MONTREAL, Nov. 25, 2015 /CNW Telbec/ - PyroGenesis
Canada Inc. (http://pyrogenesis.com) (TSXV: PYR.V) (OTCQB: PYRNF) a
TSX Venture 50® clean-tech company (the "Company" or "PyroGenesis")
that designs, develops, manufactures and commercializes plasma
waste-to-energy systems and plasma torch products, announced today
its financial and operational results for the three and nine months
ended September 30th,
2015.
Highlights
Revenue recorded in Q3, 2015 increased by 12% to $1.4M, compared with $1.2M in Q3, 2014.
Revenue recorded for the first 9 months of 2015 remains flat
with prior year at $4.0M.
Excluding extraordinary revenue of $0.6M recorded during the first 9 months of 2014,
revenue recorded during the first 9 months of 2015 increased by
19%.
The order backlog as at November
25th, 2015 is confirmed at $16.0M.
Financial Summary
Revenue
PyroGenesis recorded revenue of $1,363,077 for the third quarter of 2015,
representing an increase of 12% compared to the $1,215,261 recorded in the same period of the
previous year.
During the first nine months of 2015 the Company recorded
revenue of $4,013,221, representing
an increase of 1% over revenue of $3,980,220 recorded during the first nine months
of 2014.
Revenue for the first nine months of 2014 benefitted from a
one-time credit of $620,000 related
to the termination of a project due to a customer's breach of
contract. This one-time credit was not repeated in the first nine
months of 2015. Excluding this one-time credit, PyroGenesis
recorded an adjusted revenue growth of $653,001, or 19%, for the first nine months of
2015.
Revenue recorded in the first nine months of 2015 was generated
primarily from (i) work completed under PyroGenesis' project to
design, manufacture and supply ten plasma-based powder production
systems for 3D printing to an Asian client, (ii) advances made on
two R&D projects incorporating novel plasma based technologies
in the oil and gas industrial sector, and (iii) progress made on
various contracts in the defense sector, specifically 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.
Backlog
Management has dedicated the Company's business development
resources to high value niche markets, other than those within the
US military, for more than 2 years. As a result, PyroGenesis has
diversified into 3 additional business sectors (Additive
Manufacturing, Oil & Gas, and Metals & Mining) operating in
multiple geographical locations. The benefits of this strategic
diversification have generated a backlog of signed contracts
totalling $16.0 million that
Management expects to be recorded as revenue prior to the end of
fiscal 2016.
Cost of Sales and Services
In Q3, 2015 cost of sales and services before amortization of
intangible assets amounted to $989,362, representing an increase of 37% over
the $722,860 recorded in Q3, 2014. On
a year-to-date basis, the cost of sales and services before
amortization of intangible assets increased by 48% to $3,012,263 compared with $2,039,701 during the same period of the previous
year.
Various factors, including, but not limited to, mix of long and
short-term manufacturing projects, project complexity and scale,
and 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 labour, materials and equipment may be
significantly different.
During the first nine months of 2015 employee compensation,
subcontracting costs, and the cost of direct materials increased to
$1,386,330 (2014: $894,708), $265,139
(2014: $42,503) and $1,118,762 (2014: $769,171) respectively. The costs incurred in
2015 are directly attributable to the work completed under
PyroGenesis' project to design, manufacture and supply ten
plasma-based powder production systems for 3D printing to an Asian
client, together with advances made on two R&D projects
incorporating novel plasma based technologies in the oil and gas
industrial sector, 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.
Throughout the first nine months of 2015, many of PyroGenesis'
engineering and R&D resources were concentrated on accelerating
progress on the Company's revenue generating projects, as opposed
to research and development activities. As a result, costs of goods
sold for the year-to-date increased significantly and, whilst this
has negatively impacted gross margins in fiscal 2015 thus far,
Management believes that upon completion of these projects, gross
margins will be in line with previous estimates. Furthermore,
Management believes that the Company will gain significant future
financial benefit from the additional intellectual property
generated through the investment in this project acceleration
programme, with the filing of:
- a provisional patent for a one step process using plasma for
producing high purity silicon from silica, PUREVAP™, a proprietary
process that uses a plasma arc within a vacuum furnace to produce
high purity, metallurgical grade silicon (MG-Si), solar grade
silicon (UMG Si) and polysilicon from quartz, and
- a provisional patent for a new Plasma Atomization Process
("PAP"), a new process enabling PyroGenesis to produce metallic
powders at higher production rates whilst, at the same time,
controlling powder size distribution. PyroGenesis expects to file a
world-wide patent application for its PAP by the end of Q2,
2016.
The amortization of intangible assets of $349,268 in Q3, 2015 (2014: $349,268) relates to licenses and know-how
purchased in 2011 from a company under common control. This expense
is a non-cash item and the underlying asset will be fully amortized
by the end of 2016.
Gross Margin
In Q3, 2015 the Company generated a gross margin before
amortization of intangible assets of $373,715, representing 27.4% of revenue. This
compares with a gross margin before amortization of intangible
assets of $492,401, representing
40.5% of revenue, in Q3, 2014.
Year-to-date gross margin before amortization of intangible
assets for 2015 and 2014 were $1,000,958 (24.9%) and $1,940,519 (48.8%) respectively. Included in the
gross margin achieved in the first nine months of 2014 is the
revenue recognition of $620,000
related to billings in excess of costs and profits on uncompleted
contracts in respect of the termination of a project due to a
customer's breach of contract. No costs were applicable against
this one-time revenue benefit and the one-time benefit was not
repeated in the first nine months of 2015. Excluding this one-time
benefit, the gross margin achieved in the first nine months of 2014
was $1,320,519, or 39.8%.
Selling, General and Administrative Expenses
In Q3, 2015 selling, general and administrative expenses
("SG&A") totalled $1,121,932,
representing an increase of 4% compared to $1,082,803 recorded in Q3, 2014. Excluding costs
associated with share-based compensation (a non-cash item in which
options vest over a four year period) SG&A increased by 2%,
from $1,032,803 in Q3, 2014 to
$1,048,876 in Q3, 2015.
Year-to-date SG&A totalled $3,421,520 in 2015, compared with $3,109,362 in the same period of 2014,
representing an increase of 10%. Excluding the costs associated
with share-based compensation, SG&A increased by 8%, from
$2,930,862 in the first nine months
of 2014 to $3,165,332 in the first
nine months of 2015. The increase in year-to-date SG&A is
attributable to the net effect of:
- a decrease of 11% in employee compensation, primarily due to
the departure of two senior executives previously employed in
administrative functions,
- an increase of 53% for professional fees, primarily due to
increased levels of external investor relations services, business
development, and accounting services,
- an increase of 41% in office and general costs, primarily due
to an increase in rent and related taxes, together with increased
communications expenses,
- Travel costs increased 34%, primarily due to increased Business
Development activities in international markets,
- Government grants increased by 112% due to the improved volume
of the Company's projects that are eligible for grants, and
- Other expenses decreased 6%, primarily due to lower insurance
premiums.
Separately, share based payments increased 44% as a result of
the vesting structure of the stock option plan and for new options
that were issued throughout the first nine months of 2015.
Research and Development ("R&D") Costs
In Q3, 2015 the Company incurred $32,743 on internal R&D project costs, net of
grants. This compares with $36,102
for Q3, 2014 and represents a decrease of 9%. For the nine months
ended September 30th,
2015, net spending on internal R&D projects was $88,862 versus $164,802 during the same period of fiscal 2014,
representing a decrease of 46%.
The decrease in both the third quarter and year-to-date R&D
expenditure is, as previously noted, primarily attributable to the
fact that many of the Company's resources were concentrated on
accelerating progress on the Company's revenue generating projects,
as opposed to research and development activities.
Financing Charges
Financing charges in Q3, 2015 totalled $137,907 compared with $19,970 for Q3, 2014. Year-to-date financing
charges were $286,765 in the first
nine months of 2015, compared with $197,274 in the same period of 2014.
The increase in year-to-date financing charges relates primarily
to the quarterly interest payable on the convertible debenture,
together with the accretion and amortisation of financing costs of
the convertible debenture, since March
30th, 2015.
Financing charges would have decreased significantly in Q3, 2015
due to the conversion of $6,000,000
of debt to equity which took place in May
2014 (see note 15(i) of the 2014 Audited Financial
Statements) but was offset by the interest, accretion and financing
costs associated with the new convertible debentures issued on
March 30th, 2015.
Total Comprehensive Loss
The comprehensive loss in Q3, 2015 totalled $1,267,748 compared with a comprehensive loss of
$995,695 in Q3, 2014, representing an
increase of 27%. The comprehensive loss for the first nine months
of 2015 amounted to $3,842,948,
compared with a loss of $2,577,576
for the first nine months of 2014, representing an increase of
49%.
The increase of $1,265,372 in the
comprehensive loss for the first nine months of fiscal 2015 is
primarily attributable to:
- a one-time benefit of $620,000 in
2014 in respect of the termination of a project due to a customer's
breach of contract, which increased revenue at 100% gross
margin,
- a reduction in gross margin of $319,561 arising from increased costs of goods
sold, which is partly attributable to the mix of projects under
construction, but also due to the fact that many of the Company's
engineering and R&D resources were concentrated on accelerating
progress on the Company's revenue generating projects, as opposed
to research and development activities.
- an increase in SG&A expenses of $312,158, primarily related to increased
professional fees, increased travel expenses and an increase in
office and general costs, partly offset by decreases in employee
compensation and higher government grants,
- a decrease in R&D expense $75,940, primarily due to the fact that many of
the Company's engineering and R&D resources were concentrated
on accelerating progress on the Company's revenue generating
projects, as opposed to research and development activities.
- an increase in financing charges of $89,491 that is primarily due to interest payable
and an accretion expense in respect of the convertible debenture
financing of March 2015, partly
offset by reduced interest due to the conversion of $6,000,000 of debt to equity in May 2014.
Adjusted EBITDA
The Adjusted EBITDA loss for Q3, 2015 was $666,314 compared with an Adjusted EBITDA loss of
$531,629 for Q3, 2014. The Adjusted
EBITDA loss for the first nine months of 2015 was $2,129,586 compared with an Adjusted EBITDA loss
of $1,024,660 for the first nine
months of 2014.
The increase of $1,104,926 in the
Adjusted EBITDA loss for the first nine months of fiscal 2015
attributable to the increase in comprehensive loss of $1,265,372 for the period, as previously
described, plus the reduction for the depreciation on property and
equipment of $6,733 less both the
increased financing charges of $89,491 and the increased cost of other non-cash
items, specifically share-based payments, of $77,688.
Liquidity
During the first nine months of 2015, the primary sources of
funding for the Company have been cash generated from projects and
private placements. In March 2015,
the Company completed a private placement which resulted in the net
proceeds (gross proceeds minus cash commissions and convertible
debentures issue costs) of $2,957,804. The proceeds from these offerings
have been used to fund operations and strengthen the Company's
working capital position.
At September 30th,
2015, the Company had cash on hand of $268,704 and positive working capital of
$1,005,977 compared with a cash
balance of $362,183 and positive
working capital of $1,502,802 at
December 31st, 2014.
Although the Company has significantly increased its backlog of
new projects, this is not expected to have a positive impact on
cash flow until the end of 2015 or early 2016; the active projects
during the first nine months of 2015 have not produced sufficient
positive cash flow to fund operations. Based upon the current
backlog, together with the pipeline of prospective new projects,
cash flows from operations are expected to be positive in the near
future.
On March 30th, 2015,
the Company completed a financing and raised $4 million through an issuance of convertible
debentures, which mature 3 years from the date of issuance and bear
interest, paid quarterly, at 7.5% per annum. As part of this
offering, $755,000 of existing debt
was converted into convertible debentures, thereby further
strengthening the balance sheet.
About PyroGenesis Canada Inc.
PyroGenesis Canada Inc., a TSX Venture 50® clean-tech company,
is the world leader in the design, development, manufacture and
commercialization of advanced plasma processes. We provide
engineering and manufacturing expertise, cutting-edge contract
research, as well as turnkey process equipment packages to the
defense, metallurgical, mining, advanced materials (including 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. Our 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. Our operations are
ISO 9001:2008 certified, and have been 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 OTCQB accepts responsibility for the
adequacy or accuracy of this press release.
SOURCE PyroGenesis Canada Inc.