PyroGenesis Announces 2024 Second Quarter Results
[ Back ]   [ More News ]   [ Home ]
PyroGenesis Announces 2024 Second Quarter Results

Gross profit: $1.12 million
Total revenue (Q2): $3.93 million, +29.6% year-over-year
Backlog: $29.8 million

MONTREAL, Aug. 06, 2024 (GLOBE NEWSWIRE) -- PyroGenesis Canada Inc. (http://pyrogenesis.com) (TSX: PYR) (OTCQX: PYRGF) (FRA: 8PY), a high-tech company (the “Company” or “PyroGenesis”) that designs, develops, manufactures and commercializes advanced plasma processes and sustainable solutions which are geared to reduce greenhouse gases (GHG) and address environmental pollutants, is pleased to announce its financial and operational results for the second quarter ended June 30th, 2024.

“With Q2’s strong earnings, PyroGenesis continues its string of positive results reflecting growing industry momentum and customer interest, together with corporate commitment to optimizing expenditures and processes. After posting a three-year low revenue mark back in Q1 2023, we now have posted 5 consecutive quarters of revenue improvement, with four of those quarters, including this most recent, surpassing the previous quarter’s revenue,” said P. Peter Pascali, President and CEO of PyroGenesis.

“The collection of key receivables whose payment timelines were strategically extended, together with a cost reduction program, and the meeting of significant project milestones, resulted in us posting these results. Second-half trends, including the post-quarter end announcement of a large land-based waste-to-energy system design and potential development contract, provides me with the confidence that PyroGenesis will continue to distinguish itself in the industrial decarbonization and electrification arena well beyond 2024.”

KEY Q2 2024 FINANCIAL HIGHLIGHTS

SUBSEQUENT EVENTS

Q2 2024 PRODUCTION AND SALES HIGHLIGHTS

The information below represents highlights from the past quarter for each of the Company’s main business verticals.

Q2 2024 continued the positive revenue growth trend that began in Q2 2023. Q2 2024 marks the 5th straight quarter of revenue improvement compared to the low revenue mark of Q1 2023, with four of those five quarters – including Q2 2024 – surpassing the previous quarter’s revenues.

The Company operates within three verticals that align with economic drivers that are key to global heavy industry:

  1. Energy Transition & Emission Reduction:
    • fuel switching – utilizing the Company’s all-electric plasma torches and biogas upgrading technology to help heavy industry reduce fossil fuel use and greenhouse gas emissions,
  2. Commodity Security & Optimization:
    • recovery of viable metals – and optimization of production methods/processes geared to increase output, maximize raw materials and improve availability of critical minerals,
  3. Waste Remediation:
    • safe destruction of hazardous materials – and the recovery and valorization of underlying substances such as chemicals and minerals.

Within each vertical the Company offers solutions at different stages of commercialization.

Solution Ecosystem


Energy Transition & Emission Reduction

Commodity Security & Optimization

Q2 2024 FINANCIAL HIGHLIGHTS

Q2 2024 OPERATIONAL HIGHLIGHTS

FINANCIAL SUMMARY

1. Revenues

PyroGenesis recorded revenue of $3.9 million in the second quarter of 2024 (“Q2, 2024”), representing an increase of $0.9 million compared with $3.0 million recorded in the second quarter of 2023 (“Q2, 2023”). Revenue for the six-month period ended June 30, 2024, was $7.4 million, an increase of $1.8 million over revenue of $5.6 million in the same period of 2023.

Revenues recorded in the three and six-months ended June 30, 2024, were generated primarily from:

  Three months ended June 30Variation Six months ended June 30Variation
  2024
20232024 vs 2023 2024
20232024 vs 2023
High purity metallurgical grade silicon & solar grade silicon from quartz (PUREVAP™) 101,790 445,840 (344,050) 496,234 973,439 (477,205)
Aluminium and zinc dross recovery (DROSRITE™) 327,503 115,325 212,178  990,688 205,552 785,136 
Development and support related to systems supplied to the U.S. Navy 237,175 813,125 (575,950) 1,281,609 1,165,228 116,381 
Torch-related products and services 2,792,009 561,942 2,230,067  3,669,057 1,732,690 1,936,367 
Refrigerant destruction (SPARC™) 149,173 187,444 (38,271) 251,891 255,292 (3,401)
Biogas upgrading and pollution controls 175,959 618,070 (442,111) 208,008 650,965 (442,957)
Other sales and services 155,489 297,733 (142,244) 528,008 647,935 (119,927)
Revenue 3,939,098 3,039,479 899,619  7,425,495 5,631,101 1,794,394 


Q2, 2024 revenues increased by $0.9 million, mainly as a result of:

During the six-month period ended June 30, 2024, revenues varied by $1.8 million, mainly as a result of:

As of August 6, 2024, revenue expected to be recognized in the future related to backlog of signed and/or awarded contracts is $29.8 million. Revenue will be recognized as the Company satisfies its performance obligations under long-term contracts, which is expected to occur over a maximum period of approximately 3 years.

2. Cost of Sales and Services and Gross Margins

Cost of sales and services were $2.8 million in Q2 2024, representing an increase of $0.9 million compared to $1.9 million in Q2, 2023, primarily attributable to a $1.4 million increase in direct materials which reached $1.7 million. The increase in direct materials is related to the recognition of costs from the completion of the power supplies required for the Company’s high-powered torch systems. However, the increase was offset by the decrease in employee compensation of $0.1 million reducing it to $0.8 million (three-month period ended June 30, 2023 - $0.9 million), and a decrease of $0.2 million in subcontracting (three-month period ended June 30, 2023 - $0.2 million), attributed to additional work being completed in-house and the product mix related to the cost of sales.

The gross profit for Q2, 2024 was $1.1 million or 29% of revenue compared to a similar gross profit of $1.1 million for Q2 2023, however it represents 37% of revenue. The decrease in gross margin percentage was mainly due to the increase on direct materials costs, and to the 2023 Q2 sales mix which has higher margins.

During the six-month period ended June 30, 2024, cost of sales and services were $5.5 million, an increase from $4.0 million for the same period in the prior year. The $1.6 million increase is primarily driven by a $2.0 million rise in direct materials related to the recognized costs of substantial items, namely power supplies. This increase was partially offset by the decrease in subcontracting expenses of $0.2 million attributed to additional work being completed in-house and the product mix related to the cost of sales.

The amortization of intangible assets for Q2, 2024 was $0.02 million compared to $0.2 million for Q2, 2023, and during the six-month period ended June 30, 2024, was $0.1 million compared to $0.4 million for the same period in the prior year. This expense variation relates mainly to the intangible assets in connection with the Pyro Green-Gas acquisition, which have been fully amortized by January 2024. These expenses were non-cash items, and the remaining intangible assets are composed of patents, and deferred development costs that will be amortized over the expected useful lives.

As a result of the type of contracts being executed, the nature of the project activity, as well as the composition of the cost of sales and services, the mix between labour, materials and subcontracts may be significantly different. In addition, due to the nature of these long-term contracts, the Company has not necessarily passed on to the customer, the increased cost of sales which was attributable to inflation, if any. The costs of sales and services are in line with management’s expectations and with the nature of the revenue.

3. 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 the second quarter of 2024 amounted to $0.2 million, reflecting a significant decrease of $6.2 million from Q2 2023. This reduction is primarily attributed to several key factors. The expected credit loss and bad debt experienced a substantial decrease of $5.2 million, primarily due to a $4.1 million payment received on a previously provisioned outstanding receivable. This payment led to a reversal of the previously recognized credit loss. Additionally, there was a decrease in the expenses following the settlement of legal proceedings involving Pyro Green-Gas and Gas RNG Systems Inc., which concluded favourably, with a $1.5 million payment. Professional fees were reduced by $0.3 million from the three-month period ended June 30, 2023, due to decreased reliance on external consultants, legal services, and other professional services. Other expenses showed a favorable variance of $0.5 million, driven by reductions in insurance expenses and marketing costs. Additionally, there was a favorable impact of $0.4 million due to changes in the foreign exchange charge on materials due to the variation of the U.S. dollar.

These decreases were partially offset by an increase in employee compensation by $0.1 million. There was also an increase of $0.2 million in office and general expenses. Moreover, there was a positive variance of $0.3 million in government grants due to higher levels of activities supported by such grants.

During the six-month period ended June 30, 2024, SG&A expenses totaled $4.8 million, a notable decrease of $9.2 million from $14.0 million for the same period in the prior year. The key factors contributing to this decrease include the expected credit loss and bad debt provision, which varied favourably by $6.2 million. This was caused mainly by the payment received from a customer whose balance was provisioned, and to higher credit loss expense recognized in Q2 2023. Employee compensation decreased by $0.3 million. Professional fees saw a significant reduction of $1.0 million due to less reliance on external consultants, legal services, and other professional services. Other expenses decreased by $0.7 million, as well, there was a favorable impact of $0.7 million on the foreign exchange charge on materials due mainly to the variation of the U.S. dollar.

Share-based compensation expense for the three and six-month periods ended June 30, 2024, was $0.3 million and $0.8 million, respectively (three and six-month periods ended June 30, 2023 - $0.7 million and $1.7 million, respectively), a decrease of $0.4 million and $1.0 million respectively, which is a non-cash item and relates mainly to 2022, and 2023 grants not repeated in 2024.

Share-based payments expenses as explained above, are non-cash expenses and are directly impacted by the vesting structure of the stock option plan whereby options vest between 10% and up to 100% on the grant date and may require an immediate recognition of that cost.

4. Depreciation on Property and Equipment

The depreciation on property and equipment for the three and six-month periods ended June 30, 2024, decreased to $0.1 million and $0.16 million, respectively, compared with $0.2 million and $0.3 million for the same periods in the prior year. The expense is comparable to the same quarters last year and the decrease is primarily due to the nature and useful lives of the property and equipment being depreciated.

5. Research and Development (“R&D”) Costs, net

During the three-months ended June 30, 2024, the Company incurred $0.3 million of R&D costs on internal projects, a decrease of $0.5 million when compared to Q2 2023. The decrease in Q2 2024 is primarily related to a decrease in employee compensation and in other expenses due to a reduction in R&D activities.

During the six-months ended June 30, 2024, the Company incurred $0.5 million of R&D costs on internal projects, a decrease of $0.6 million when compared to the same period in the prior year. The decrease is mainly due to lower levels of R&D activities in the 2024 period.

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).

6. Finance Expenses (income), net

Finance expenses for Q2 2024 totaled $0.3 million as compared with an income of $0.9 million for Q2, 2023, representing a variation of $1.3 million year-over-year. The increase in finance expenses in Q2 2024 is mainly due to the favourable $1.1 million of the revaluation of the balance due on business combination in Q2 2023, not repeated in 2024 and to the increase in interest and accretion related to the convertible debenture and convertible loan.

During the six-month period ended June 30, 2024, the finance expenses totaled $0.5 million as compared with an income of $1.8 million for the 2023 comparable period, representing a variation of $2.4 million year-over-year. This is due to the favourable revaluation of the balance due on business combination due to two milestones that would not be achieved, thus a reversal of the liabilities was recorded. In addition, greater financial expenses were due to the interest and accretion for the convertible debenture and convertible loan.

7. Strategic Investments

During the three-months ended June 30, 2024, the adjustment to fair market value of strategic investments for Q2, 2024 resulted in a loss of $0.04 million compared to a loss in the amount of $1.2 million in Q2, 2023, a favorable variation of $1.2 million. During the six-months ended June 30, 2024, the adjustment to fair market value of strategic investments resulted in a loss of $0.2 million compared to a loss in the amount of $0.9 million for the same period in the prior year, a favorable variation of $0.7 million. The decrease in loss for the three and six-month periods ended June 30, 2024, is attributable to the variation of the market value of the common shares owned by the Company of HPQ Silicon Inc.

8. Other Income

During the three-months ended June 30, 2024, Other Income includes a gain on settlement of legal proceedings with a third party which was also a customer of the Company’s subsidiary, Pyro Green-Gas. As a result, the Company received a settlement of $1.5 million and recognized a gain of $1,180,335 and the remainder as a reduction of accounts receivable.

9. Comprehensive Income (loss)

The comprehensive income for Q2, 2024 of $1.4 million compared to a loss of $6.3 million, in Q2, 2023, represents a variation of $7.8 million, and is primarily attributable to the factors described above, which have been summarized as follows:

The comprehensive loss for the six-month period ended June 30, 2024, of $3.0 million compared to a loss of $12.5 million, for the same period in the prior year, represents a variation of $9.5 million, and is primarily attributable to the factors described above, which have been summarized as follows:

10. Liquidity and Capital Resources

As at June 30, 2024, the Company had cash of $3.4 million, included in the net working capital deficiency of $9.2 million. Certain working capital items such as billings in excess of costs and profits on uncompleted contracts do not represent a direct outflow of cash. The Company expects that with its cash, liquidity position, and its access to capital markets it will be able to finance its operations for the foreseeable future.

The Company’s term loan balance at June 30, 2024 was $317,140 and decreased by $86,939 since December 31, 2023, due mainly to the complete reimbursement of a loan. The decrease from January 1, 2023, to December 31, 2023 was mainly attributable to the accretion on the Economic Development Agency of Canada loan, which is interest free and will remain so, until the balance is paid over the 60-month period ending March 2029. In July 2023, the Company closed a brokered private placement for $3,030,000, bearing interest at 10%. On December 20, 2023, the Company closed a non-brokered private placement of a convertible loan for gross proceeds of $1,250,000 and bears interest at 3%. The average interest expense on the other term loans and convertible debenture is approximately 10%. The Company does not expect changes to the structure of term loans and convertible debentures and loans in the next twelve-month period. The Company maintained one credit facility which bears interest at a variable rate of prime plus 2%, therefore 7.95% at June 30, 2024. The Company will continue to reimburse the existing credit facility in 2024.

OUTLOOK

Consistent with the Company’s past practice, and in view of the early stage of market adoption of our core lines of business, the Company is not providing specific revenue or net income (loss) guidance for 2024. The following is an outline of the Company’s strategy plus key developments that are expected to impact subsequent quarters.

Overall Strategy

PyroGenesis provides technology solutions to heavy industry that leverage the Company’s expertise in ultra-high temperature processes. The Company has evolved from its early beginnings as a specialty-engineering firm to being a provider of a robust technology eco-system for heavy industry that helps address key strategic goals.

The Company believes its strategy to be timely, as multiple heavy industries are committing to major carbon and waste reduction programs at the same time as many governments are increasingly supportive – from both a policy and financial perspective – of environmental technologies and infrastructure projects. Additionally, both industry and government are developing strategies to ensure the availability of critical minerals during the coming decades of increased output demand.

While there can be no guarantees, the Company believes the evolution of its strategy beyond greenhouse gas emission reduction, to an expanded focus that encapsulates the key verticals listed in the section “Q4 2024 Production and Sales Highlights”, both (i) improves the Company’s chances for success while (ii) also providing a clearer picture of how the Company’s wide array of offerings work in tandem to support heavy industry goals.

PyroGenesis’ market opportunity is significant, as major industries such as aluminum, steelmaking, manufacturing, cement, chemicals, defense, aeronautics, and government seek factory-ready, technology-based solutions to help steer through the paradoxical landscape of increasing demand, tightening regulations, and material availability.

As more of the Company’s offerings reach full commercialization, PyroGenesis will remain focused on attracting influential customers in broad markets while at the same time ensuring that operating expenses are controlled to achieve profitable growth.

Cost Controls and Efficiencies

PyroGenesis has been, and continues to, scrutinize both potential and existing projects to ensure that the utilization of labour and financial resources are optimized. The Company continues to only engage in projects that reflect significant benefits to PyroGenesis and the risks of which are defined. The Company intends to intensify its focus on project and budgetary clarity during this period of elevated inflationary pressures, by identifying alternative suppliers while constantly adjusting project resources. The early-stage project assessment process has also been refined to allow for a faster “go / no-go” decision on project viability.

Enhanced Sales and Marketing

Against the backdrop of this 3-tiered strategy, the Company continues to increase sales, marketing, and R&D efforts in-line with – and in some cases ahead of – the growth curve for industrial change related to greenhouse gas reduction efforts.

Initiatives during the second quarter 2024 included enhanced use of video, including a long form video message from the Company’s CEO as part of the Company’s annual general meeting.

Macroeconomic Conditions

With some continued uncertainty in the macroeconomic environment, including ambiguity in the banking sector with regard to interest rate adjustments, and the continued inflationary pressures causing shifting demand dynamics across various industries at different times, it may be difficult to assess the future impact these events and conditions will have on our customer base, the end markets we serve and the resulting effect on our business and operations, both in the short term and in the long term.

Despite these uncertainties, we continue to believe there is an accelerated need for PyroGenesis’ solutions in the industries we serve as heavy industry continues to decarbonize / transition their energy sources, manufacture utilizing both lighter metals (such as aluminum) and additive manufacturing techniques, and deal with tighter hazardous waste regulations.

While we expect these uncertainties and other macroeconomic conditions to continue to impact the variability in our quarter to quarter revenue, we believe our diversity in both customer base and solution set will continue to be a strong mitigating factor to these challenges. Additionally, the Company’s ongoing efforts to reduce costs through various measures including the sourcing of more high quality, cost-competitive suppliers, further bolsters the Company against cost fluctuations.

The various military conflicts in the Middle East and Eastern Europe continue to create some level of global economic uncertainty, as well as supply chain disruptions that can change at any time. However, it’s important to note that the Company does not have any operations, customers or supplier relationships in Russia, Belarus or Ukraine, and as such are not directly impacted at a customer level in these countries. The Company does have customer relationships and projects in Poland and will continue to monitor the situation in the region regarding challenges to the completion of current projects, which at this time are not inhibited.

As always, the Company monitors the potential impact macroeconomic events and conditions could have on the business, operations, and financial health of the Company.

Generally, the Company believes that broad-based threats to global supply chains increase awareness and interest in the many solutions the Company offers. This is particularly true within the minerals and metals industries, as manufacturers seek alternatives to off-shore suppliers as well as technologies that could optimize output or recycle critical material from byproducts or waste – solutions that the Company currently offers.

Business Line Developments

The upcoming milestones which are expected to confirm the validity of our strategies are outlined below (please note that these timelines are estimates based on information provided to us by the clients/potential clients, and while we do our best to be accurate, timelines can and will shift, due to protracted negotiations, client technical and resource challenges, or other unexpected situations beyond our or the clients’ control):

Business Line Developments: Near Term (0 – 3 months)

Financial

Energy Transition & Emission Reduction

Commodity Security & Optimization

Waste Remediation

Business Line Developments: Mid Term (3-6 months)

Energy Transition & Emission Reduction

Commodity Security & Optimization

Business Line Developments: Long Term (> 6 months)

Commodity Security & Optimization

Waste Remediation

** Please note that projects or potential projects previously announced that do not appear in the above summary update should not be considered as at risk. Noteworthy developments can occur at any time based on project stages, and the information presented above reflects information on hand. Projects not mentioned may have simply not concluded or not presented milestones or client updates worthy of discussion or update.

FURTHER INFORMATION

Additional information relating to Company and its business, including the 2023 consolidated 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.sedarplus.ca, 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.

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 “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) within the meaning of applicable securities laws. In some cases, but not necessarily in all cases, forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “targets”, “expects” or “does not expect”, “is expected”, “an opportunity exists”, “is positioned”, “estimates”, “intends”, “assumes”, “anticipates” or “does not anticipate” or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might”, “will” or “will be taken”, “occur” or “be achieved”. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking statements. Forward-looking statements are not historical facts, nor guarantees or assurances of future performance but instead represent management’s current beliefs, expectations, estimates and projections regarding future events and operating performance.

Forward-looking statements are necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable by the Company as of the date of this release, are subject to inherent uncertainties, risks and changes in circumstances that may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ, possibly materially, from those indicated by the forward-looking statements include, but are not limited to, the risk factors identified under “Risk Factors” in the Company’s latest annual information form, and in other periodic filings that the Company has made and may make in the future with the securities commissions or similar regulatory authorities, all of which are available under the Company’s profile on SEDAR+ at www.sedarplus.ca. These factors are not intended to represent a complete list of the factors that could affect the Company. However, such risk factors should be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct. You should not place undue reliance on forward-looking statements, which speak only as of the date of this release. The Company undertakes no obligation to publicly update or revise any forward-looking statement, 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 OTCQX Best Market accepts responsibility for the adequacy or accuracy of this press release.

For further information please contact:
Rodayna Kafal, Vice President, IR/Comms. and Strategic BD
E-mail: ir@pyrogenesis.com

RELATED LINK: http://www.pyrogenesis.com/

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/4560d4c2-3dac-4843-98a9-6b9f9f35dc93


Primary Logo

Solution Ecosystem

Solution Ecosystem