PyroGenesis Announces 2023 Second Quarter Results

During the six-months ended June 30, 2023, the Company incurred $1.1 million of R&D costs on internal projects, a decrease of $0.2 million as compared to $1.3 million for the same period in the prior year. The decrease is mainly due to lower levels of R&D activities requiring subcontracting and material and equipment, decreasing to $0.2 million as compared with $0.7 million, a decrease of $0.5 million, which is offset by the increase in other expenses to $0.4 million compared to $0.2 million for the same period in the prior year.

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).

Financial Expenses

Finance costs for Q2 2023 represent an income of $0.9 million as compared with an expense of $0.2 million for Q2, 2022, representing a favourable variation of $1.1 million year-over-year. The decrease in finance expenses in Q2 2023, is primarily due as the Company determined that a milestone related to the business combination would not be achieve and therefore, a reversal of the liability was recorded.

During the six-month period ended June 30, 2023, the finance costs represent an income of $1.8 million as compared with an expense of $0.3 million for the 2022 comparable period, representing a favourable variation of $2.2 million year-over-year. The decrease in finance expenses is primarily due to the revaluation of balance due on business combination due to the Company’s Italian subsidiary and a customer who both agreed on the final acceptance of a contract, prior to final completion and the Company determined that a milestone related to the business combination would not be achieved. As a result, the contract did not attain the pre-determined milestone in connection with the balance due on business combination, and reversals of the liabilities were recorded.

Strategic Investments

During the three-months ended June 30, 2023, the adjustment to fair market value of strategic investments for Q2, 2023 resulted in a loss of $1.2 million compared to a loss in the amount of $7.5 million in Q2, 2022, a favorable variation of $6.2 million.

During the six-months ended June 30, 2023, the adjustment to fair market value of strategic investments resulted in a loss of $0.9 million compared to a loss in the amount of $6.3 million for the same period in the prior year, a favorable variation of $5.4 million. The decrease in loss for the three and six-month periods ended June 30, 2023, is attributable to the variation of the market value of the common shares and warrants owned by the Company of HPQ Silicon Inc.

Comprehensive Loss

The comprehensive loss for Q2, 2023 of $6.3 million compared to a loss of $13.0 million, in Q2, 2022, represents a variation of $6.7 million, and is primarily attributable to the factors described above, which have been summarized as follows:

  • a decrease in product and service-related revenue of $2.8 million arising in Q2, 2023,
  • a decrease in cost of sales and services of $1.4 million, primarily due to a decrease in subcontracting, direct materials, and manufacturing overhead and other, offset by the increase in employee compensation, foreign exchange charge on materials, and amortization of intangible assets,
  • a decrease in SG&A expenses of $0.7 million arising in Q2, 2023, was primarily due to a decrease in professional fees, office and general and other expenses, offset by increases in employee compensation, travel, depreciation of property and equipment, depreciation of ROU assets, foreign exchange charge on materials, and the allowance for credit loss of $0.7 million,
  • a decrease in share-based expenses of $0.9 million
  • a decrease in R&D expenses of $0.06 million primarily due to a decrease in subcontracting, materials and equipment, and an increase in employee compensation, investment tax credits and other expenses,
  • a decrease in finance costs (income), net of $1.1 million in Q2, 2023 primarily due to the revaluation of balance due on business combination,
  • a favourable variation in the fair market value of strategic investments of $6.2 million,
  • a decrease in income taxes of $0.02 million in Q2, 2023.

The comprehensive loss for the six-month period ended June 30, 2023, of $12.5 million compared to a loss of $17.1 million, for the same period in the prior year, represents a variation of $4.6 million, and is primarily attributable to the factors described above, which have been summarized as follows:

  • a decrease in product and service-related revenue of $4.4 million,
  • a decrease in cost of sales and services of $2.5 million, primarily due to a decrease in subcontracting, direct materials, manufacturing overhead and other, and investment tax credits, offset by the increase in employee compensation foreign exchange charge on materials, and amortization of intangible assets,
  • an increase in SG&A expenses of $1.3 million was primarily due to an increase in employee compensation, travel, depreciation in property and equipment, foreign exchange charge on materials, and the allowance for credit loss of $2.1 million which is offset by a decrease in professional fees, office and general, and other expenses,
  • a decrease in share-based expenses of $1.6 million
  • a decrease in R&D expenses of $0.2 million primarily due to a decrease in subcontracting and material and equipment and an increase in employee compensation, investment tax credits and other expenses,
  • a decrease in net finance costs (income) of $2.2 million is primarily due to the revaluation of balance due on business combination,
  • a favourable variation in the fair market value of strategic investments of $5.4 million,
  • a decrease in income taxes of $0.08 million.

Liquidity and Capital Resources

As at June 30, 2023, the Company had cash of $0.8 million, included in the net working capital deficiency of $3.2 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, the proceeds available from the strategic investment and 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, 2023 was $391,564, and varied only slightly since December 31, 2022. The increase from January 1, 2022 to December 31, 2022, was mainly attributable to the additional proceeds received 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. The average interest expense on the other term loans was 7.2% in the period. The Company does not expect changes to the structure of term loans in the next twelve-month period. The Company maintained one credit facilities which bears interest at a variable rate of prime plus 1%, therefore 7.95% at June 30, 2023. The Company reimbursed a portion of the credit facilities during Q2 2023, and extended the due date of the remaining balance, while maintaining the similar conditions.

About PyroGenesis Canada Inc.

PyroGenesis Canada Inc., a high-tech company, is a proud 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 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 of PyroGenesis are ISO 9001:2015 and AS9100D certified, having been ISO certified since 1997. For more information, please visit: www.pyrogenesis.com .

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