MONTREAL, April 30, 2019 (GLOBE NEWSWIRE) -- PyroGenesis Canada Inc. (http://pyrogenesis.com) (TSX-V: PYR) (OTCQB: PYRNF), a high-tech company, (the "Company", the “Corporation” or "PyroGenesis") that designs, develops, manufactures and commercializes plasma atomized metal powder, plasma waste-to-energy systems and plasma torch products, today announced its financial and operational results for the fourth quarter and the fiscal year ended December 31, 2018.
“2018 was significantly affected by management’s decision to pursue strategic partnerships at the expense of revenues. However, as a result, we have press released imminent contracts in excess of $32MM with associated future revenues in excess of that,” said Mr. P. Peter Pascali, President and CEO of PyroGenesis. “Therefore if 2018 was the year in which the Company successfully positioned itself with unique and strategic partnerships, geared to effectively accelerate commercialization, then 2019 is the year that bears the fruit of that strategy. We strongly recommend that these financials be viewed in this context.”
2018 was a year in which PyroGenesis posted:
- Revenues of $5,030,116, a decrease of 30% from $7,192,861 year over year;
- Gross margin of 22.1% a decrease of 21.4% year over year;
- R&D costs of $892K, an increase of 208% from $290K year over year, the increase is related to torch development and plasma atomization related expenses;
- Leasehold improvements of $821K were spent to build a clean room for Plasma atomization system;
- A Modified EBITDA loss of $5.3MM compared to a Modified EBITDA loss of $1.45MM year over year;
- Backlog of signed contracts as of the date of this writing is $7.7MM;
- Cash on hand on December 31, 2018 was $645K (December 31, 2017: $623K).
Outlook
2018 was a year in which PyroGenesis successfully positioned each of its commercial business lines for rapid growth by strategically partnering with multi-billion-dollar entities who have identified PyroGenesis’ offerings to be unique, in demand, and of such a commercial nature as to warrant such unique relationships.
By the end of 2018 PyroGenesis could boast of a unique relationship with a multi-billion-dollar entity in each of its three commercial offerings:
| 1) The US Navy within the Military/Environmental sector;
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| 2) A Japanese trading house within the DROSRITETM (tolling) offering; | |
| 3) Aubert & Duval within the Additive Manufacturing/3D printing (“AM”) offering. |
Most companies would be thankful for one such relationship, but PyroGenesis has successfully developed three.
It became readily apparent to management that partnering with the right entity could significantly accelerate commercialization in each of its new business lines. This however, would come with a cost in 2018. In order to succeed, PyroGenesis would have to dedicate significant resources to demonstrating the value proposition, and capabilities, to these entities. This meant that assets which should have been dedicated to sales now had to be deployed to developing these relationships. This not only impacted revenues, but it also increased costs of non-paying projects.
If 2018 was the year in which the Company successfully positioned itself with unique and strategic partnerships, geared to effectively accelerate commercialization, then 2019 is the year that bears the fruit of that strategy.
To date, PyroGenesis has announced that it should be awarded a two-ship build for its PAWDS unit shortly, for approximately $12.5MM. Add to this the recently announced potential contract with 1st year revenues of $20MM ($30-$50MM in subsequent years revenues) and the impact of this strategy is apparent: over $30 MM in revenues over the next 18 months. Approximately 6x 2018 revenues.
With these two contracts in hand alone, 2019 will be a profitable year.
2019 should also be the year in which the Company takes steps, outside of the ordinary course of business, to unlock additional value for investors.
One such step that has been announced is the spin-off of the Company’s additive manufacturing capabilities. Management has decided that, given all it knows, that a spin off at this time should unlock additional value for investors as it would:
| (i) | Attract an investor base best suited to the Company’s AM value proposition, particular business operations, and financial characteristics. There are large pools of money interested in investing in the AM space, but have no desire to have their funds comingled with unrelated business lines. A spin-off would assure them that such funds would be used for AM alone. |
| (ii) | Maximize shareholder value by placing the spin-off in a better position to generate revenues and develop strategic relationships than had it remained part of the PyroGenesis stable of technologies |
| (iii) | Simplify the offering making it easier for analysts to understand and value it properly . As it stands now PyroGenesis Additive is part of PyroGenesis Canada Inc’s offerings which include Drosrite™, US Military, and Purevap™, just to name a few, and as such makes it complicated to analyze. Last but not least, a spin-off creates a well understood entity with which interested parties could joint venture or acquire. |
Another step, which is likewise outside the ordinary course of business, and is geared to unlocking shareholder value, is the previously announced up-listing of the Company’s stock to a more senior exchange other than the one the Company is currently on.
There are other steps, outside the ordinary course of business, that the Company is considering to increase shareholder value and these will each be announced in due course.
2019 is positioned to be the first year, of many, that will bear the fruit of strategic decisions made in the recent past.
Financial Summary
Revenue
PyroGenesis recorded revenue of $5,030,116 in the year of 2018, representing a decrease of 30% compared with $7,192,861 recorded in the year of 2017.
Revenues recorded in fiscal 2018 were generated primarily from:
| (i) | PUREVAP™ related sales of $1,781,009 (2017 - $2,330,691); | |
| (ii) | DROSRITE™ related sales of $1,237,740 (2017 - $98,391)); | |
| (iii) | Support services related to PAWDS-Marine Systems supplied to the US Navy $1,451,998 (2017 - $4,337,681). | |
| (iv) | Other sales and services $559,369 (2017 - $426,098) |
Cost of Sales and Services and Gross Margins
Cost of sales and services before amortization of intangible assets was $3,860,493 in 2018, representing a decrease of 5% compared with $4,065,894 in 2017.
In 2018, employee compensation, direct materials and manufacturing overhead decreased to $3,590,381 (2017 - $4,338,252) while subcontracting increased to $364,463 (2017- $98,256). The gross margin for 2018 was $1,109,297 or 22.1% of revenue compared to a gross margin of $3,126,967 or 43.5% of revenue for 2017.
