TSO3 Reports Record First Quarter 2017 Results

QUEBEC CITY, May 10, 2017 /PRNewswire/ - 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.

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.

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. TSO₃ also 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.