PyroGenesis Announces 2023 Fourth Quarter and Year End Results

  • PUREVAP™ related sales decreased by $4.6 million due to the completion of the project and initial phase of testing and one-time $3.6 million sale of IP, in 2022, which was not repeated in the current fiscal year,
  • DROSRITE™ related sales decreased by $1.4 million due to the impact of the continued customer delays in funding for the construction of the onsite facility,
  • Support services related to systems supplied for the US Navy increased by $2.0 million due to the completion of several milestones and the increase in awarded contracts,
  • Torch-related products and services decreased by $2.2 million, due to the completion of the project, with the Company currently providing continuous onsite support,
  • SPARC™ related sales increased by $0.6 million due to the advancement of the project, and,
  • Biogas upgrading and pollution controls related sales decreased by $1.6 million due to the delivery of and agreed completion of projects during the comparable period of the previous year.

As of April 1, 2024, revenue expected to be recognized in the future related to backlog of signed and/or awarded contracts is $28.8 million. Revenue will be recognized as the Company satisfies its performance obligations under long-term contracts, which are expected to occur over a maximum period of approximately 3 years.

Cost of Sales and Services and Gross Margins

Cost of sales and services were $2.3 million in Q4 2023, representing an decrease of $0.5 million compared to $2.8 million in Q4, 2022, primarily due to a decrease of $0.1 million in employee compensation, a decrease of $0.3 million in direct materials, and a decrease of $0.2 million in foreign exchange on materials due to the reclassification of the expense from Cost of Sales and Services to Selling, General and Administrative expenses, which is in line with the decrease in product and service-related revenues, but offset by the increase in manufacturing overhead & other of $0.1 million.

The gross profit for Q4, 2023 was $0.7 million or 23% of revenue compared to a gross margin of $0.5 million or 15% of revenue for Q4 2022, the increase in gross margin was mainly attributable a reduction of manufacturing overhead, employee compensation and to the impact on foreign exchange charge on materials.

Fiscal 2023, cost of sales and services were $8.9 million compared to $10.9 million for the same period in the prior year, the $2.0 million decrease is primarily due to a decrease of $0.2 million in employee compensation (twelve-month period ended December 31, 2022 - $3.7 million), a decrease of $1.1 million in subcontracting (twelve-month period ended December 31, 2022 - $1.3 million) attributed to more work being completed in-house, a decrease in direct materials and manufacturing overhead & other of $1.5 million and $0.2 million respectively (twelve-month period ended December 31, 2022 - $4.7 million and $1.4 million respectively), due to lower levels of material required based on the decrease in product and service-related revenues and the positive impact of the foreign exchange charge on material of $Nil due to the reclassification of foreign exchange from Cost of Sales and Services to Selling, General and Administrative expenses.

The amortization of intangible assets for Q4, 2023 was comparable to Q4, 2022 and during the twelve-month period ended December 31, 2023, was $0.9 million compared to $0.9 million for the same period in the prior year. This expense relates mainly to the intangible assets in connection with the Pyro Green-Gas acquisition, patents and deferred development costs. These expenses are non-cash items, and the intangible assets 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, as 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.

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 Q4, 2023 were $9.4 million, representing a decrease of $1.0 million compared to $10.4 million for Q4, 2022. The decrease is primarily due to a decrease in share-based expenses of $0.6 million (Q4, 2022 - $1.3 million), a decrease in professional fees of $0.4 million (Q4, 2022 - $1.5 million), a decrease in office and general of $0.1 million (Q4, 2022 - $0.5 million), and a decrease of $4.2 million in expected credit loss & bad debt (Q4, 2022 - $4.5 million) offset by an increase in other expenses of $0.9 million (Q4, 2022 - $(0.1) million), an increase in foreign exchange charge of $0.3 million (Q4, 2022 - $Nil) and an increase in impairment of goodwill and changes in assumptions of cash flows of royalty receivables of $3.2 million (Q4, 2022 - $Nil).

During the twelve-month period ended December 31, 2023, SG&A expenses were $31.0 million, representing an increase of $1.9 million compared to $29.0 million for the same period in the prior year. The increase is mainly a result of employee compensation increasing by $1.5 million to $9.6 million (year ended December 31, 2022 - $8.1 million) mainly caused by additional headcount. As well, travel increased by $0.1 million to $0.4 million, the foreign exchange charge on materials was $0.3 million and goodwill impairment and changes in assumptions of cashflows from royalty receivables increased to $3.2 million. The expected credit loss and bad debt increased by $0.6 million due to an additional expense related to doubtful accounts and an amount related to the Company’s Italian subsidiary and a customer who both agreed on the final acceptance of a contract which resulted in the reversal of costs and profits in excess of billings on uncompleted contract. This was offset by the decrease of $1.0 million in professional fees, due to less legal, accounting and investor relation expenses, which are $4.1 million, compared to $5.1 million in the comparable period, a decrease in office and general, mainly related to the decrease of office expenses, to $1.0 million from $1.2 million, a variation of $0.2 million, compared to the year ended December 31, 2022, and to a decrease in government grants of $0.2 million.

Share-based compensation expense for the three and twelve-month periods ended December 31, 2023, was $0.7 million and $3.1 million, respectively (three and twelve-month period ended December 31, 2022 - $1.3 million and $5.5 million, respectively), a decrease of $0.6 million and $2.4 million respectively, which is a non-cash item and relates mainly to 2021, 2022 and 2023 grants.

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