TSO3 INC. QUEBEC CITY, May 10, 2017 /PRNewswire/ - TSO(3) 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 TSO(3) 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- Q1 Q2 Q3 Q4 Adjust- Q4
ment(1) ment(1)
------ ------
$000's Non- Non-
IFRS IFRS
IFRS IFRS IFRS IFRS 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, December 31,
2017 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
TSO(3) 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. TSO(3) 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 TSO(3)
Founded in 1998, TSO(3)'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. TSO(3 )also offers services related to the maintenance of sterilization equipment and compatibility testing of medical devices with such processes.
For more information about TSO(3), visit the Company's website at www.tso3.com
The statements in this release and oral statements made by representatives of TSO(3) relating to matters that are not historical facts (including, without limitation, those regarding the timing or outcome of TSO(3)'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 TSO(3)( )to obtain financing on favourable terms and other risks and uncertainties. Although TSO(3) 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 TSO(3)'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 TSO(3) 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.
