PyroGenesis Announces Q1 2018 Results

MONTREAL, May 30, 2018 (GLOBE NEWSWIRE) -- PyroGenesis Canada Inc. (http://pyrogenesis.com) (TSX-V:PYR) (OTCQB:PYRNF), a high-tech company (the “Company” or “PyroGenesis”) that designs, develops, manufactures and manufactures and commercializes advanced plasma processes and plasma torch products, is pleased to announce today its financial and operational results for the first quarter ended March 31, 2018.

Q1 2018 results reflect the following highlights:

  • Revenues increased 21% to $2.1MM in Q1 2018 from $1.7MM posted in Q1 2017;
  • Gross profit of 34.3%represents a decrease of 17.3% over the same period in Q1 2017,
  • An amount of $600K has been spent and capitalized for the plasma atomization system and related development,
  • A Modified EBITDA loss of $545K an increase of 207% over the same period in Q1 2017,
  • Backlog of signed contracts as of the date of this writing is $5.2MM,
  • Cash on hand at quarter end: $2.5MM (December 31st , 2017: $623K).

OUTLOOK

2017 was a year in which all key indicators of operational performance posted significant gains and positioned the Company for profitability in the future.  Building upon the successes of 2016, which saw the establishment of healthy gross margins, in excess of 40% that continued and improved throughout 2017, as the Company put in place the infrastructure and personnel to ensure that these margins, not only continue into the foreseeable future, but improve once powder production is in full commercialization.

The following is a non-exhaustive review of PyroGenesis’ main commercial activities:

A) Powder Production:

2017 became the year in which the Company went from relative obscurity within the additive manufacturing industry, to being nominated “Materials Company of the Year” at the 3D Printing Industry Awards 2018. 

During this period, not only,  did the Company successfully assemble and commission its first metal powder production system, but also  (i) successfully delivered orders for Titanium and Inconel powders, all while still in the ramp up phase, (ii) generated new IP which provides for more control over particle size distribution, with little to no waste, while increasing powder production even further, and (iii) entered into several NDA’s  with significant players in the industry (end users, printer manufacturers, and distributors) all with a view of providing sample orders, repeat orders, long term orders, contract R&D, and/or strategic partnerships for long term powder supply contracts, some with a view to a possible acquisition.  Given the level of activity, and the prospect of significant orders in the near term, management decided to order the long lead items for two powder production systems, both of which should be fully operational during the summer 2018. These new powder production units will incorporate some of the cutting-edge IP that has recently been developed and/or is in development.  We expect these units will cost significantly less to manufacture, generate higher production rates, and provide greater control over particle size distributions.

Of note, although the Company’s strategic plan has always been based on its existing IP, know-how, and system (the economics of which remain valid to this day), management has decided to leverage off of its significant advantage in plasma technology and dedicate certain limited assets to increasing its IP base with the goal of further significantly reducing capital and operating costs of the powder production system while at the same time improving production rates even further.  PyroGenesis is confident that these goals once achieved will significantly impact our build out strategy for the better.

The Company’s recent press release dated May 17th, 2018, which announced a contract for a minimum order of 10,000 kg over two years from Asia, came sooner than expected and, as such, highlighted the need to have the optimum industrialization plan in place to be executed on the back of a significant take-or-pay contract.  The Company has already taken steps to have an industrialization plan at the ready for multiple units (1, 3, and 5 units), and is now looking at ways to accelerate the technological advances mentioned above.

B) DROSRITE™

As the Company positioned itself, during 2017, to become a significant powder producer to the Additive Manufacturing Industry, it also successfully positioned its DROSRITE™ Furnace System to become a fully commercial product line in and of its own right.

2017 saw the commercial acceptance of PyroGenesis’ patented DROSRITE™ System with, not only an acceptance of its first commercial sale, but a subsequent re-order by the same client at a higher price.

During this time, successful demonstrations of the DROSRITE™ System in the Middle East and India has resulted in significant interest from those regions.  Of note, the Company’s demonstration unit is fully booked in India, to September, with paid-for-demonstrations. This flurry of activity and interest for the DROSRITE™ System resulted in the Company hiring a full-time business development manager to market the DROSRITE™ System, and who’s role is exclusively to secure DROSRITE™ system sales. PyroGenesis is aggressively targeting both primary aluminum smelters in Asia and the Middle East where the market is estimated to be in excess of 1 million tonnes of dross1, as well as tertiary casting producers worldwide. The Company has recently added zinc recovery from dross as a target market.  These markets alone represent a potential market for DROSRITE™ systems numbering in the hundreds of units.

Due to this high demand for on-site paid-for demonstrations, the Company is in the process of constructing a second DROSRITE™ demonstration system which is expected to be available for demonstrations in Q3 2018.  There is a high probability that PyroGenesis will be profitable in 2018 from DROSRITE™ system sales when combined with existing backlog.

C) US Military:

Originally it was thought that just one new US Aircraft Carrier would be ordered in 2018, with an estimated value of approximately $6MM, but now it seems that the interest is for two, for an estimated value of between $10-12 MM.

The chemical warfare destruction unit, that PyroGenesis developed for a consortium involving various groups within the US military, and was in the process of being tested, continues to have its schedule delayed accommodating other unrelated testing needs by the group.  This testing timeline is out of the Company’s control.

Revenues from military contracts in 2017 were over $4,300,000, mainly related to providing technical support, training services and sale of spare parts.  Over the past three years, revenues from military contracts have typically represented more than $2,000,000 per year of PyroGenesis’ revenues.  As the PAWDS technology becomes fully operational on US Navy ships, management expects the level of recurring revenues from the sale of parts and services to increase over the next 2 to 5 years.

D) HPQ:

On August 2, 2016, PyroGenesis announced that it had signed contracts totaling CAN$8,260,000 with HPQ Silicon Resources Inc., formally Uragold Bay Resources Inc. (“HPQ”) for the sale of IP and to provide a pilot system to produce silicon metal directly from quartz. Of particular note, if successful, PyroGenesis benefits from a 10% royalty on all revenues derived from the use of this system by HPQ, subject to annual minimums.

E) Torch Sales:

Consistent with the Company’s overall strategy to (i) remain 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, and (ii) to actively target recurring revenue opportunities that will generate a growing, and profitable, regular cash flow to the Company, the Company continues to market its torch capabilities and expects this to start becoming a revenue contributor, with its recurring revenue stream, in the very near future.

PyroGenesis has one of the largest concentrations of plasma expertise in the world, with over 250 years of accumulated technical experience and supporting patents, combined with unique relationships with major Universities performing cutting edge plasma research and development, positions the Company well to execute its strategies.

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