MONTREAL, QUEBEC--(Marketwired - Aug. 28, 2017) - PyroGenesis Canada Inc. (http://pyrogenesis.com) (TSX VENTURE:PYR)(OTCQB:PYRNF), a high-tech company (the "Company" or "PyroGenesis") that designs, develops, manufactures and commercializes plasma waste-to-energy systems and plasma torch products, is pleased to announce today its financial and operational results for the second quarter ended June 30, 2017.
Q2-2017 results reflected the following highlights:
At yearend 2016, we described the preceding twelve months as being a pivotal year for PyroGenesis as the Company shifted its focus away from being a fabricator of plasma-based systems that produced unique titanium powders, in favour of becoming a producer of metal powders for the Additive Manufacturing Industry (the "Industry"). Given their unique properties (pure, small, spherical, and uniform; which make them flow like water), these powders are greatly sought after in the Industry, particularly 3D printing. Given this strategic shift, together with the backlog of signed contracts from our non-additive manufacturing business ("Core/Traditional Lines of Business") of over $13MM since June 30, 2016, we projected that 2017 was shaping up to be a break out year for PyroGenesis, and Q1 and Q2-2017 have not been disappointing.
What is key to note is that these results reflect revenues from what we call our Core/Traditional Lines of Business (little to no revenues from powder sales at all), however expenses reflect certain costs of building our first powder production system, and improvements made on it, which came on stream in Q1-2017 and is, as previously announced, currently ramping up to full production.
We are more convinced than ever before that 2017 is the breakout year we have been positioning the Company for, for a number of reasons:
The following is a non-exhaustive review of PyroGenesis' main commercial activities:
1 | Wohlers Report 2016 (ISBN 978-0-9913332-2-6) |
Given the above, we expect a strong performance in the coming year, and based on existing contracts, the Company expects to be profitable in 2017 (excluding any contribution from powder sales) as noted above. Our projections for 2017 are only heightened by the reception we have received so far, particularly how well received our entrance as a powder producer in the Additive Manufacturing community has been.
Management remains focused on reducing PyroGenesis' dependency on long-cycle projects by developing a strategic portfolio of volume driven, high margin/low risk products that resolve specific problems within niche markets, and doing so by introducing these plasma-based technologies to industries that have yet to consider such solutions.
Management is also actively targeting recurring revenue opportunities that will generate a growing, and profitable, regular cash flow to the Company.
PyroGenesis has one of the largest concentrations of plasma expertise in the world, with over 250 years of accumulated technical experience and 59 patents, combined with unique relationships with major Universities performing cutting edge plasma research and development, which positions the Company well to execute upon its various strategies.
Financial Summary
Revenues
The Company posted revenues of $2,173,397 in the second quarter of 2017 ("Q2, 2017"), representing an increase of 165% compared with $818,990 recorded in the second quarter of 2016 ("Q2, 2016"). Revenue recorded in Q2 2017 was generated primarily from (i) the development of a vacuum arc reducing process to convert Silica into high purity Silicon metal, (ii) manufacture and further field testing of Tactical PACWADS, the first mobile plasma system for destruction of chemical warfare agents under contract with an international military consortium, (iii) the demonstration of the viability of PyroGenesis' existing plasma chemical warfare agent destruction platform with locally available materials, for the complete eradication of chemical warfare agents without creating hazardous by-products, and (iv) support services related to PAWDS-Marine systems supplied to the US Navy.
Cost of Sales and Services and Gross Margins
Cost of sales and services before amortization of intangible assets was $1,130,295 in Q2, 2017, representing an increase of 52% compared with $744,926 in Q2, 2016. Total costs of sales and services, was $1,130,295 representing an increase of 3% compared with $1,094,196 in Q2, 2016.
Various factors, including, but not limited to, the mix of long and short-term manufacturing projects, project complexity and scale, and project R&D content, may significantly impact both the composition and overall level of cost of sales and services reported in a given period, as the mix of labor, materials and subcontracts may be significantly different.
The costs incurred in Q2, 2017 are primarily attributable to the work completed under PyroGenesis' project to develop a vacuum arc reducing process to convert Silica into high purity Silicon metal, work completed on the tactical mobile plasma system for destruction of chemical warfare agents under contract with an international military consortium, and support services related to PAWDS Marine systems supplied to the US Navy.
Investment tax credits recorded against cost of sales are primarily related to client funded projects that qualify for tax credits from the provincial government of Quebec. Qualifying tax credits increased to $136,994 in Q2, 2017, compared with $26,221 in Q2, 2016. This represents an increase of 422% quarter-over-quarter. The Company continues to make investments in research and development projects incorporating the involvement of strategic partners and government bodies.
In Q2, 2017, the gross margin before amortization of intangible assets was $1,043,102, which represents 48% of revenue. This compares with a gross margin before amortization of intangible assets of $74,063 (9% of revenue) for Q2, 2016.
The amortization of intangible assets of Nil in Q2, 2017 ($349,269 in Q2, 2016) relates to the licenses and know-how purchased in 2011 from a company under common control. This expense is a non-cash item and the underlying asset was fully amortized by December 31, 2016.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") for Q2, 2017 were $1,133,456, representing an increase of 13% compared with $999,500 reported for Q2, 2016. Excluding the costs associated with share-based compensation (a non-cash item in which options vest over a four-year period), SG&A expenses increased by 4% in Q2, 2017 compared with Q2, 2016.
The increase in SG&A expenses is attributable to the net effect of (i) an increase of 7% in employee compensation, (ii) a decrease of 40% for professional fees, primarily due to a decrease in accounting fees and deferred patent expenses, (iii) an increase of 37% in office and general expenses, due to a decrease in computers and internet expenses, (iv) travel costs increased by 74%, due to an increase in travel abroad, (v) depreciation on property and equipment decreased by 9%, asset under development in Q2 2017 will begin to be depreciated when the asset is available or ready for use, (vi) government grants decreased by 41% due to lower level of activities supported by such grants, (vii) other expenses increased by 41%, primarily due to the higher cost of freight and shipping, and (viii) an increase in share base payments of 278% primarily due to the vesting structure of the stock option plan and the stock options offered on September 25, 2016.
Total Comprehensive Loss
The comprehensive loss for Q2, 2017 was $608,584 compared to a loss of $1,345,000 in Q2, 2016, representing a decrease of 55% quarter-over-quarter.
The decrease of $736,416 in the comprehensive loss in Q2, 2017 is primarily attributable to: (i) an increase in product and service related revenue of $1,354,407, (ii) an increase in cost of sales and services totaling $385,370 as explained above, (iii) an increase in SG&A expenses of $133,956 as explained above, (iv) an increase in R&D expenses of $43,431 primarily due to the fact that many of the Company's engineering and R&D resources were concentrated on activities within projects under construction for clients, with such costs being recorded within cost of sales, (v) an increase in net finance costs of $404,505 due to a decrease in the fair value of investments of $406,078.
EBITDA
The EBITDA loss in Q2, 2017 was $419,325 compared with an EBITDA loss of $801,894 for Q2, 2016, representing a decrease of 48%.
EBITDA (Mod.) gain in Q2, 2017 was $12,197 compared with an EBITDA (Mod.) loss of $876,029 for Q2, 2016. The increase of $888,226 in the EBITDA (Mod.) in Q2, 2017 is mainly attributable to the decreased comprehensive loss of $736,416, a decrease in depreciation on property and equipment of $3,005, a decrease of $349,269 in amortization of intangible assets, a decrease in finance charges of $1,572, a decrease in the fair value of investments of $406,078 and an increase in share-based payments of $99,579.
Liquidity
As at June 30, 2017, the Company had cash on hand of $258,138 and negative working capital of $6,486,226 compared with a cash balance of $385,257 and negative working capital of $2,079,353 as at December 31, 2016.
About PyroGenesis Canada Inc.
PyroGenesis Canada Inc. is the world leader in the design, development, manufacture and commercialization of advanced plasma processes. PyroGenesis provides engineering and manufacturing expertise, cutting-edge contract research, as well as turnkey process equipment packages to the defense, metallurgical, mining, additive manufacturing (3D printing), oil & gas, and environmental industries. With a team of experienced engineers, scientists and technicians working out of our Montreal office and our 3,800 m2 manufacturing facility, PyroGenesis maintains its competitive advantage by remaining at the forefront of technology development and commercialization. Its core competencies allow PyroGenesis to lead the way in providing innovative plasma torches, plasma waste processes, high-temperature metallurgical processes, and engineering services to the global marketplace. Its operations are ISO 9001:2008 certified, and have been ISO certified since 1997. PyroGenesis is a publicly-traded Canadian company on the TSX Venture Exchange (Ticker Symbol: PYR) and on the OTCQB Marketplace (Ticker Symbol: PYRNF). 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 Company'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 Company with respect to future events and are subject to certain risks and uncertainties and other risks detailed from time-to-time in the Company's ongoing filings with the securities regulatory authorities, which filings can be found at www.sedar.com, or at www.otcmarkets.com. Actual results, events, and performance may differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements. The Company 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 TSX Venture Exchange, its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) nor the OTC Markets Group Inc. accepts responsibility for the adequacy or accuracy of this press release.
SOURCE PyroGenesis Canada Inc.
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