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 plasma atomized metal powders,
environmentally friendly plasma waste-to-energy systems and clean
plasma torch products, is pleased to announce today its financial
and operational results for the first quarter ended March 31st,
2021.
“We are happy to be announcing that our Q1 2021
financial results continue to reflect the historical trend set
early last year. The last several quarters saw PyroGenesis more
than triple its backlog of signed contracts, reduce debt to
basically zero, and recording over $25 million of cash on the
balance sheet. All this, while graduating to the TSX, co-listing on
the NASDAQ, and closing an oversubscribed bought deal of over $10
million,” said Mr. P. Peter Pascali, CEO and Chair of PyroGenesis.
“Q1 2021 saw PyroGenesis post $6.3 million in revenues; over 7x
that posted in same period 2020. Operations broke even after
share-based compensation, costs associated with up-listings, as
well as R&D expenses (Q1 2021: $286K vs $23K in same period
last year) which were associated with developments in our additive
manufacturing offering. The statistic I find most revealing in
terms of what we have done in the past 12 months, and where we may
be going, is the fact that we posted 40% more revenues in this
quarter alone than we did for the entire year in 2019, a year that
saw us post a net loss of over $9 million. We believe that the
Company has never been better positioned and is well placed to
build upon this trend for the foreseeable future.”
Q1 2021 results reflect the following
highlights:
- Revenues of $6,264,503, an increase
of 771% over $718,908 posted in Q1 2020,
- Net earnings and comprehensive
income of $3,712,903 an increase of $5,469,931 over that posted in
Q1 2020,
- Gross margin profit of $2,143,010
an increase of 701% vs. $267,414 in Q1 2020,
- Backlog of signed contracts of
$26MM,
- Cash and cash equivalents at March
31, 2021 of $26,274,344 (December 31, 2020: $18,104,899),
- Total Assets as at March 31, 2021
of $87,339,065 (December 31, 2020: $74,531,378),
- Gross margin of 34.2%, a decrease
of 3% year over year,
- Shareholders’ Equity at March 31,
2021 of $72,122,309 (December 31, 2020: $59,423,106),
- Current Ratio at March 31, 2021 of
3.26x versus 2.20x at December 31, 2020 (versus 0.21x at March 31,
2020),
- Basic Earnings per Share (EPS) of
$0.02 for Q1 2021 as compared to ($0.01) in Q1 2020.
OUTLOOK
PyroGenesis continues to be well positioned,
with a clean balance sheet, to execute on all its organic growth
strategies as well as to actively pursue growth through synergistic
mergers & acquisitions. The Company has recently focused
its offerings to highlight their 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 considering stimulating their respective economies
by promoting and funding both environmental technologies and
infrastructure projects. As such, management expects that this will
be a tailwind into an already strong pipeline which will further
increase revenues, and add directly to shareholder value.
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, ideally,
(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.
DROSRITE™
Within the DROSRITE™ offering, the Company is
aggressively exploring horizontal growth opportunities. The Company
is currently bidding on an RFQ, valued at approx. $40MM (estimated
award date: within 3-4 months; estimated time to completion:
approx. 15 months). Management notes that it has been very
successful in the selection process to date. We consider this
project to now have a better than average probability of success,
and is an example of a company’s commitment to this strategy.
Additive Manufacturing
With respect to additive manufacturing, we
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.
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. 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. PyroGenesis is evaluating, and
intends to pursue, plasma based tunneling opportunities,
specifically those identified to be outside of the scope of the
current agreement.
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.
HPQ/PUREVAP™
With respect to HPQ, the goal is continue to
expand our role as HPQ’s technology provider for the game changing
PUREVAP™ family of silicon processes which we are developing
exclusively for HPQ and its wholly owned subsidiary HPQ Nano
Silicon Powders 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) then 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 (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.
We expect 2021 to be a year in which significant
development occurs on both these fronts.
Growth through Synergistic Mergers and
Acquisitions:
As previously disclosed, the Company would
conservatively consider a synergistic M&A strategy 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
& Donuts strategy or (ii) could uniquely benefit from the
Company’s engineering advantage and/or international
relationships.
PyroGenesis recently announced a Binding Letter
of Intent with AirScience, a company with experience with biogas
upgrading, under which the Company would acquire AirScience for
$4.8MM. PyroGenesis believes that AirScience’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 Company has been evaluating the following
opportunities, additional details of which should be disclosed over
the coming weeks.
DROSRITE™
We expect 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).
Plasma Torches
PyroGenesis often considers opportunities to
leverage its plasma expertise and continues to review a torch
technology which could complement PyroGenesis’ existing offerings,
and leverage off of our unique relationships. The Company gives
this a very low probability of success given the initial valuation,
provided by the sole owner, in the context of publicly available
data. However, PyroGenesis has identified similar opportunities and
is evaluating them in due course.
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 $6,264,503 in
the first quarter of 2021 (“Q1, 2021”), representing an increase of
771% compared with $718,908 recorded in the first quarter of 2020
(“Q1, 2020”).
Revenues recorded in the first quarter of 2021 were
generated from: |
|
(i) |
DROSRITE™
related sales of $2,740,725 (2020 Q1 - $474,432) |
|
(ii) |
PUREVAP™ related sales of $625,086 (2020 Q1 - $17,965) |
|
(iii) |
torch related sales of $195,221 (2020 Q1 - $87,944) |
|
(iv) |
support services related to PAWDS-Marine systems supplied to
the US Navy $2,586,021 (2020 Q1 - $23,896) |
|
(v) |
other sales and services of $117,450 (2020 - $114,671) |
Cost of Sales and Services and Gross
Margins
Cost of sales and services before amortization
of intangible assets was $4,114,713 in Q1 2021, representing an
increase of 825% compared with $444,681 in Q1 2020, primarily due
to an increase in employee compensation, subcontracting, direct
materials and manufacturing overhead and other and foreign exchange
charge on materials.
In Q1 2021, employee compensation,
subcontracting, direct materials and manufacturing overhead
increased to $4,176,248 (Q1 2020 - $391,305). The gross margin for
Q1 2021 was $2,143,010 or 34.2% of revenue compared to a gross
margin of $267,414 or 37.2% of revenue for Q1 2020. 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, as the mix between labour, materials and subcontracts may
be significantly different.
Investment tax credits related to qualifying
projects from the provincial government were $26,649 (2020 -
$131,871) and $Nil (2020 $1,058,017) of investment tax credits
earned in prior years that met the criteria for recognition. The
Company also recorded for the three months ended March 31, 2021
$1,183 (2020 - $18,420) of the investment tax credits against cost
of sales and services, $17,967 (2020 - $1,141,468) against research
and development expenses and $7,500 (2020 - $30,000) against
selling general and administrative expenses.
The amortization of intangible assets of $6,780
in Q1 2021 and $6,813 for Q1 2020 relates to patents and deferred
development costs. Of note, these expenses are non-cash items and
will be amortized over the duration of the patent lives.
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 2021 excluding the
costs associated with share-based compensation (a non-cash item in
which options vest principally over a four-year period), were
$2,803,095 representing an increase of 132% compared with
$1,205,726 reported for Q1 2020.
The increase in SG&A expenses in Q1 2021
over the same period in 2020 is mainly attributable to the net
effect of:
- an increase of 35% in employee
compensation due primarily to additional head count,
- an increase of 1,805% for
professional fees, primarily due to an increase in accounting fees,
legal fees, and listing fees.
- an increase of 112% in office and
general expenses, is due to an increase in safety supplies and
computer related expenses,
- travel costs decreased by 82%, due
to a decrease in travel abroad,
- depreciation on property and
equipment increased by 659% due to higher amounts of property and
equipment being depreciated,
- depreciation on right of use assets
increased by 14% due to higher amounts of right of use assets being
depreciated,
- Investment tax credits were the
same year to year,
- government grants decreased by 100%
due to lower levels of activities supported by such grants,
- other expenses increased by 346%,
primarily due to an increase in insurance.
Separately, share based payments increased by
1,202% in Q1 2021 over the same period in 2020 as a result of the
stock options granted on July 16, 2020. This was directly impacted
by the vesting structure of the stock option plan with options
vesting between 25% and 50% on the grant date requiring an
immediate recognition of that cost.
Research and Development (“R&D”)
Costs
The Company incurred $286,307 of R&D costs,
net of government grants, on internal projects in Q1 2021, an
increase of 1,140% as compared with $23,088 in Q1 2020. The
increase in Q1 2020 is primarily related to a decrease in
government grants recognized.
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.Net Finance Costs
Finance costs for Q1 2021 totaled $53,087 as
compared with $232,736 for Q1 2020, representing a decrease of 77%
year-over-year. The decrease in finance costs in Q1 2020, is
primarily attributable to lower interest and accretion on lower
amounts of debt.
Strategic Investments
The adjustment to the fair market value of
strategic investments for Q1 2021 resulted in a gain of $5,634,722
compared to a gain in the amount of $492,024 in Q1 2020.
Net Earnings and Comprehensive Income
(Loss)
The net comprehensive income for Q1 2021 of
$3,712,903 compared to a loss of $1,757,027, in Q1 2020, represents
an increase of 311% year-over-year. The increased in income of
$4,253,146 in the comprehensive income in Q1 2021 is primarily
attributable to the factors described above, which have been
summarized as follows:
- an increase in product and
service-related revenue of $5,545,595 arising in Q1 2021,
- an increase in cost of sales and
services of $3,669,999, primarily due to an increase in employee
compensation, subcontracting, direct materials, manufacturing
overhead & other, and a decrease in foreign exchange,
investment tax credits, and amortization of intangible assets,
- an increase in SG&A expenses of
$1,597,369 arising in Q1 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,
and government grants,
- an increase in R&D expenses of
$263,219 primarily due to an increase in subcontracting, material
and equipment and other expenses,
- a decrease in net finance costs of
$179,649 in Q1 2021 primarily due to lower interest and accretion
on lower amounts of debt,
- an increase in fair value
adjustment of strategic investments of $5,142,698 in Q1 2021.
EBITDA
The EBITDA gain in Q1 2021 was $3,950,881
compared with an EBITDA loss of $1,418,057 for Q1 2020,
representing an increase of 379% year-over-year. The $5,368,938
increase in the EBITDA gain in Q1 2021 compared with Q1 2020 is due
to the increase in comprehensive income of $5,469,930, an increase
in depreciation on property and equipment of $66,261, and an
increase in depreciation ROU assets of $12,429, offset by a
decrease in amortization of intangible assets of $33 and a decrease
in finance charges of $179,650.
Adjusted EBITDA gain in Q1 2021 was $4,873,221
compared with an Adjusted EBITDA loss of $1,347,190 for Q1 2020.
The increase of $6,220,411 in the Adjusted EBITDA gain in Q1 2021
is attributable to an increase in EBITDA gain of $5,368,938, and by
an increase of $851,473 in share-based payments.
The Modified EBITDA loss in Q1 2021 was $761,501
compared with a Modified EBITDA loss of $855,166 for Q1 2020,
representing a decrease of 11%. The decrease of $93,664 in the
Modified EBITDA gain in Q1 2021 is attributable to the increase as
mentioned above in the Adjusted EBITDA of $6,220,411 and a decrease
in the change of fair value of strategic investments of
$6,126,745.
Liquidity
As at March 31, 2021, the Company has cash and
cash equivalents of $26,274,344. In addition, the accounts payable
and accrued liabilities of $8,236,489 are payable within 12 months.
The Company expects that its cash position will be able to finance
its operations for the foreseeable future.
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 products. The
Company provides its engineering and manufacturing expertise and
its turnkey process equipment packages to customers in the defense,
metallurgical, mining, advanced materials (including 3D printing),
and environmental industries. 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 Company’s core
competencies allow PyroGenesis to provide innovative plasma
torches, plasma waste processes, high-temperature metallurgical
processes, and engineering services to the global marketplace.
PyroGenesis’ operations are ISO 9001:2015 and AS9100D certified.
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 first quarter ended March 31st 2021,
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.
SOURCE PyroGenesis Canada Inc.
For further information please contact: Rodayna
Kafal, Vice President, IR/Comms. and Strategic BDPhone: (514)
937-0002, E-mail: ir@pyrogenesis.com RELATED LINK:
http://www.pyrogenesis.com/
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