PyroGenesis Announces Q2 2021 Results Revenues $8.3MM; Gross Margin 59.6%; Current Backlog $32.1MM
PyroGenesis Canada Inc. (NASDAQ: PYR) reported significant growth in Q2 2021, achieving record revenues of $8.3 million, up 289% from the previous year, and net income of $850,000, a 329% increase. The gross margin remained strong at 59.6%, and the company has a contract backlog of $32.1 million. Despite challenges from COVID-19 and increased expenses, management anticipates ongoing growth driven by their innovative technologies in greenhouse gas reduction and strategic partnerships. Cash reserves stand at $18.1 million, supporting further expansion efforts.
- Record revenues of $8.3 million, up 289% YoY.
- Net income from operations reached $850,859, a 329% increase.
- Gross margin of 59.6%, maintaining strong profitability.
- Backlog of signed contracts at $32.1 million, indicating future revenue streams.
- Cash and cash equivalents of $18.1 million, ensuring operational liquidity.
- Total comprehensive loss of $20.4 million, a decrease of 489% YoY.
- Significant loss of $17.9 million from strategic investments, impacting overall financials.
- Increase in SG&A expenses by 105%, indicating rising operational costs.
- Continued impacts from COVID-19 expected to affect supply chains until Q2 2022.
MONTREAL, Aug. 16, 2021 (GLOBE NEWSWIRE) -- PyroGenesis Canada Inc. (http://pyrogenesis.com) (NASDAQ: PYR) (TSX: 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 to reduce greenhouse gases (GHG), is pleased to announce today its financial and operational results for the second quarter ended June 30th, 2021.
“We are happy to be announcing financial results for Q2 2021 and, once again, they are historical. As can be seen from the table below, net income from operations (not including share-based expenses) was profitable at
Three months ended June 30, | % Change | Six months ended June 30, | % Change | |||||||||||
2021 | 2020 | 2021vs2020 | 2021 | 2020 | 2021vs2020 | |||||||||
Revenues | $ | 8,280,572 | $ | 2,128,454 | $ | 14,545,075 | $ | 2,847,362 | ||||||
Cost of sales and services | 3,347,091 | 861,862 | 7,468,584 | 1,313,356 | ||||||||||
Gross margin | 4,933,481 | 1,266,592 | 7,076,491 | 1,534,006 | ||||||||||
Expenses | ||||||||||||||
Selling, general and administrative (not including share-based expenses) | 3,371,888 | 1,641,336 | 6,174,984 | 2,847,061 | ||||||||||
Research and development | 710,734 | (3,867 | ) | 18, | 997,041 | 19,221 | 5, | |||||||
Total expenses (not including share-based expenses) | 4,082,622 | 1,637,469 | 7,172,025 | 2,866,282 | ||||||||||
Net income from operations (not including share-based expenses) | 850,859 | (370,879 | ) | (95,534 | ) | (1,332,278 | ) | - | ||||||
Q2 2021 results reflect the following highlights:
- Revenues of
$8,280,572 , an increase of289% from$2,128,454 in Q2 2020, - Gross margin profit of
$4,933,481 an increase of290% from$1,266,592 in Q2 2020, - Net income from operations (not including share-based expenses) of
$850,859 , an increase of329% as compared to Q2 2020, - Modified EBITDA gain of
$1,090,915 compared to a loss of$265,804 in Q2 2020, - Cash and cash equivalents at June 30, 2021 of
$18,076,539 (December 31, 2020:$18,104,899) , - Backlog of signed contracts, at August 16, 2021, of
$32.1M M,
OUTLOOK
PyroGenesis continues to be well positioned, with a clean balance sheet, to execute on all its organic growth strategies as well as to continue actively pursuing growth through synergistic mergers & acquisitions.
The Company has recently focused its offerings to highlight their greenhouse gases (“GHG”) emissions reduction benefits. Most of PyroGenesis’ product lines do not depend on environmental incentives (tax credits GHG certificates, environmental subsidies, etc.) to be economically viable.
We consider this strategy to be timely as many governments are stimulating their respective economies by promoting and funding both environmental technologies and infrastructure projects. As such, although management expects that this will be a tailwind into an already strong pipeline (which would further increase revenues and add directly to shareholder value), there may be some delays before the full effect is recognized as companies will likely take additional time to submit the necessary government paperwork to qualify for such incentives.
The Company is not immune to the negative impact Covid-19 has had on businesses, specifically related to the work force and, more importantly, the supply chain. Management believes that the Company is better situated than most and is doing everything to mitigate these challenges. It does not expect any improvements from the impact of Covid-19 before Q2 2022.
A. ORGANIC GROWTH
Organic growth will be spurred on by (i) the natural growth of our existing offerings which can now be accelerated given our strong balance sheet and (ii) leveraging off our “Golden Ticket” advantage.
We have described in the past our Golden Ticket advantage as one which occurs when one sells directly, or is engaged directly, with the end user and, as a result, is “inside the fence”. A Golden Ticket affords the opportunity to either, (i) cross sell other products or (ii) identify new areas of concern that can be addressed uniquely by PyroGenesis. We call the latter our Coffee and Donuts strategy (if you are selling coffee you could generate additional revenues, with little additional effort, by adding on donuts).
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 particularly in iron ore pelletization & DROSRITE™ (short term) and 3D printing (mid to long term).
1. DROSRITE™
Within the DROSRITE™ offering, the Company continues to aggressively explore horizontal growth opportunities. The Company is currently bidding on an up-stream opportunity valued at approximately
2. Additive Manufacturing
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, lower capex, lower opex), is now on-line.
There are 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. Of note, a major tier one global aerospace company entered into an agreement with the Company to qualify its powder, at considerable expense to the global aerospace company, with a view towards having the Company become a supplier. 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.
3. Plasma Torches
With respect to the Company’s plasma torch offerings, we expect this offering to be significantly impacted by continued developments in the iron ore pelletization industry, where serious consideration is being given to replacing the fossil fuel burners, currently being used throughout the industry, with PyroGenesis’ proprietary plasma torches, in an effort to reduce their carbon footprint.
To date, everything is proceeding as expected. Initial discussions have evolved into confirmation stages which typically consist of a computer simulation followed by a small torch order. These confirmation stages are expected, if successful, to result with a roll-out program to replace fossil fuel burners with PyroGenesis’ plasma torches in the iron ore pelletization industry, in which PyroGenesis is patent protected.
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. However, this could delay the onset of contracts as potential clients seek government support for large initiatives.
To date, all computer simulations have been successful, and Client A has ordered 1 torch and has requested a cost estimate for 36 more. We expect that in short order a long overdue torch order for between 1-5 torches from Client B will be forthcoming with strong visibility on the next series of torch orders from them. All indications to date are that the iron ore pelletization industry will be a large user of PyroGenesis plasma torches.
PyroGenesis is proactively targeting other industries which are experiencing significant pressure to reduce GHGs, and which utilize fossil fuel burners as well.
Separately, the Company also offers plasma torches to niche markets where there is a high probability of on-going sales from successful implementation. One such example is the previously announced contract with a very small company to produce a plasma torch ideal for tunneling. PyroGenesis has reason to believe that the real plasma-based tunneling opportunity may lie outside of the scope of the current agreement. PyroGenesis is in discussion with the client to determine the best way to terminate this arrangement. For all intents and purposes, from the readers perspective, this project with the client has ended. PyroGenesis is evaluating, and intends to pursue, plasma based tunneling opportunities, specifically those identified to be outside of the scope of the current agreement.
Another niche market where the Company is offering its plasma torch, and where there is a high probability of on-going sales is in land-based waste destruction applications, and more specifically medical waste. The Company is currently in discussions for a small contract to provide plasma torches to destroy medical waste in Southeast Asia. If successful, this could usher in another interesting application of our plasma expertise to a rather large market with an unaddressed need.
As sales of PyroGenesis’ plasma torches increase, the Company will also benefit from providing proprietary spare parts from which the Company expects to generate significant recurring revenue, thus complementing the Company’s long-term strategy to build upon a recuring revenue model.
4. 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 specialized 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 (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
5. Land Based Units/Environmental
Until this writing, plasma land-based/environmental solutions were not aggressively targeted by the Company in favor of lower-hanging fruit represented by the Company’s other offerings, such as iron ore pelletization & DROSRITE™.
The Company took an opportunistic approach to these opportunities and there now seems to be significant early interest in the Company’s capabilities in this arena. 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.
B. GROWTH TRHOUGH SYNERGESTIC MERGERS & ACQUISITIONS:
As previously disclosed, the Company is conservatively considering synergistic M&A strategies to augment its growth, and the Company has been very actively involved in pursuing several opportunities in support of this strategy. In so doing, the focus has been on private companies exclusively which (i) primarily leverage the Company’s Golden Ticket advantage/Coffee & Donut strategy or (ii) could uniquely benefit from the Company’s engineering advantage and/or international relationships.
PyroGenesis recently announced the acquisition of AirScience Technologies Inc. (“AST”), a company with experience in biogas upgrading, for an amended cash purchase price of
The acquisition of AirScience 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 expectation is to, over the next 12-18 months, strengthen AST’s operations and quality control systems, 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.
Separately, the Company has been evaluating the following opportunities:
1. DROSRITE™
After experiencing some unforeseen last minute contract clarifications/interpretations the Company expects to be able to announce, within the next few weeks, the conclusion of a joint venture relationship 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, if concluded, 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. For further clarity, 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).
2. Plasma Torches
PyroGenesis often considers opportunities to leverage its plasma expertise and they continue to review torch technologies which could complement existing offerings and leverage off of their unique relationships. There is nothing currently being discussed that, at this time, has a material probability of being concluded.
CONCLUSION
In conclusion, PyroGenesis is well positioned in 2021 to take advantage of its unique position in its four main business offerings to accelerate growth in each, with a particular emphasis on offerings geared to aggressively reducing GHG emissions. Furthermore, we do not expect at this point in time, given our strong balance sheet, a need to raise capital to execute on our growth strategy over the foreseeable future.
Financial Summary
Revenues
PyroGenesis recorded revenue of
Revenues recorded in the three and six months ended June 30, 2021 were generated from:
(i) | DROSRITE™ related sales of | |
(ii) | PUREVAP™ related sales of | |
(iii) | torch related sales of | |
(iv) | support services related to PAWDS-Marine systems supplied to the US Navy | |
(v) | 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 Q2 2021, subcontracting, and foreign exchange charge on materials decreased to
Investment tax credits related to qualifying projects from the provincial government against cost of sales 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 Q2 2021 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 Q2 2021 over the same period in 2020 is mainly attributable to the net effect of:
- an increase of
19% in employee compensation due primarily to additional head count, - an increase of
164% for professional fees, primarily due to an increase in accounting fees, legal fees, and listing fees. - an increase of
31% in office and general expenses, is due to an increase in office and computer related expenses, - travel costs decreased by
79% , due to a decrease in travel abroad, - depreciation on property and equipment increased by
736% due to higher amounts of property and equipment being depreciated, - depreciation on right of use assets increased by
69% due to higher amounts of right of use assets being depreciated, - Investment tax credits decreased by
74% due to a decrease in qualifying projects, - government grants decreased by
50% due to lower levels of activities supported by such grants, - other expenses increased by 1,
186% , primarily due to an increase in D&O insurance expenses.
Separately, share based payments increased by 13,
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).
Net Finance Costs
Finance costs for Q2 2021 totaled
Strategic Investments
The adjustment to the fair market value of strategic investments for Q2 2021 resulted in a loss of
Net (Loss) Income and Comprehensive (Loss) Income
The net comprehensive loss for Q2 2021 of
- an increase in product and service-related revenue of
$6,152,118 arising in Q2 2021, - an increase in cost of sales and services of
$2,485,231 , primarily due to an increase in employee compensation, direct materials, manufacturing overhead & other, investment tax credits and a decrease in subcontracting, foreign exchange charge on materials, and amortization of intangible assets,
- an increase in SG&A expenses of
$1,730,552 arising in Q2 2021 primarily due to an increase in employee compensation, professional fees, office and general, depreciation in property and equipment, depreciation ROU assets, other expenses and share based expenses, and a decrease in travel, investment tax credits and government grants, an increase in R&D expenses of$714,601 primarily due to an increase in employee compensation, subcontracting, material and equipment, other expenses and government grants and a decrease in investment tax credits. - a decrease in net finance costs of
$236,841 in Q2 2021 primarily due to lower interest and accretion on lower amounts of debt and an increase of$64,329 in accretion of royalty receivable, - a decrease in fair value adjustment of strategic investments of
$23,546,916 in Q2 2021.
EBITDA
The EBITDA loss in Q2 2021 was
Adjusted EBITDA loss in Q2 2021 was
The Modified EBITDA gain in Q2 2021 was
Liquidity
As at June 30, 2021, 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.
FURTHER INFORMATION
Additional information relating to Company and its business, including the 2020 Financial Statements, the Annual Information Form and other filings that the Company has made and may make in the future with applicable securities authorities, may be found on or through SEDAR at www.sedar.com, EDGAR at www.sec.gov, or the Company’s website at www.pyrogenesis.com.
Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities and securities authorized for issuance under equity compensation plans, is also contained in the Company’s most recent management information circular for the most recent annual meeting of shareholders of the Company.
SOURCE PyroGenesis Canada Inc.
For further information please contact:
Rodayna Kafal, Vice President, IR/Comms. and Strategic Business Development
Phone: (514) 937-0002, E-mail: ir@pyrogenesis.com
RELATED LINK: http://www.pyrogenesis.com/
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