Revised to update 2015-Q2 EBITDA
MONTREAL, Sept. 1, 2015 /CNW Telbec/ - PyroGenesis
Canada Inc. (http://pyrogenesis.com) (TSXV: PYR.V), 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 six months
ended June 30, 2015.
2015-Q2 Highlights
2015-Q2 revenues increased by 37%, from $1.1 million to $1.5
million, over the previous quarter, but are down 22% from
the $2.0 million recorded in
2014-Q2.
Year-to-date revenues, at $2.7
million in the first 6 months of 2015, are broadly in line
with the $2.8 million recorded in the
first 6 months of 2014.
The current backlog as at August 28,
2015 stands at $15.7 million
and represents approximately 2.6 x revenues recorded for the 2014
fiscal year.
Financial Summary
Revenues
The Company posted revenues of $1,533,667 for the second quarter of fiscal year
2015 ended June 30, 2015 ("2015-Q2"),
a decrease of 22% as compared to the $1,958,534 reported in the same period of fiscal
2014. The revenues for 2015-Q2 resulted primarily from the
Company's progress on (i) work completed under phase 1 and phase 2
of the tactical mobile plasma system for destruction of chemical
warfare agents, (ii) the ongoing R&D projects incorporating
novel plasma based technologies in the oil and gas industrial
sector, and (iii) work completed on the Company's latest project to
manufacture ten plasma based powder production systems for 3D
printing.
Year-to-date revenues of $2,650,144 are down $114,815, or 4%, on revenues of $2,764,959 achieved in the same period of fiscal
2014. Year-to-date revenues were negatively impacted by the
termination of a customer's Development Use and Commercialization
Agreement related to PyroGenesis' SPARC™ Technology. As such, no
revenue could be generated for this project.
The majority of revenues associated with signed backlog are
expected to impact revenues in the second half of 2015 and first
half of 2016.
Cost of Sales and Services
Cost of Sales and Services before amortization of intangible
assets increased 45% to $1,208,578,
in 2015-Q2 as compared to $833,700
posted in the same quarter of fiscal 2014. On a year-to-date basis,
the cost of sales and services before amortization of intangible
assets was $2,022,901 as compared to
$1,316,841 for the same period in the
prior year, an increase of 54%.
The type of contracts being executed and the nature of project
activity during any given quarter has a significant impact on both
the overall level of cost of sales and services reported in a
period, as well as the composition of the cost of sales and
services, as the mix between labour and materials and equipment may
be significantly different.
A key development impacting gross margins in 2015-Q2 was again
the utilization of many of the Company's engineering and research
& development resources on accelerating the development and
implementation of projects that would have otherwise been committed
to advancing the implementation of current live projects. Although
this has significantly increased Cost of Goods Sold in the first
six months of fiscal 2015, management believes that these resources
accelerated the progress of certain projects, and that gross
margins upon completion of these projects will be in line with
previous estimates, and will be more reflective of recent
trends.
The number of projects/contracts the Company is currently
executing, and has under development, has increased significantly.
The Company has continued to invest in reducing fixed manufacturing
costs and streamlining its operating procedures, and management
firmly believes that the Company is well positioned to address this
higher business volume. All manufacturing overhead costs are fully
applied against Cost of Sales and Services.
The amortization of intangible assets of $349,269 in 2015-Q2 ($349,268 in 2014-Q2) 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.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") for
2015-Q2 were $1,108,072, an increase
of 3% as compared to $1,079,641
reported during the same quarter of fiscal 2014. The costs
associated with share-based compensation (a non-cash item in which
options vest over a four year period) commenced in the third
quarter of 2011 when the stock option plan was put in place.
SG&A before share based payments increased by 7% in 2015-Q2 as
compared to the same quarter of the prior fiscal year and 12% on a
year-to-date basis for the six months ended June 30, 2015.
Within SG&A are costs associated with corporate
administration, business development, proposals, operations
administration, investor relations and employee training.
Of note, during 2013, management decided to dedicate business
development resources to other high value niche markets other than
those within the US military. It is expected that there will be a
natural lag between incurring business development related expenses
and the resulting increase in revenues. This commitment resulted in
record levels of signed backlog at fiscal year-end
2014.
Total SG&A expenses before share based payments increased 7%
to $1,074,391 for 2015-Q2 as compared
to $1,001,141 for the same period of
fiscal 2014, and relate to the following:
- Employee compensation decreased 4%, due to the departure of two
senior employees within the administrative function of the
Company.
- Professional fees increased 41% due to increased levels of
external investor relations services and business development
services.
- Travel costs increased 62%, due to increased Business
Development activities in international markets.
- Government grants increased by 127% due to progress made on a
long-term development project that is supported by the Industrial
Research Assistance Program of the National Research Council
Canada.
- Other expenses decreased 21%.
Separately, share based payments decreased 57% as a result of
the vesting structure of the stock option plan. New options were
issued in 2015-Q2, of which $12,969
has been expensed when options were granted.
Research and Development ("R&D") Costs
In 2013, management made the strategic decision to increase the
level of R&D funding, and to account and disclose the net costs
incurred on these projects as a separate line item in the Statement
of Comprehensive Loss. Management believes that internally funded
R&D projects will become a significant source of new business
opportunities, and as such, this new reporting reflects
management's commitment to such. Prior to 2013, all of the
Company's R&D work was done as part of contract research
services as well as with externally client funded projects, some of
which were R&D tax credit expenditure eligible. However, during
the first six months of 2015, many of our R&D resources that
would customarily work on internal R&D projects were engaged
with the delivery of certain customer orders as the Company deals
with record levels of current backlog.
During 2015-Q2, the Company incurred $26,995 in costs, net of grants, on internal
R&D projects as compared to $29,099 for the same quarter of fiscal 2014, a
decrease of 7% year-over-year. For the six months ended
June 30, 2015, net spending on
internal R&D projects was $56,119
versus $128,700 during the same
period of fiscal 2014, a decrease of 56%.
Financing Charges
Financing charges for 2015-Q2 were $137,334 as compared to $85,045 for the same period of the prior fiscal
year, an increase of 61% year-over-year.
Financing charges relate to:
- the interest component of the Company's debt, due to a related
party, that was paid during the period;
- the interest component of the convertible debenture that was
paid during the period; and
- the accretion and amortization of financing costs of the
convertible debenture.
Financing charges would have decreased significantly in 2015-Q2
due to the conversion of $6,000,000
of debt to equity which took place in May
2014 but was offset by the interest, accretion and financing
costs associated with the new convertible debentures issued end of
March 2015.
Total Loss and Total Comprehensive Loss
The Loss from operations for 2015-Q2 was $1,296,581 as compared to a Loss of $418,219 in the same quarter of fiscal 2014, an
increase of 210% year-over-year. Year-to-date, Loss from operations
was $2,575,859 as compared to
comparable losses of $1,582,982 for
the same period in 2014, an increase of 63%.
The total Comprehensive loss for 2015-Q2 was $1,296,111 as compared to a Comprehensive loss of
$417,153 in the same period of fiscal
2014, an increase of 211% year-over-year. Year-to-date,
Comprehensive loss was $2,575,200 as
compared to comparable losses of $1,581,881 for the same period in 2014, an
increase of 63%.
The increase in the Comprehensive loss in 2015-Q2 as compared to
2014-Q2 is primarily a result of: (i) acceleration of project
development in the quarter which resulted in significant increases
in Cost of Goods Sold; (ii) increase in professional services costs
within SG&A as a result of additional investor relations
activities, together with investments in our internal and external
reporting structure; and (iii) an increase in travel expenses
associated to increased sales and marketing
activities.
EBITDA
EBITDA (earnings from operations before interest, taxes,
depreciation and amortization) loss for 2015-Q2 was $768,193 as compared to an EBITDA of $59,762 for the same period of fiscal 2014.
Year-to-date, EBITDA loss was $1,646,404 as compared to comparable losses of
$621,531 for the same period in 2014.
The increase in the EBITDA (loss) in the quarter is due primarily
to lower gross margins resulting from the utilization of many of
the Company's engineering and research & development resources
on accelerating the development and implementation of projects that
would have otherwise been committed to advancing the implementation
of current live projects, as previously explained. EBITDA in
2015-Q2 was also negatively impacted by the increased investment in
investor relations activities, and additional spend on business
development with the goal to increase backlog and future
revenues.
Liquidity
During the first six 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 June 30, 2015, the Company had
cash on hand of $1,208,904 and
positive working capital of $2,219,657 (cash balance of $362,183 and positive working capital of
$1,502,802 at December 31, 2014).
Although the Company has significantly increased its backlog of
new projects, this will not impact cash flow until the 2nd half of
2015; the active projects in 2015-Q2 were not producing sufficient
positive cash flow to fund operations. Based on current
backlog and known pipeline of prospective new projects, cash flows
from operations are expected to be positive in the near future.
Separately, on March 30, 2015, the
Company raised an additional $4
million through an issuance of convertible debentures which
mature in three (3) years from the date of issuance and bear
interest at 7.5% per annum, paid quarterly. As part of this
offering, $755,000 of existing debt
was converted to 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). 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. 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 nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
SOURCE PyroGenesis Canada Inc.