Mr. Frank Busch reports

KELSO TECHNOLOGIES INC. 2025 OUTLOOK AND STRATEGIC INITIATIVES

Kelso Technologies Inc.'s board of directors has approved the budget for fiscal year 2025. The company anticipates sales growth to be flat to slightly positive, in the range of 0 per cent to 5 per cent, compared with fiscal year 2024. For fiscal 2024, the company expects to report revenue of $10.7-million. A key focus for fiscal 2025 will be maintaining cost discipline as the company prepares for the anticipated upswing in new tank car builds expected to begin starting 2026. This strategic approach will position the company to capitalize on the increased demand and maximize profitability.

"We are pleased to have reached a consensus on a budget that supports our strategic objectives for 2025," said Paul Cass, lead independent director. "While we anticipate modest sales growth, we are confident in our ability to navigate the current economic environment, maintain cost discipline and deliver value to our shareholders, particularly as we look ahead to the increased tank car build cycle."

As of early 2025, Kelso is emerging from a challenging financial landscape, influenced by market dynamics and strategic initiatives in 2024. The new management team has focused on improving operational efficiency and reducing overhead costs, and anticipates a positive impact on profitability for 2025. For fiscal 2024, the company intends to optimize its balance sheet by reassessing inventory levels and the carrying value of KXI. Consequently, Kelso anticipates a significant loss in fiscal 2024 due to one-time expenses and write-offs.

Strategic initiatives

Kelso is actively pursuing full Association of American Railroads approval for its bottom outlet valve and angle valve, both of which are well into their required service trial periods. This approval is expected to open new revenue streams, especially given the higher unit value of pressure car packages.

"Two thousand twenty-five will be a rebuilding year for Kelso," said Frank Busch, chief executive officer. "We have, and continue to hear, our shareholders' concerns and are acting upon fundamental business principles of increasing top-line revenue and reducing expenditures to maximize EBITDA."

Additionally, the company is undergoing a strategic reorganization to enhance financial stability without compromising production capabilities. This includes a comprehensive review of the KXI HD product line to unlock shareholder value.

Market outlook

"The outlook for tank car deliveries has improved slightly from recent history," said Amanda Smith, executive vice-president of operations. "After averaging just over 8,700 cars per year from 2021 to 2023, actual tank car deliveries for 2024 reached just over 10,000 cars, and FTR projects a slight improvement to 10,325 in 2025. This level of production represents a 15.8-per-cent increase over the 2021-2023 average and an opportunity for improved results."

Industry projections for 2026 and beyond show a positive trend, with anticipated growth to 13,000 units in 2027. Kelso's strategic focus on obtaining AAR approvals aligns with this projected market upturn, positioning the company to capitalize on future demand increases.

Liquidity and capital resources

Management's cost-cutting initiatives have yielded positive results, enabling the company to meet its vendor obligations promptly. In addition, Kelso has established a Texas Capital Bank line of credit with $250,000 available, further bolstering liquidity.

Conclusion

Kelso Technologies is striving for a profitable fiscal 2025. Despite current market headwinds, the company's strategic initiatives, including the pursuit of AAR approvals and financial restructuring, are designed to enhance performance in the coming years. The anticipated market recovery post-2025 provides a favourable backdrop for these efforts.

About Kelso Technologies Inc.

Kelso is a diverse transportation equipment company that specializes in the creation, production, sales and distribution of proprietary products used in rail and automotive transportation. The company's rail equipment business has been developed as a designer and reliable domestic supplier of unique high-quality rail tank car valves that provide for the safe handling and containment of commodities during rail transport. The automotive division of the company has created the first proven automated suspension-based advanced driver assistance system for commercial mission-critical wilderness operations. All Kelso products are specifically designed to address the challenging issues of public safety, worker well-being and potential environmental harm while providing effective and efficient operational advantages to customers. Kelso's innovation objectives are to create products that diminish the potentially dangerous effects of human and technology error through the use of the company's portfolio of proprietary products.

For a more complete business and financial profile of the company, please view the company's website and public documents posted under the company's profile on SEDAR+ in Canada and on EDGAR in the United States.

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