Core Points - Kelso Technologies Inc. announces the retirement of Lead Director Paul Cass effective August 31, 2025, with Independent Director Jesse Crews taking over the role from September 1, 2025 [1][4] - Sameer Uplenchwar, the CFO, has been appointed to the newly vacant seat on the Board of Directors [1][4] - Paul Cass has served on the board for approximately ten years, holding various positions including Chair of the Audit Committee and Lead Director, contributing significantly to the company [2][3] - Jesse Crews, the new Lead Director, has extensive experience in the rail industry and has been an Independent Director since 2018 [3][4] Company Overview - Kelso Technologies is a diverse transportation equipment company specializing in the creation, production, sales, and distribution of proprietary products for rail and other transportation sectors [5] - The company focuses on high-quality tank car valves designed for safe handling and containment of commodities during rail transport, addressing public safety and environmental concerns [5]

Core Insights - Kelso Technologies Inc. reported its second consecutive profitable quarter with a net income of $72,175 for Q2-2025, despite a revenue decline of 8.6% year-over-year due to macroeconomic challenges [5][12][14] - The company anticipates flat to slightly positive sales growth of 0% to 5% for FY2025 compared to FY2024, while maintaining disciplined cost management to prepare for future demand increases [5][14][16] - Kelso is actively seeking full approval from the Association of American Railroads (AAR) for its new products, which is expected to create new revenue opportunities [15][17] Financial Performance Summary - For the three months ended June 30, 2025, revenues were $2,643,208, down from $2,891,591 in the same period of 2024, with a gross profit of $1,075,446 and a gross profit margin of 41% [4][5] - In the first half of 2025, total revenues reached $5,801,283, slightly up from $5,544,195 in the first half of 2024, with a gross profit of $2,485,201 and a gross profit margin of 43% [4][5] - The company reduced total expenses by 30% year-over-year, amounting to $580,303, demonstrating effective cost management [5][12] Liquidity and Capital Resources - As of June 30, 2025, the company had cash of $488,273 and accounts receivable of $1,303,613, compared to cash of $153,147 and accounts receivable of $1,091,304 as of December 31, 2024 [8][9] - The working capital position improved to $2,682,405 as of June 30, 2025, up from $2,125,386 at the end of 2024 [9] - The company fully repaid $250,000 drawn from its $500,000 line of credit, now having access to the entire amount [10] Strategic Outlook - The company is preparing for a potential rebound in tank car builds, expecting lower production in 2026 but a rise to 13,000 units in 2027 [16] - Kelso's strategic focus includes maintaining operational readiness and cost management to capitalize on anticipated demand increases in the rail industry [14][16] - The company aims to enhance profitability through a wider array of new proprietary products and improved operational efficiency [17][18]

Financial Data and Key Metrics Changes - Revenues totaled $548 million, down approximately 4% on an organic basis after adjusting for FX translation and business divestitures [20] - Adjusted EBITDA was $67 million, with year-over-year comparisons affected by negative FX and divestiture impacts of $7 million [21] - Adjusted diluted loss per share was $0.18 for the quarter, excluding the impact of special items [21] Business Line Data and Key Metrics Changes - Clean Earth revenues totaled $235 million, with adjusted EBITDA reaching $38 million, reflecting a 12% increase in EBITDA and 4% revenue growth [25] - Harsco Environmental segment revenues totaled $243 million, with adjusted EBITDA of $39 million, impacted by lower volumes due to site exits and closures [23] - Rail revenues totaled $70 million, with an adjusted EBITDA loss of $2 million, in line with expectations due to lower product and service volumes [26] Market Data and Key Metrics Changes - Steel production at customer locations declined less than 1% compared to the prior year, with service volumes and earnings at these sites up slightly year over year [23] - The U.S. dollar strength has negatively impacted Harsco Environmental's revenues and EBITDA by approximately $100 million and $25 million over the past three years [13] - Recent dollar weakness is seen as a potential tailwind for Harsco Environmental, which generates roughly 80% of its revenues outside the U.S. [13] Company Strategy and Development Direction - The company aims to maintain its guidance for the full year, with organic growth driven by Clean Earth while Harsco Environmental's performance is expected to be stable [17] - The focus remains on operational excellence and productivity improvements, particularly through ongoing investments in a common IT platform [11] - The company anticipates generating annual free cash flow of $150 million on a consistent basis in future years [17] Management's Comments on Operating Environment and Future Outlook - Management acknowledges significant macroeconomic uncertainty due to ongoing global trade issues but does not expect a material direct impact from tariffs [8][19] - The outlook for Clean Earth's earnings, margins, and free cash flow is positive, outpacing other segments [11] - Management remains cautious about potential economic slowdowns but has not built these concerns into guidance [41] Other Important Information - Cash flow was ahead of expectations, supporting full-year cash flow guidance of $30 million to $50 million [7] - The company completed the rebuild of the Rail leadership team with new appointments [7] - The amendment of the ETO contract with Deutsche Bahn is seen as a key milestone, reducing future risks [48] Q&A Session Summary Question: Thoughts on steel production and the economy going forward - Management expects a bit of volume growth for Harsco Environmental, with efficiency and cost reduction programs mitigating impacts from site shutdowns [36] Question: Clean Earth's performance and volume assumptions - Management sees volume as a larger contributor to earnings growth this year, with no signs of economic slowdown yet [40] Question: Status of Rail ETO contract renegotiation - The amendment recognizes cost inflation and includes a new delivery schedule, reducing future penalty risks [46] Question: Sustainability of Clean Earth margin expansion - Management expects margins in Clean Earth to exceed previously projected levels, with ongoing efficiency improvements [50] Question: Pressure in the steel industry from excess capacity - Management notes encouraging signs in the EU market, expecting higher capacity utilization and volume growth later in the year [55][57]