TSO3 Reports Record First Quarter 2017 Results

QUEBEC CITY, May 10, 2017 /CNW Telbec/ - TSO3 Inc. (TSX: TOS), an innovator in sterilization technology for medical devices in healthcare settings, reported financial results for its first fiscal quarter 2017 ended March 31, 2017. 

First Quarter 2017 Financial Summary

  • Revenue increased to a record $4.2 million, a 13.5% sequential increase over the $3.7 million recorded in the fourth quarter of 2016 and a 35% increase over the $3.1 million recorded in the first quarter of 2016. The Company shipped 36 STERIZONE® VP4 Sterilizers, along with associated accessories and consumables, to Getinge Infection Control, its exclusive global distributor, in the first quarter of 2017.
  • Gross profit on an IFRS basis was $1.6 million, or 37% of revenue, which compares non-IFRS gross profit of $1.3 million, or 36% of revenue, in the fourth quarter of 2016 and an IFRS gross profit of $1.1 million, or 36% of revenue in the first quarter of 2016. The Company experienced improvements in sterilizer production costs, and sales growth of higher-gross margin consumables in the first quarter of 2017 relative to prior periods. IFRS gross profit in the fourth quarter of 2016 was $1.0 million and includes a one-time write-off of $0.3 million for obsolete raw materials inventory.
  • Research and Development (R&D) expense grew to $1.4 million, as compared to $1.3 million in the fourth quarter of 2016 and $0.6 million in the year-ago quarter.
  • Sales, General and Administrative (SG&A) expense was $2.2 million, which compares to $1.8 million in the fourth quarter of 2016 and $1.4 million in the first quarter of 2016. $0.3 million of the increase from Q4 2016 to Q1 2017 related to additional non-cash stock compensation expense.
  • The Company's IFRS net loss was $(2.0) million or $(0.02) per share in the first quarter of 2017 and compares to non-IFRS net losses of $(1.8) million or $(0.02) per share in the fourth quarter of 2016 and $(0.9) million, or $(0.01) per share, in the first quarter of 2016. On an IFRS basis, the Company reported a net loss of $(2.1) million or $(0.02) per share in the fourth quarter of 2016 and a net profit of $0.6 million, or $0.01 per share, in the first quarter of 2016.
  • The Company had $19.6 million in cash, cash equivalents and investments and no debt as at March 31, 2017, as compared to $19.3 million and no debt at the end of 2016.

Management Commentary

"We are pleased with our first quarter 2017 results as we continue to expand our business in North America and EMEA," said TSO3 President and CEO, R.M. (Ric) Rumble. "We continue to see solid progress with manufacturing, sales, installations and end customer utilization of our industry leading technology into hospitals. We continue to support Getinge in North America, Europe and other international markets, including leveraging the traction we are gaining within the flexible endoscope reprocessing area of healthcare facilities. This includes implementing complete transitions away from traditional high level disinfection practices in favour of our low-temperature terminal sterilization solution in cleared markets and preparation to pursue expanded regulatory claims for duodenoscopes in the United States."

Supplemental Non-IFRS Financial Measures

In addition to IFRS financial measures, management uses non-IFRS financial measures to assess the Company's operational performance. It is likely that the non-IFRS financial measures used by the Company will not be comparable to similar measures reported by other issuers or those used by financial analysts as their measures may have different definitions. The measures used by the Company are intended to provide additional information and should not be considered in isolation or as a substitute for IFRS financial performance measures.

Generally, a non-IFRS financial measure is a numerical measure of an entity's historical or future financial performance, financial position or cash flows that is neither calculated nor recognized under IFRS. Management believes that such non-IFRS financial measures are important as they provide users of the financial statements with a better understanding of the results of the Company's recurring operations and their related trends, while increasing transparency and clarity into its operating results. Management also believes these measures can be useful in assessing the Company's capacity to discharge its financial obligations.

In 2016, management began assessing its operational performance using supplemental non-IFRS statement of income which removes typically one-time unusual items that do not reflect the recurring and ongoing operational results and trends. The results of the associated adjustments in 2016 included the removal of a one-time expense associated with a commitment to purchase of raw materials made in the year but made obsolete by adjustments and improvements in installation alternatives in response to feedback from end customers, and a one-time foreign exchange gain recorded in the first quarter of 2016, which resulted in the calculation of adjusted gross profit, adjusted EBITDA and adjusted net income.

 



2017

2016


Q1

Q1

Adjust-
ment(1)

Q1

Q2

Q3

Q4

Adjust-
ment(1)

Q4

$000's

 

IFRS

 

IFRS

Non-
IFRS

 

IFRS

 

IFRS

 

IFRS

Non-
IFRS

Revenues

4,211

3,071

-

3,071

2,977

3,507

3,746

-

3,746

Cost of Goods Sold

2,641

1,961

-

1,961

2,143

2,368

2,716

(312)

2,404

Gross Profit

1,570

1,110

-

1,110

834

1,139

1,030

(312)

1,341

Gross Margin

37%

36%

-

36%

28%

32%

28%

(8%)

36%











R&D

1,353

606

-

606

803

806

1,297

-

1,297

SGA

2,209

1,385

-

1,385

1,529

1,841

1,774

-

1,774

Financial

(39)

(1,588)

1,578

(10)

-

(50)

(21)

-

(21)

Net Income (loss) before tax

(1,953)

707

(1,578)

(871)

(1,499)

(1,458)

(2,020)

(312)

(1,708)

Tax

27

58

-

58

(12)

15

48

-

48

Net Income (loss)

(1,980)

649

(1,578)

(929)

(1,487)

(1,473)

(2,068)

(312)

(1,756)

Net Income (loss) per share

(0.02)

0.01

(0.02)

(0.01)

(0.02)

(0.02)

(0.02)

0.00

(0.02)

Adjusted Ebitda

(1,176)

1,000

(1,578)

(578)

(1,128)

(977)

(1,614)

(312)

(1,302)

 (1) Refer to the Non-IFRS financial measures.

 

Non-IFRS cost of goods sold, non-IFRS gross profit and non-IFRS gross margin in 2016 were impacted in Q4-2016 by a one-time write-off of inventory of $0.3 million associated with a commitment to purchase of raw materials made in the year, but made obsolete by improvements in installation alternatives in response to feedback from end customers.

Non-IFRS financial income in Q1-2016 was impacted by the one-time foreign exchange gain realized of $1.6 million following the change in functional currency from Canadian dollars to US dollars.

Adjusted EBITDA, is adjusted Earnings before Interest, Taxes, Depreciation, and Amortization (Adjusted EBITDA). Adjusted EBITDA adjusts net income for (1) significant realized and unrealized foreign exchange gains or losses, (2) amortization and depreciation expenses (3) share-based compensation expense, (4) amortization or write-downs of certain tangible and intangible assets, (5) one-time write-off of inventory, (6) income taxes, and (7) other significant unusual items.

  

Summary of Results

Periods ended March 31 (Unaudited, IFRS Basis, in thousands of US dollars, except per share amounts)




First Quarter


2017

$

2016

$

Revenues

4,211

3,071

Cost of sales

2,641

1,961


1,570

1,110

Expenses




Research and development

1,353

606


Selling, general and administrative

2,209

1,385


Financial expenses (income)

(39)

(1,588)

Total Expenses

3,523

403

Net income (loss) before income taxes

(1,953)

707

Income taxes

27

58

Net income (loss) and total comprehensive income (loss)

(1,980)

649

Basic and diluted net income (loss) per share (in $)

(0.02)

0.01

Basic and diluted net comprehensive income (loss) per share (in $)

(0.02)

0.01

 

Consolidated Statements of Financial Position

(Unaudited, IFRS Basis, in thousands of US dollars)





March 31,

2017

$

December 31,

2016

$

Current Assets




Cash and Cash Equivalents

5,086

2,698


Short-term Investments

14,504

15,064


Accounts Receivable

507

2,318


Inventories

2,075

1,703


Prepaid Expenses

190

102


22,362

21,885

Non-current Assets




Long-term Investments

-

1,498


Property, Plant and Equipment

2,427

2,357


Intangible Assets

1,920

1,836


4,347

5,691


26,709

27,576

Current Liabilities




Accounts Payable and Accrued Liabilities

2,748

2,272


Warranty Provision

728

575


Deferred Revenues

1,083

1,004


4,559

3,851

Non-current Liabilities




Deferred Income Tax Liabilities

136

109


Deferred Revenues

5,651

5,945


10,346

9,905

Equity




Share Capital

110,515

110,406


Reserve – Share-based Compensation

5,272

4,709


Deficit

(97,712)

(95,732)


Accumulated Other Comprehensive Loss

(1,712)

(1,712)


16,363

17,671


26,709

27,576

 

Consolidated Statements of Cash Flows

As of March 31, 2017 and 2016 (Unaudited, IFRS Basis, in thousands of US dollars)




First Quarter


2017 $

2016 $

Cash flows from operating activities



Net income (loss)

(1,980)

649

Adjustments for:




Depreciation and amortization

168

77


Deferred income tax liabilities

27

-


Share-based compensation

609

216


Investment income

(75)

(38)


(1,251)

904


Changes in non-cash operating working capital items

1,765

(1,656)


Interest received

41

29

Cash flows generated by (used in) operating activities

555

(723)

Cash flows from investing activities




Acquisition of investments

(1,412)

(2,000)


Disposal of short-term investments

3,504

2,466


Acquisition of property, plant and equipment

(193)

(102)


Acquisition of intangible assets

(129)

(55)

Cash flows generated by investing activities

1,770

309

Cash flows from financing activities




Options exercised

63

-


Warrants exercised

-

10,145

Cash flows generated by financing activities

63

10,145

Increase in cash and cash equivalents

2,388

9,731

Cash and cash equivalents at the beginning

2,698

12,654

Cash and cash equivalents at the end

5,086

22,385

Investments at the end

14,504

2,000

Total cash, cash equivalents and investments at the end

19,590

24,385

 

Annual General Meeting of Shareholders

TSO3 will also hold its Annual Meeting of shareholders at 10:30 a.m. (EDT) today. The meeting will be held at the McCord Museum in Montreal. TSO3 President and CEO, R.M. (Ric) Rumble and CFO, Glen Kayll will host the meeting, where management will also discuss its first quarter 2017 financial results and provide an operational update, followed by a question and answer period.

The meeting will be webcast live and available for replay at http://event.on24.com/r.htm?e=1383427&s=1&k=26BB6E3FB663B27C9D25F93D0DBD1D4C  and via the Investors section of the Company's website at www.tso3.com.

About TSO3

Founded in 1998, TSO3's activities encompass the sale, production, maintenance, research, development and licensing of sterilization processes, related consumable supplies and accessories for heat-sensitive medical devices. The Company designs products for sterile processing areas in the hospital environment that offer an advantageous replacement solution to other low temperature sterilization processes currently used in hospitals. TSOalso offers services related to the maintenance of sterilization equipment and compatibility testing of medical devices with such processes.

For more information about TSO3, visit the Company's website at www.tso3.com         

The statements in this release and oral statements made by representatives of TSO3 relating to matters that are not historical facts (including, without limitation, those regarding the timing or outcome of TSO3's sales, business or operations) are forward-looking statements that involve certain risks, uncertainties and hypotheses, including, but not limited to, the ability of the Company to obtain the required regulatory clearance to market its products on a worldwide basis; general business and economic conditions, the condition of the financial markets, the ability of TSO3 to obtain financing on favourable terms and other risks and uncertainties. Although TSO3 believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. The complete versions of the cautionary note regarding forward-looking statements as well as a description of the relevant assumptions and risk factors likely to affect TSO3's actual or projected results are included in the Management's Discussion and Analysis for the year ended December 31, 2016, which is available on the Company's website. The forward-looking statements contained in this press release are made as of the date hereof and TSO3 does not assume any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise unless expressly required by applicable securities laws.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful.

 

 

SOURCE TSO3 Inc.

For further information: Company Contacts: TSO3 Inc., R.M. (Ric) Rumble, President and CEO, Tel: 418 651-0003, Email: info@tso3.com; TSO3 Inc., Glen Kayll, CFO, Tel: 418 651-0003, Email: info@tso3.com; Investor Relations: Capital Market Access LLC, Ron Both, Tel: 949 432-7566, Email: rb@cma.bz; Renmark Financial Communications Inc., Barry Mire, Tel: 416 644-2020 or 514 939-3989, Email: bmire@renmarkfinancial.com

RELATED LINKS
http://www.tso3.com

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