PyroGenesis Announces Q1 2022 Results: Revenues $4.2MM; Gross Margin 25%; Current Backlog of Signed and/or Awarded Contracts $41.2MM
PyroGenesis Canada Inc. reported Q1 2022 revenues of $4.2 million, a 33% decrease from Q1 2021. Despite a large backlog exceeding $41 million and production momentum, gross margin profit fell to 25%. Notably, the company anticipates significant growth, driven by a thriving aluminum market with a project pipeline exceeding $300 million. Challenges include rising SG&A expenses, which surged by 41%, and a comprehensive loss of $4 million. The company maintains a robust cash position of $18.5 million to navigate ongoing operational challenges.
- Backlog of signed contracts over $41 million.
- Strong pipeline in aluminum business exceeding $300 million.
- Ongoing production and testing of new technologies.
- Cash and equivalents stand at $18.5 million.
- Q1 revenues fell 33% year-over-year.
- Gross margin profit dropped to 25% from 34.2% in Q1 2021.
- SG&A expenses increased by 41%.
- Comprehensive loss of $4 million compared to income of $3.7 million in Q1 2021.
MONTREAL, May 16, 2022 (GLOBE NEWSWIRE) -- PyroGenesis Canada Inc. (http://pyrogenesis.com) (TSX: PYR) (NASDAQ: PYR) (FRA: 8PY), a high-tech company (hereinafter referred to as the “Company” or “PyroGenesis”), that designs, develops, manufactures and commercializes advanced plasma processes and sustainable solutions which are geared to reduce greenhouse gases (GHG), is pleased to announce today its financial and operational results for the first quarter ended March 31st, 2022.
“We are happy to be announcing our Q1 2022 financial results. We have posted quarterly revenues of
Perhaps even more exciting, our new business development efforts have grown dramatically, with a pipeline of pitched projects within the aluminum business line alone now over several hundred million dollars.
2022 continues to build on the foundation set by the previous two years. With the successful execution and delivery of the backlog of signed contracts, the benefit of the biogas upgrading projects from Pyro Green-Gas, and exploding interest across seemingly every aspect of the aluminum industry, 2022 is scaling up to be another great year for the company.
The board and I see continued production and sales success in the months ahead; as our iron ore pelletization torches enter into on-site client install and testing, 3D powder qualification with the global aerospace company moves to the finish line, and some of our potential aluminum projects in negotiations reach a signing point, we expect the backlog to race past the
Q1 2022 results reflect the following highlights:
- Revenues of
$4,206,762 , - Gross margin profit of
$1,051,723 or25% of revenue, - Cash, cash equivalents and publicly traded shares at March 31, 2022 of
$18.5M M - Backlog of signed and/or awarded contracts of
$41.2M M - Milestone new market entry sales, including for the destruction of polyfluoroalkyl substances
OUTLOOK
With 2021 having achieved many important accomplishments and milestones, 2022 has begun by maintaining the accelerated business momentum of the previous two years.
Despite the continuing challenges of the global marketplace due to Covid, plus new challenges resulting from conflict in Ukraine, as well as energy supply shortages in Europe and China impacting both the cost and output of aluminum and steel, opportunities for PyroGenesis continue to expand across the board. Led by unprecedented awareness of the Company’s capabilities across the aluminum industry after the successful commissioning of its DROSRITETM metal recovery systems at a leading Middle Eastern primary aluminum producer; along with the discovery, pursuit, and active engagement of new market prospects both upstream and downstream from the Company’s DROSRITETM systems; and major new developments within primary, secondary (recycled) and tertiary (manufacturers’ in-house casting facilities) aluminum producers who are engaging the Company in a variety of discussions and negotiations regarding metal recovery, furnace retro-fitting, and comprehensive fuel-switching initiatives. These factors, bolstered by the quickening global push towards fossil fuel reduction at both industry and government levels that further showcases the PyroGenesis advantage, allows management to expect that tailwinds into an already strong pipeline will continue throughout 2022 and beyond.
Overall Strategy
Continuing to build on its strategy to offer technology solutions that provide benefits from greenhouse gas (“GHG”) emissions reduction,
While we had previously considered our strategy to be timely, as many governments are stimulating their respective economies by promoting and funding both environmental technologies and infrastructure projects; and after 2021 proved an even greater affirmation of this approach as major industries and organizations targeted by the Company not only recommitted to their targets, but in some cases raised them significantly, 2022 has brought about more circumstances that highlight how technology solutions like those from PyroGenesis will be in even greater demand.
In particular, the conflict in Ukraine has showed once again how geopolitical influences will continue to impact the supply of metals that are already under extraordinary market demand. As the war in the Ukraine drove supply chain issues and additional sanctions on Russia, aluminum spot-prices spiked as high as
The conflict also more fully exposed the vulnerability of aluminum producers to power availability and energy price uncertainty, as current energy supply challenges being experienced by European and Asian metal producers were exacerbated during the war.
All of these factors show that with global metal demand only growing (anticipated to grow by
These same or similar pressures are affecting the global steelmaking industry, into which the Company has already sold initial torches for final pre-order trials; the Company expects similar positive outcomes as a result of these additional pressures.
For clarity, as stated many times, most of PyroGenesis’ product lines do not depend on environmental incentives (tax credits GHG certificates, environmental subsidies, etc.) to be economically viable; with the increased commitments by industry to carbon reduction, it is anticipated that the Company’s growth drivers will expand, and shareholders will see increased value.
The Company is not immune to the negative impact that COVID-19 and other external factors brought on businesses, specifically related to the work force and, more importantly, the supply chain. However, Management believes that the Company is better situated than most, and through various mitigation measures these challenges continue to be dealt with in an effective manner. The Company expects even greater improvements as the impact of COVID-19 and other external factors continues to recede after Q2 2022.
Organic Growth
Organic growth will be spurred on by (i) the natural growth of our existing offerings, which continue to be accelerated given our strong balance sheet (ii) leveraging off our insider “Golden Ticket” advantage that because of, for example, the fact that the inline, hot dross-enabled DROSRITETM system in installed inside a customer’s facility (vs. the legacy cold-dross Rotary Salt Furnace approach that is installed off-site), this allows us to see first-hand some of the additional and peripheral needs of our customers, and (iii) exploring new ways scientifically (and corresponding markets laterally) to provide unique solutions and value that helps industries deal with some of the most pressing environmental, engineering, and energy problems.
A “Golden Ticket” provides the opportunity to either, (i) cross sell other products or, ideally, (ii) identify new areas of concern that can be addressed uniquely by PyroGenesis.
Over the past several years, PyroGenesis has successfully positioned each of its business lines for rapid growth by strategically partnering with multi-billion-dollar entities. These entities have identified PyroGenesis’ offerings to be unique, in demand, and of such a commercial nature as to warrant such unique relationships. We expect that these relationships are now positioned to transition into significant revenue streams.
Aluminum Industry Process Improvement
As mentioned in previous reports, momentum with PyroGenesis’ Aluminum Industry strategy and offering continues to not just bear fruit, but to explode in opportunity in several different directions.
In 2021, the Company concluded a joint venture and a license agreement with an existing and proven technology provider. The technology is geared to uniquely handle the residues resulting from the processing of dross in the aluminum industry. We had previously announced our intention to secure this technology and would not only make our traditional DROSRITE™ offering more appealing but could also be offered as a stand-alone product. We believe that valorizing the residues and producing high end products will further define us as the go-to company for all dross related processing. This is a prime example of our “Coffee & Donuts” strategy in play. The joint venture will only relate to the new technology and, as such, PyroGenesis will not have to vet in any assets or IP (specifically not the DROSRITE™ technology).
Overall, the Company is now one of the largest and certainly the fastest growing dross recovery solutions in the world, with 11 large DROSRITE™ systems in use or slated for delivery to markets around the world, and three more LOI’s. The Company also continues to increase the price and the efficiency of its systems, and is pitching several more contracts as of the writing of this document.
During the quarter, the Company announced on February 2, receipt of a
Steel Industry Process Improvement
With steelmaking being one of the most carbon-emission intensive industries in the world, estimated to be responsible for between 7 to 12 per cent of all global fossil fuel and greenhouse gas emissions, that industry continues to be under intense pressure, including huge financial penalties, to find emission reductions.
This pressure on the steel-making industry allows PyroGenesis to expect demand for its upstream, iron ore pelletization solution to increase significantly, as steelmakers look to all aspects of the production lifecycle for carbon reduction opportunities.
Serious consideration is being given to replacing large numbers of the fossil fuel burners in iron ore pelletization with PyroGenesis’ proprietary and patented plasma torches. To date, everything is proceeding as expected. Initial discussions with potential customers have evolved into confirmation stages, computer simulations, business case development, and initial torch orders for in-factory testing with two of the largest steelmaking and mining companies in the world. As these torches are tested in live settings over the coming months, the company expects a resulting roll-out program to replace many, if not all, fossil fuel burners with PyroGenesis’ plasma torches in the customers’ iron ore pelletization furnaces – a technology process for which PyroGenesis, as the patent holder, commands a significant competitive advantage.
During the quarter, the company announced on January 27 the scheduling of a factory acceptance test (FAT) for plasma torches for its “client A”, a multi-billion dollar international producer of iron ore. Subsequently, on February 8, the Company announced the completion of said FAT, and further announced that the torch system would be shipped to the Client’s facility, with scheduled arrival on or about the end of Q2 2022.
On February 1, the Company provided a cost estimate for 36 plasma torches to that same Client A. The estimate was accordingly provided, at an estimated value of
PyroGenesis expects that the previously mentioned government initiatives, geared to stimulating their respective economies by promoting and funding environmental technologies and infrastructure projects, will only serve to increase interest in PyroGenesis’ plasma torch offerings to other companies in this space. While potential clients seeking government support for large initiatives may draw out the onset of large contracts, the sheer number of potential customers, and the fact that the Company will engage with many of them in different stages at different times, will help to ensure a long, overlapping pipeline of potential projects.
In addition, PyroGenesis is proactively targeting other industries which are experiencing significant pressure to reduce GHGs, and which utilize fossil fuel burners as well, such as the cement, aluminum, and automotive industries.
Plasma Torches for Emerging / Niche Markets
Separately, the Company also offers plasma torches to emerging / niche markets where there is a high probability of on-going sales from successful implementation.
One such example is when, during the quarter, on February 7, the Company announced that it had signed a
For each new market, the Company will also benefit from providing proprietary spare parts and service, which generates significant recurring revenue, thus complementing the Company’s long-term strategy to build a recurring revenue model.
Additive Manufacturing (Metal Powders for 3D Printing)
With respect to additive manufacturing, we continue to expect to see significant year over year improvements in our 3D metal powders offering as our NexGen™ facility, which incorporates all the previously disclosed benefits (increased production rates and lower capital & operating expenditures), is now officially on-line and operational.
Of note, a major tier-one global aerospace company has already entered into an agreement with the Company to formally qualify its powder, at considerable expense to the global aerospace company, with a view towards having the Company become a supplier.
There are additional major top tier aerospace companies and OEMs, in both Europe and North America, eagerly awaiting powders from this new state-of-the-art production line, and we are currently in the process of supplying sample powders to them for analysis.
The Company expects that such developments will continue and will translate into significant improvements in contributions to revenue by this segment in the mid-long term.
HPQ/PUREVAP™
With respect to HPQ, the goal is to continue to expand our role as HPQ’s technology provider for the game changing family of silicon processes which we are developing exclusively for HPQ and its wholly owned subsidiaries HPQ Nano Silicon Powders Inc. and HPQ Silica Polvere Inc., namely:
- The PUREVAP™ “Quartz Reduction Reactors” (QRR), an innovative process (patent pending), which should permit the one step transformation of lower purity quartz (SiO2) than any traditional processes can handle into a silicon (Si) of a higher purity level (2N-4N) that can be produced by any traditional smelter, at reduced costs, energy input, and carbon footprint. The unique capabilities of this process could position HPQ as a leading provider of the specialised silicon material needed to propagate its considerable renewable energy potential; and
- The PUREVAP™ Nano Silicon Reactor (NSiR), which, if successful, could position itself as a new proprietary low-cost process that can transform the silicon (Si) made by the PUREVAP™ QRR into the nano-silicon materials (spherical silicon powders and silicon nanowires) sought after by energy storage, batteries, electric vehicle manufactures and clean hydrogen sectors participants. The aim of the ongoing work is to position HPQ NANO as the first to market with a commercial scale low-cost nanoparticle production system.
- A new plasma-based process that could convert Silica (Quartz, SiO2) into fumed silica (Pyrogenic Silica) in one step. This new process could be a low-cost and environmentally friendly option that combines HPQ Silicon High Purity Quartz initiatives with PyroGenesis’ industry leading know-how in the development of commercial plasma processes. It is envisioned that the process will eliminate harmful chemicals presently generated by traditional methods. This new process could revolutionize the manufacturing of fumed silica, while repatriating production back to North America.
Government participation in a
Land Based Units/Environmental
The Company did not previously aggressively target the Company’s land-based/environmental solutions during the period where the Company’s other offerings, such as in steelmaking and aluminum industry process improvement, were accelerating.
However, during 2021, interest in the Company’s capabilities in this arena was renewed. Besides the interest in niche torch applications mentioned above (ex. medical waste), PyroGenesis’ plasma-based solutions have generated interest in processing a waste stream that has recently been classified as hazardous. Management believes that, in a current bidding process, its solution is the technology of choice. If successful, this will represent a significant positioning of PyroGenesis plasma-based solutions not only for this specific product line but, when taken in conjunction with the historic success with its offering on US Aircraft carriers, the land based/environmental segment in general.
Growth through Synergistic Mergers and Acquisitions
As previously disclosed, the Company is conservatively considering synergistic merger and acquisition strategies to augment its growth, and the Company has been very actively involved in pursuing several opportunities to support this strategy. In so doing, the focus has been on private companies exclusively which (i) primarily leverage the Company’s Golden Ticket advantage, or (ii) could uniquely benefit from the Company’s engineering advantage and/or international relationships.
During 2021, the Company acquired AirScience Technologies Inc. (“AST”), a company with experience in biogas upgrading. PyroGenesis believes that AST’s experience in biogas upgrading, combined with PyroGenesis’ engineering and multidisciplinary skills, as well as its proven record of meeting the exacting demands of multibillion-dollar companies and the US military, positions the combination well to address the opportunities arising from this growing need to generate renewable natural gas.
The acquisition of AST also provides potential synergies with PyroGenesis’ land-based waste destruction offerings which, if successful, will significantly increase their value to the market. AST’s technology complements PyroGenesis’ existing offerings and further strengthens PyroGenesis’ position as an emerging leader in GHG solutions for sustainable long-term growth.
Our objective is to strengthen AST’s operations and quality control systems, over the course of the next 12-15 months, while at the same time increasing the backlog of signed contracts and successfully delivering on existing contracts thus positioning AST as a significant and credible player in the marketplace. Once established, we will evaluate our options to accelerate the rollout of these solutions.
Additional Opportunities - Plasma Torches:
Within the Plasma Torch line of business, the Company continues to consider options to leverage its plasma expertise and continue to review torch technologies that could complement existing offerings, leverage off their unique relationships, or explore new opportunities. In early stage discussion across many sectors and many potential customers, no additional details are available at this time.
CONCLUSION
In conclusion, PyroGenesis sees 2022 as a platform from which decades of exponential growth will stem.
The Company plans to take advantage of its unique position in its main business offerings to accelerate growth, with a particular emphasis on offerings geared to aggressively reducing GHG emissions and the world’s carbon footprint, while finding and offering solutions to pressing environmental, engineering, and energy challenges.
Financial Summary
Revenues
PyroGenesis recorded revenue of
Revenues recorded in the first quarter of 2022 were generated from:
(i) | DROSRITE™ related sales of |
(ii) | PUREVAP™ related sales of |
(iii) | torch related sales of |
(iv) | development and support related to systems supplied to the U.S. Navy of |
(v) | Biogas upgrading and pollution controls of |
(vi) | other sales and services of |
Cost of Sales and Services and Gross Margins
Cost of sales and services before amortization of intangible assets was
In Q1 2022, employee compensation, subcontracting, and foreign exchange charge on materials increased to
Investment tax credits related to qualifying projects from the provincial government were
The amortization of intangible assets of
Selling, General and Administrative Expenses
Included within Selling, General and Administrative expenses (“SG&A”) are costs associated with corporate administration, business development, project proposals, operations administration, investor relations and employee training.
SG&A expenses for Q1 2022 excluding the costs associated with share-based compensation (a non-cash item in which options vest principally over a four-year period), were
The increase in SG&A expenses in Q1 2022 over the same period in 2021 is mainly attributable to the net effect of:
(i) | an increase of |
(ii) | a decrease of |
(iii) | an increase of |
(iv) | travel costs increased by |
(v) | depreciation on property and equipment increased by |
(vi) | depreciation on right of use assets increased by |
(vii) | Investment tax credits were the same year to year, |
(viii) | government grants increased by |
(ix) | other expenses increased by |
Separately, share based payments increased by
Research and Development (“R&D”) Costs
The Company incurred
In addition to internally funded R&D projects, the Company also incurred R&D expenditures during the execution of client funded projects. These expenses are eligible for Scientific Research and experimental Development (“SR&ED”) tax credits. SR&ED tax credits on client funded projects are applied against cost of sales and services (see “Cost of Sales” above).
Financial Expenses
Finance expenses for Q1 2022 totaled
Strategic Investments
The adjustment to fair market value of strategic investments for Q1 2022 resulted in a gain of
Comprehensive (Loss) Income
The comprehensive loss for Q1 2022 of
(i) | a decrease in product and service-related revenue of |
(ii) | a decrease in cost of sales and services of |
(iii) | an increase in SG&A expenses of |
(iv) | an increase in R&D expenses of |
(v) | an increase in financial expenses of |
(vi) | a decrease in fair value adjustment of strategic investments of |
EBITDA
The EBITDA in Q1 2022 was a
Adjusted EBITDA loss in Q1 2022 was
The Modified EBITDA loss in Q1 2022 was
Liquidity
As at March 31,2022, the Company has cash and cash equivalents of
About PyroGenesis Canada Inc.
PyroGenesis Canada Inc., a high-tech company, is a leader in the design, development, manufacture and commercialization of advanced plasma processes and sustainable solutions which reduce greenhouse gases (GHG), and are economically attractive alternatives to conventional “dirty” processes. PyroGenesis has created proprietary, patented and advanced plasma technologies that are being vetted and adopted by multiple multibillion dollar industry leaders in four massive markets: iron ore pelletization, aluminum, waste management, and additive manufacturing. With a team of experienced engineers, scientists and technicians working out of its Montreal office, and its 3,800 m2 and 2,940 m2 manufacturing facilities, PyroGenesis maintains its competitive advantage by remaining at the forefront of technology development and commercialization. The operations are ISO 9001:2015 and AS9100D certified, having been ISO certified since 1997. For more information, please visit: www.pyrogenesis.com.
This press release contains certain forward-looking statements, including, without limitation, statements containing the words "may", "plan", "will", "estimate", "continue", "anticipate", "intend", "expect", "in the process" and other similar expressions which constitute "forward- looking information" within the meaning of applicable securities laws. Forward-looking statements reflect the Corporation's current expectation and assumptions and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. These forward-looking statements involve risks and uncertainties including, but not limited to, our expectations regarding the acceptance of our products by the market, our strategy to develop new products and enhance the capabilities of existing products, our strategy with respect to research and development, the impact of competitive products and pricing, new product development, and uncertainties related to the regulatory approval process. Such statements reflect the current views of the Corporation with respect to future events and are subject to certain risks and uncertainties and other risks detailed from time-to-time in the Corporation's ongoing filings with the securities regulatory authorities, which filings can be found at www.sedar.com, or at www.sec.gov. Actual results, events, and performance may differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements. The Corporation undertakes no obligation to publicly update or revise any forward- looking statements either as a result of new information, future events or otherwise, except as required by applicable securities laws. Neither the Toronto Stock Exchange, its Regulation Services Provider (as that term is defined in the policies of the Toronto Stock Exchange) nor the NASDAQ Stock Market, LLC accepts responsibility for the adequacy or accuracy of this press release.
SOURCE PyroGenesis Canada Inc.
For further information please contact:
Rodayna Kafal, Vice President, IR/Comms. and Strategic BD
Phone: (514) 937-0002, E-mail: ir@pyrogenesis.com
RELATED LINK: http://www.pyrogenesis.com/
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