20-F: Kelso Technologies Inc. Reports Fiscal Year 2024 Results Amidst Tank Car Industry Downturn

Kelso Technologies Inc. announces its fiscal year 2024 results, navigating a challenging economic landscape with a net loss of $4.62 million despite consistent revenue.

Summary

• Kelso Technologies Inc. reported a net loss of $4.62 million for the year ended December 31, 2024, compared to a net loss of $2.10 million in 2023.
• Revenue remained relatively stable at $10.68 million in 2024, slightly below the $10.82 million reported in 2023.
• The company experienced increased expenses, primarily due to a one-time KXI project impairment of $1.17 million and higher legal costs of $621,364 related to NYSE delisting.
• Gross profit margin improved to 44% in 2024 from 42% in 2023, with a gross profit of $4.69 million.
• Adjusted EBITDA loss was $1.25 million in 2024, compared to $0.85 million in 2023.
• Working capital decreased to $2.13 million as of December 31, 2024, from $5.03 million in the previous year.
• The company is focusing on obtaining AAR approval for its K2AV product to improve sales and complete its pressure car kit.
• Kelso is exploring strategic alternatives for its KXI project, including potential joint ventures and assessing the value of its core technology.
• The company's production facility is located in Bonham, Texas, and it sources raw materials and components domestically.
• Kelso is monitoring potential tariff actions that could impact the broader rail industry.

Sentiment

Score: 4

Explanation: The document presents a mixed sentiment. While revenue remained relatively stable and gross profit margin improved, the significant increase in net loss and decrease in working capital indicate challenges. The company's strategic focus on AAR approval and exploration of alternatives for the KXI project suggest efforts to improve future performance, but the overall outlook is cautious.

Positives

• Gross profit margin improved to 44% in 2024 from 42% in 2023.
• The company is focused on obtaining AAR approval for its K2AV product to improve sales and complete its pressure car kit.
• Kelso is exploring strategic alternatives for its KXI project, including potential joint ventures and assessing the value of its core technology.
• The company's production facility is located in Bonham, Texas, and it sources raw materials and components domestically, mitigating certain tariff-related risks.

Negatives

• Kelso Technologies Inc. reported a net loss of $4.62 million for fiscal year 2024, a significant increase from the $2.10 million loss in 2023.
• Working capital decreased to $2.13 million as of December 31, 2024, from $5.03 million in the previous year.
• A one-time KXI project impairment of $1.17 million and higher legal costs of $621,364 related to NYSE delisting contributed to increased expenses.

Risks

• The tank car industry is historically cyclical, and the company's financial performance is affected by macroeconomic factors beyond its control.
• Potential tariff actions undertaken by the Trump administration could increase the cost of imported materials and components.
• The company's success depends on obtaining AAR approval for new products, which is a lengthy and rigorous process.
• The company is dependent on a small number of OEM customers, and the loss of any of these customers could have a material negative impact.
• The company may face uninsurable or underinsured risks, such as destruction of production facilities by a natural disaster or acts of war.

Future Outlook

The company anticipates that capital resources generated from rail operations will sustain its capacity to continue business activities for the foreseeable future and is focused on obtaining AAR approval for its K2AV product to improve sales and complete its pressure car kit.

Industry Context

The tank car industry is historically cyclical, and the company's financial performance is affected by macroeconomic factors beyond its control. The broader rail industry faces significant risk from potential tariff actions.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or comparable companies.
• It mentions that Kelso's margins remain well above industry averages due to production effectiveness and per-order based pricing models.
• The document references industry analysts' projections for new tank car demand and re-qualifications, but does not compare Kelso's performance against specific competitors.

Management Changes

Legal Proceedings

• A Notice of Claim was served by Mr. Rick Lee with the Superior Court of British Columbia, alleging wrongful termination, which the Company disputes.

Related Party Transactions

• Management fees for the Company were $743,846 for Fiscal 2024.
• Share-based expenses for Fiscal 2024 were $137,240.
• RSU payments for Fiscal 2024 were $15,719.
• Director's fees were $127,625 for Fiscal 2024.
• The Company paid consulting fees of $30,000 to a consulting company owned by the spouse of the previous Chief Executive Officer.

Stakeholder Impact

• Shareholders may be concerned about the increased net loss and decreased working capital.
• Employees may be affected by the reorganization and reevaluation of the company's direction.
• Customers may be impacted by the company's focus on diversifying and growing revenues in new market segments.
• Suppliers may be affected by potential tariff actions and disruptions in supply chains.

Next Steps

• Obtain AAR approval for the K2AV product.
• Complete the pressure car kit.
• Explore strategic alternatives for the KXI project, including potential joint ventures and assessing the value of its core technology.
• Continue efforts to strengthen the portfolio of tank car products with active field service trials in progress.
• Focus on diversifying and growing revenues in new market segments.

Key Dates

Keywords

Kelso Technologies, financial results, tank car industry, AAR approval, K2AV, KXI project, impairment, revenue, net loss, working capital, tariffs, rail equipment, financials