Kelso Technologies Inc. 2024-Q3 Financials Summary
Kelso Technologies Inc. (TSX: KLS) released its Q3 2024 financial results, reporting a 20% decrease in revenue to $2.52 million compared to Q3 2023. The company faced challenging market conditions in tank car demand, resulting in a net loss of $361,800. However, this represents an improvement from Q2 2024's net loss of $544,927, attributed to new management's expense reduction strategies.
Despite challenges, Kelso maintained an above-industry-average gross profit margin of 44%. The company appointed Frank Busch as interim CEO, Sameer Uplenchwar as CFO, and Maureen O'Hanley Doucette as Corporate Secretary. Kelso's US subsidiary secured a $500,000 line of credit from Texas Capital Bank after the quarter-end.
The company remains focused on cost control and aligning operations with reduced revenue. Kelso is also conducting a strategic review of its KXI HD system to maximize shareholder value and is nearing completion of AAR approvals for its rail pressure car products, expected to drive new sales growth in 2025.
- Improvement in net loss from Q2 2024 ($361,800) to Q3 2024 ($544,927)
- Maintained above-industry-average gross profit margin of 44%
- Secured $500,000 line of credit from Texas Capital Bank
- Reduced expenses relative to revenue from 65% in Q2 to 58% in Q3
- Nearing completion of AAR approvals for rail pressure car products, potentially driving new sales growth in 2025
- 20% decrease in revenue to $2.52 million compared to Q3 2023
- Net loss of $361,800 in Q3 2024
- Challenging market conditions in tank car demand
- Working capital decreased from $5,026,580 in December 2023 to $3,133,530 in September 2024
- Cash on hand decreased from $1,433,838 in December 2023 to $410,416 in September 2024
Insights
Kelso Technologies' Q3 2024 results show a challenging period with a
Key points:
- Maintained a strong gross profit margin of
44% , above industry average - Improved expense management, with expenses relative to revenue decreasing from
65% in Q2 to58% in Q3 - Secured a
$500,000 line of credit, enhancing liquidity - Working capital decreased to
$3.13 million from$5.03 million at year-end 2023
The company faces ongoing market weakness in tank car demand but is positioning itself for future growth with its pressure car package nearing full AAR approval. This could drive significant revenue growth in 2025 and beyond, aligning with forecasted industry improvements. While current financials are concerning, Kelso's debt-free position and strategic focus on high-margin products provide a foundation for potential recovery.
The rail tank car industry is facing headwinds, with FTR forecasting approximately 8,400 tank car deliveries for 2024 and 8,000 for 2025, representing the lower end of replacement demand. However, the outlook improves significantly from 2026 onwards:
- 2026 forecast: 9,350 units (
+17% year-over-year) - 2027 forecast: 13,000 units (
+39% year-over-year)
Kelso's strategy to complete its rail pressure car product portfolio with full AAR approvals by 2025 aligns well with this projected industry upturn. The company's focus on "Made in USA" products and its upcoming pressure car package (which commands higher per-unit value) position it to capitalize on the anticipated market growth.
While current market conditions are challenging, Kelso's strategic reorganization, cost-cutting measures and product development efforts suggest a potential for improved performance as the market recovers. Investors should monitor the progress of AAR approvals and the company's ability to maintain its strong gross margins as key indicators of future success.
VANCOUVER, British Columbia and BONHAM, Texas, Oct. 17, 2024 (GLOBE NEWSWIRE) -- 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 of65% . 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
LIQUIDITY AND CAPITAL RESOURCES
As at September 30, 2024 the Company had cash on deposit in the amount of
The Company had income tax payable of
The working capital position of the Company as at September 30, 2024 was
Total assets of the Company were
The Company’s revenue was down
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 (+
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
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 “
For further information, please contact:
| Frank Busch Interim Chief Executive Officer Email: busch@kelsotech.com | Sameer Uplenchwar Chief Financial Officer Email: sameer@kelsotech.com | Head office: 305 – 1979 Old Okanagan Hwy, West Kelowna, BC V4T 3A4 www.kelsotech.com |
FAQ
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