PyroGenesis Announces 2023 Second Quarter Results

These discussions are very positive, both in regards to the ongoing payment plan, and in regards to a potential substantial new order of additional Drosrite™ systems, as the client’s cash flow pressures and their new business opportunities move closer to resolution.

Innovation Grants: as mentioned in the Q1 outlook on May 15 the Company has applied for grants tailored to technology innovation and/or carbon reduction, and expects to have results regarding these applications. This situation has progressed very positively, and the Company is awaiting formal government announcement of the grants before it is legally allowed to indicate specifics.

      (ii)    Commodity Security & Optimization

Negotiations for Multiple Metal Powder Orders: Negotiations with companies for commercial orders of the Company’s metal powders continues, as projected within the Company’s Q1 outlook for Q2. As noted above, in Q2 the Company announced a first by-the-tonne contract for titanium metal powder of 5 metric tonnes, with an option for 6 additional tonnes.

Product Qualification Process for Global Aerospace Firm: Based on information flow between the Company and the aerospace client previously announced, the Company believes that the 2-year long qualification process to approve the Company’s titanium metal powers for use by a global aerospace firm and their suppliers, will conclude in the near term. This project continues to move forward positively.

      (iii)    Energy Transition & Emission Reduction

Plasma Torch Order: As mentioned in the Q1 outlook for Q2, on May 15, the Company was in advanced discussions with an international entity, whereby a plasma torch contract, if signed, would be between $3-$4 million. Post quarter end, on August 1, 2023, the Company received a signed contract for this project, for $4.1 million, with a confidential US-based aeronautics and defense client.

Iron Ore Pelletization Torch Trials: As mentioned in the Q1 outlook on May 15, in April 2023, the commissioning of the plasma torch systems, for use in Client B’s pelletization furnaces, was underway, with the Company’s engineers onsite at the Client’s iron ore facility. The commissioning process includes installation, start-up, and site acceptance testing (SAT). “Client B” is the customer to whom the Company previously announced that it had shipped four 1 MW plasma torch systems for use in Client B’s iron ore pelletization furnaces, for trials toward potentially replacing fossil-fuel burners with plasma torches in the Client’s furnaces.

This project continues to move forward. The Client recently suffered a series of unfortunate technical events that caused delays of several weeks, as a result of damaging regional torrential rain storms and flooding that caused significant impairment to the facility’s electrical system and furnace components. Repairs have been ongoing. The Company’s plasma torches have been installed and activated, and the final commissioning and site acceptance testing has resumed, with expectation for final SAT completion within the next few weeks or sooner.

Pyro Green-Gas: The Company’s wholly-owned subsidiary is expected to sign a contract with an approximate value of between $10-$15 million in connection with a renewable natural gas project.

Aluminum Remelting Furnaces: The Company has been working on the development of aluminum remelting furnace solutions using plasma, for use by secondary aluminum producers or any manufacturer of aluminum components that uses recycled or scrap aluminum.

With gas-fired furnaces responsible for much of the scope 1 emissions of secondary aluminum production, aluminum companies have been searching for solutions that can help in the decarbonization efforts of aluminum remelting and cast houses.

The Company has two concepts: the retro-fitting of plasma torches in existing remelting and cast house furnaces that currently use other forms of heating, such as natural gas; and the manufacturing and sale of a PyroGenesis produced furnace based off the Company’s existing Drosrite metal recovery furnace design, which has been in use commercially for several years.

The Company has been working with a number of different companies over the past few years towards these goals. The results from the conclusion of recent major tests, conducted in conjunction with these companies, have been very positive, and negotiations are underway for next step deployments and sales, with announcements forthcoming.

Status as a Dual-Listed Publicly Traded Company

As part of the Company’s proactive risk management strategy, it is currently evaluating the costs and benefits of maintaining a dual listing on both Nasdaq and the TSX. This ongoing evaluation entails an analysis of several key factors, including (i) the financial costs associated with being on each exchange, such as insurance costs, regulatory compliance costs, legal fees, and accounting fees, (ii) the volume of trading on both exchanges, and (iii) the regulatory and compliance requirements of each exchange.

Costs to PyroGenesis associated to its dual listing in the US are considerable, with incremental US-specific fees related to directors & officer insurance, legal, listing and filings, and accounting, of more than $2.2 million.

The Company has until November 20, 2023 to regain the Nasdaq’s minimum US$1 bid compliance for ten consecutive trading days. Management will continue to monitor the situation and conduct its analysis, and will provide material updates as they occur.

Please note that projects or potential projects previously announced that do not appear in the above summary updates should not be considered as at risk. Noteworthy developments can occur at any time based on project stages, and the information presented above is a reflection of information on hand.

Financial Summary

Revenues

PyroGenesis recorded revenue of $3.0 million in the second quarter of 2023 (“Q2, 2023”), representing a decrease of $2.8 million compared with $5.8 million recorded in the second quarter of 2022 (“Q2, 2022”). Revenue for the six-month period ended June 30, 2023, was $5.6 million, a decrease of $4.4 million over revenue of $10.1 million compared to the same period in 2022.

Revenues recorded in the three and six-months ended June 30, 2023, were generated primarily from:

Revenues recorded in Q2 2023 were generated primarily from:

  • PUREVAP™ related sales of $445,840 (2022 Q2 - $820,972)
  • DROSRITE™ related sales of $115,325 (2022 Q2 - $436,538)
  • Development and support services related to systems supplied to the US Navy $813,125 (2022 Q2 - $591,099)
  • Torch related sales of $561,942 (2022 Q2 - $1,707,152)
  • Refrigerant destruction (SPARC™) related sales of $187,444(2022 Q2 – $0)
  • Biogas upgrading & pollution controls of $618,070 (2022 Q2 - $2,181,107)
  • Other sales and services $297,733 (2022 Q2 - $110,312)

Q2, 2023 revenues decreased by $2.8 million, mainly as a result of:

  • PUREVAP™ related sales decreased by $0.4 million due to the completion of the project and initial phase of testing, with additional three-month testing requested by the customer and currently ongoing,
  • DROSRITE™ related sales decreased by $0.3 million due to continued customer delays in funding for the construction of the onsite facility. Based on the customers updated projected schedule and ongoing positive discussions, the new expectation aims to have the equipment installed, commissioned and fully operational by end of the year,
  • Torch-related products and services decreased by $1.1 million, due to the final phase of the project being completed with the installation and commissioning at the customers facility. Three-month onsite support currently ongoing and scheduled to be completed by the end of the third quarter, with an option to extend to six and nine-month support at the discretion of the customer,
  • Biogas upgrading and pollution controls related sales decreased by $1.6 million due to continuous testing to achieve desired results and due to the Company’s Italian subsidiary and a customer who both agreed on the completion of the project during the first quarter of 2023, with no additional revenues recorded by the Company’s Italian subsidiary for Q2, 2023 ($0.9 million – Q2, 2022),

During the six-month period ended June 30, 2023, revenues decreased by $4.4 million, mainly as a result of:

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