at
www.kelsotech.com and public documents posted under the Company’s
profile on SEDAR in Canada and on EDGAR in the United States.
On behalf of
the Board of
Directors,
Frank Busch, Interim CEO
Legal Notice Regarding Forward-Looking
Statements: This news release contains “forward-looking
statements” within the meaning of applicable securities
legislation. Forward-looking statements indicate expectations or
intentions. Forward-looking statements in this news release include
that our new rail products will sell once AAR approvals are
secured; that our specialized angle valves for the pressure car
market have completed their service trial and are in the final
stages of the full AAR approval process; that although the rail
industry is fully depressed there is still opportunity for Kelso to
grow its revenues by being able to fully service the repair,
retrofit and requalification activities by hazmat shippers with a
broader range of “100% Made in the USA” components; that the
Company is reducing KXI costs as part of a strategic review; and
that current working capital and anticipated sales activity at
above average contribution margins for 2024 are expected to protect
the Company’s ability to conduct ongoing business operations for
the foreseeable future. Although Kelso believes the Company’s
anticipated future results, performance or achievements expressed
or implied by the forward-looking statements and information are
based upon reasonable assumptions and expectations, they can give
no assurance that such expectations will prove to be correct. The
reader should not place undue reliance on forward-looking
statements and information as such statements and information
involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of
Kelso to differ materially from anticipated future results,
performance or achievement expressed or implied by such
forward-looking statements and information, including without
limitation that the risk that the longer-term effects on the rail
industry including high interest rates, inflation and short supply
chain issues may last much longer than expected delaying business
orders from customers; that the development of new products may
proceed slower than expected, cost more or may not result in a
saleable product; that tank car producers may produce or retrofit
fewer than cars than expected and even if they meet expectations,
they may not purchase the Company’s products for their tank cars;
capital resources may not be adequate enough to fund future
operations as intended; that the Company’s products may not provide
the intended economic or operational advantages to end users; that
the Company’s new rail products may not receive regulatory
certification; that customer orders may not develop or be
cancelled; that competitors may enter the market with new product
offerings which could capture some of the Company’s market share;
that a new product idea under research and development may be
dropped if ongoing product testing and market research reveal
engineering and economic issues that render a new product concept
infeasible; and that the Company’s new equipment offerings may not
capture market share as well as expected. Except as required by
law, the Company does not intend to update the forward-looking
information and forward-looking statements contained in this news
release.
For further
information, please
contact:
Frank BuschInterim Chief Executive OfficerEmail:
busch@kelsotech.com |
Sameer UplenchwarChief Financial OfficerEmail:
sameer@kelsotech.com |
Head office:305 – 1979 Old Okanagan Hwy,West Kelowna, BC V4T 3A4
www.kelsotech.com |
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