eResearch | This week, PyroGenesis Canada (TSXV: PYR), released its 2019 annual results but used the opportunity to focus on recent client signings and current backlog that could result in near record revenue for the Company in 2020.
Headquartered in Montreal, PyroGenesis designs, develops, manufactures and commercializes plasma components and solutions, including waste-to-energy systems and plasma torches.
2019 Financial Results
PyroGenesis announced revenues of $4.8 million in 2019 versus $5.0 million in 2018, down 4% year-over-year, however the current backlog of signed contracts is over $30 million.
Gross margin improved by 5% reaching 27%, in-line with the Company’s expectations and correlated to the type of contracts being executed and the nature of the project activity. Adjusted EBITDA improved slightly to a loss of $4.5 million in 2019 versus an adjusted EBITDA loss of $6.2 million in 2018.
Although the cash position on December 31, 2019 was only $34,000 thus far in 2020, PyroGenesis has received over $1 million in payments under existing contracts, retired $3 million of a convertible debenture, bought back 1.2 million shares and had over $2 million of warrants converted with a further $8 million in-the-money warrants and options maturing by 2021.
PyroGenesis also has over $50 million in tax loss carryforwards to offset future profits, reducing future tax payments and improving cash flows.
2020 Revenue Drivers
Drosrite International
In October 2019, PyroGenesis announced the triggering of a contractual arrangement between PyroGenesis and Drosrite International LLC. According to PyroGenesis, the contract could generate $25 million over the next 12 months and annual payments of $3 million per year, along with a variable amount for the subsequent 18 years based on pre-established international benchmarks.
Drosrite is a U.S. based private company providing waste management technologies to the aluminum industry.
In March 2020, PyroGenesis announced it received the first payment of roughly $1.44 million under the Drosrite contract and a second payment of $1.4 million was received in April.
“The receipt of this first payment marks an important milestone for PyroGenesis as it triggers the official beginning of the project between Drosrite and their client, in terms of benchmarks and deadlines,” said Peter Pascali, President and CEO of PyroGenesis.
US Tunneling Company
On April 1, PyroGenesis announced a contract with a U.S. based tunneling company and received an initial payment of $0.55 million with a subsequent payment of $0.46 million later in April.
PyroGenesis is expected to develop and supply high-powered plasma torches, specifically designed for tunneling applications. The Company will be involved in all aspects of design and development of the project.
“We are proud to be able to announce this relationship, particularly given the current environment where investors are more focused on multiple secure revenue streams,” said Peter Pascali, CEO of PyroGenesis Canada Inc.
The project is comprised of several phases with PyroGenesis exclusively supplying plasma torches and auxiliary equipment for the entire project. Given the current COVID-19 health crisis, the project can proceed as all engineering work will be done remotely.
“This [project] highlights the fact that we not only sell plasma torches, but also provide the expertise required to develop cutting edge plasma-based applications”, said Alex Pascali, Business Development Manager of PyroGenesis.
Backlog & Revenue Estimates
As of June 15, the current backlog of signed contracts was over $30.3 million. PyroGenesis expects a contract with the U.S. Navy to be signed soon that would increase the backlog to over $40 million.
According to our estimates, from the current and recently signed contracts, we expect PyroGenesis to generate $2-$6 million in quarterly revenue over the next 12 months.
