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    PYR   CA74734T1049

PYROGENESIS CANADA INC.

(PYR)
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PyroGenesis Canada : MD&A Q3 2021

11/16/2021 | 09:37am EST

PyroGenesis Canada Inc.

Management's Discussion and Analysis

For the three and nine month periods ended September 30, 2021 and 2020

This management's discussion and analysis ("MD&A") is intended to assist readers in understanding the business environment, strategies, performance and risk factors of PyroGenesis Canada Inc. ("PyroGenesis", or the "Company"). The MD&A provides the reader with a view and analysis, from the perspective of management, of the Company's financial results for the three and nine months ended September 30, 2021. The MD&A has been prepared in accordance with National Instrument 51-102, Continuous Disclosur e Requirements, and should be read in conjunction with the audited financial statements and related notes thereto of the Company for the year ended December 31, 2020.

The financial statements and MD&A have been reviewed by PyroGenesis' Audit Committee and were approved by its Board of Directors on November 15, 2021. The Board of Directors is responsible for ensuring that the Company fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the MD&A. The Board of Directors carries out this responsibility principally through its Audit Committee. The Audit Committee is appointed by the Board of Directors and is comprised of independent directors. The Audit Committee reports its findings to the Board of Directors for its consideration when it approves the MD&A and financial statements for issuance to shareholders.

The following information takes into account all material events that took place up until November 15, 2021, the date on which the Company's Board of Directors approved this MD&A. Unless otherwise indicated, all amounts are presented in Canadian dollars. The Company's functional and reporting currency is the Canadian dollar.

Additional information regarding PyroGenesis is available on the System for Electronic Document Analysis and Retrieval ("SEDAR) at www.sedar.com, the Electronic Data Gathering, Analysis, and Retrieval system ("EDGAR") at www.sec.gov, and on the Company's website at www.pyrogenesis.com.

FORWARD-LOOKING STATEMENTS

This MD&A contains forward-looking statements and forward-looking information (collectively, "forward-looking statements") within the meaning of applicable securities legislation. All statements other than statements of historical fact contained in this MD&A are forward-looking statements, including, without limitation, the Company's statements regarding its products and services; relations with suppliers and clients; future financial position; business strategies; potential acquisitions; potential business partnering; litigation; and plans and objectives. In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" and similar words or the negative thereof. Although management of the Company believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.

1

PyroGenesis Canada Inc.

Management's Discussion and Analysis

For the three and nine month periods ended September 30, 2021 and 2020

In particular, this MD&A contains forward-looking statements that relate, but are not limited, to:

  • the Company's business strategies, strategic objectives and growth strategy;
  • the Company's current and future capital resources and the need for additional financing;
  • the Company's ability to increase sales, including the results of the successful completion of the Company's current projects;
  • management's expectation that the Company will achieve sustained annual growth and profitability, and that gross margins will increase resulting in a decrease in cost of sales as a percentage of revenue; and
  • the Company's overall financial performance.

By their nature, forward-looking statements require assumptions and are subject to inherent risks and uncertainties including those discussed herein. In particular, forward-looking statements relating to future sales, growth and profitability are based on the assumption that current projects will be completed, and the Company will be awarded certain anticipated contracts pursuant to recent negotiations with, and statements made by, third parties. There is significant risk that predictions and other forward-looking statements will not prove to be accurate. Readers are cautioned to not place undue reliance on forward-looking statements made herein because a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements.

Many factors could cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by forward-looking statements, including, without limitation, risks and uncertainties relating to: the strength of the Canadian, US and Asian economies; operational, funding, and liquidity risks; unforeseen engineering and environmental problems; delays or inability to obtain required financing and/or anticipated contracts; risks associated with licenses, permits and regulatory approvals; supply interruptions or labour disputes; the impact of the Coronavirus (COVID-19) outbreak on our business and our operations; foreign exchange fluctuations and collection risk; competition from other suppliers, or alternative, less capital intensive, energy solutions; and risk factors described elsewhere under the heading "Risk Factors" in this MD&A and the Annual Information Form, and elsewhere in this MD&A and other filings that the Company has made and may make in the future with applicable securities regulatory authorities. We caution that the foregoing list of factors is not exhaustive, and that, when relying on forward-looking statements to make decisions with respect to the Company, investors and others should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements.

Although the Company has attempted to identify significant factors that could cause actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Forward- looking statements are provided as of the date of this MD&A, and the Company assumes no

2

PyroGenesis Canada Inc.

Management's Discussion and Analysis

For the three and nine month periods ended September 30, 2021 and 2020

obligation to update or revise such forward-looking statements to reflect new events or circumstances except as required under applicable securities laws.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this MD&A are made as of the date of this MD&A or such other date specified herein.

BASIS OF PRESENTATION

For reporting purposes, we prepared the 2021 Q3 financial statements in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. The financial information contained in this MD&A was derived from the 2020 Financial Statements. Unless otherwise indicated, all references to "$" are to Canadian dollars. Unless otherwise indicated, all references to a specific "note" refer to the notes to the 2021 Q3 Financial Statements. Certain totals, subtotals and percentages throughout this MD&A may not reconcile due to rounding.

NON-IFRS MEASURES

This MD&A makes reference to certain non-IFRS measures. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS.

We use non-IFRS measures, including EBITDA, Adjusted EBITDA and Modified EBITDA. EBITDA, Adjusted EBITDA and Modified EBITDA are not considered an alternative to income or loss from operations, or to net earnings or loss, in the context of measuring a company's performance. These non-IFRS measures are used to provide investors with supplemental measures of operating performance and thus highlight trends in our business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Our management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. Management believes that EBITDA, Adjusted EBITDA and Modified EBITDA are important measures of operating performance because it allows management, investors and others to evaluate and compare the Company's operating results, including its return on capital and operating efficiencies, from period-to-period by removing the impact of the Company's capital structure consequences, and other non-operating items not requiring cash outlays including the adjustment to the fair value of investments and share-based compensation.

EBITDA

We define EBITDA as Net Earnings before Financial Expenses, Taxes, Depreciation and Amortization. See "Results of Operations - Reconciliation of Non-IFRS measures (EBITDA, Adjusted EBITDA and Modified EBITDA)".

3

PyroGenesis Canada Inc.

Management's Discussion and Analysis

For the three and nine month periods ended September 30, 2021 and 2020

Adjusted EBITDA

We define Adjusted EBITDA as Net Earnings before Financial Expenses, Taxes, Depreciation, Amortization and other non-cash items including share-based expenses, inventory and equipment write-offs, and the tax assessment. See "Results of Operations - Reconciliation of Non-IFRS measures (EBITDA, Adjusted EBITDA and Modified EBITDA)".

Modified EBITDA

We defined Modified EBITDA as Adjusted EBITDA before the change in fair value of investments. See "Results of Operations - Reconciliation of Non-IFRS measures (EBITDA, Adjusted EBITDA and Modified EBITDA)".

OVERVIEW

PyroGenesis Canada Inc. is a 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, additive manufacturing (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 40,902 sq. ft. (3,800 m²) and 31,632 sq. ft. (2,940 m²) manufacturing facilities, 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 9001:2015 and AS9100D certified, having been ISO certified since 1997. Since our acquisition of Pyro Green-Gas (formerly AirScience Technologies Inc), we now offer technologies, equipment, and expertise in the area of biogas upgrading, and air pollution control. As a result, we have extended our presence to Italy and India, and this acquisition provides potential synergies with our current land-based waste destruction offerings. Our common shares are listed on the Toronto Stock Exchange (Ticker Symbol: PYR), NASDAQ (Ticker Symbol: PYR) and the Frankfurt Stock Exchange (FSX) (Ticker symbol: 8PY).

4

PyroGenesis Canada Inc.

Management's Discussion and Analysis

For the three and nine month periods ended September 30, 2021 and 2020

SELECTED FINANCIAL INFORMATION

Three months ended Sept 30,

% Cha ng e

Nine months ended Sept 30,

% Cha ng e

2021

2020

2021v s 2020

2021

2020

2021v s 2020

Revenues

$

9,317,926

$

8,149,427

14%

$

23,863,001

$

10,996,789

117%

Cost of sales and services

5,265,395

2,616,901

101%

12,733,979

3,930,257

224%

Gross margin

4,052,531

5,532,526

-27%

11,129,022

7,066,532

57%

Expenses

Selling, general and administrative (not including share-based expenses)

4,227,937

2,294,394

84%

10,402,921

5,141,456

102%

Research and development

389,806

131,955

-195%

1,386,847

151,176

817%

Total expenses (not including share-based expenses)

4,617,743

2,426,349

90%

11,789,768

5,292,632

123%

Net (loss) income from operations (not including share-based expenses)

(565,212)

3,106,177

118%

(660,746)

1,773,900

137%

Share-based expenses

(673,194)

(3,017,408)

-78%

(4,884,219)

(3,111,913)

57%

Net (loss) income from operations

(1,238,406)

88,769

1495%

(5,544,965)

(1,338,013)

314%

Changes in fair market value of strategic investments and financial expenses

1,862,070

15,237,227

-88%

(10,480,673)

20,135,003

152%

Income taxes

-

-

-

-

Net income (loss) and comprehensive income (loss)

$

623,664

$

15,325,996

-96%

$

(16,025,638)

$

18,796,990

185%

Earnings (loss) per share

Basic

$

0.00

$

0.10

$

(0.10)

$

0.13

Diluted

$

0.00

$

0.09

$

(0.10)

$

0.12

Modified EBITDA (1)

$

(227,001)

$

3,261,055

107%

$

102,416

$

2,140,087

95%

¹ See "Non-IFRS Measures"

Extract from Statement of Financial Position at:

Sept 30, 2021

Dec 31, 2020

Current assets

42,119,879

25,336,787

Non-current assets

44,597,101

49,194,591

Total assets

$

86,716,980

$

74,531,378

Current liabilities

18,852,455

11,539,208

Non-current liabilities

6,620,330

3,569,064

Total liabilities

$

25,472,785

$

15,108,272

Shareholders' equity

$

61,244,195

$

59,423,106

RESULTS OF OPERATIONS

Revenues

PyroGenesis recorded revenue of $9,317,926 in the third quarter of 2021 ("Q3, 2021"), representing an increase of 14% compared to $8,149,427 recorded in the third quarter of 2020 ("Q3, 2020"), Revenue for the nine months of fiscal 2021 was $23,863,001 an increase of 117% over revenue of $10,996,789 during the same period in 2020.

Revenues recorded in the three and nine months ended September 30, 2021, were generated from:

  1. DROSRITE™ related sales of $1,983,524, $6,373,130 (Q3, 2020 - $4,590,227, $6,384,563)

5

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

PyroGenesis Canada Inc. published this content on 16 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 November 2021 14:36:08 UTC.


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Financials
Sales 2020 17,8 M 14,1 M 14,1 M
Net income 2020 41,8 M 33,1 M 33,1 M
Net cash 2020 16,4 M 13,0 M 13,0 M
P/E ratio 2020 13,4x
Yield 2020 -
Capitalization 524 M 419 M 416 M
EV / Sales 2019 15,0x
EV / Sales 2020 31,1x
Nbr of Employees -
Free-Float 49,6%
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Photis Peter Pascali Chairman, President & Chief Executive Officer
Andre Mainella Chief Financial Officer
Pierre Carabin Chief Technology & Strategist Officer
Robert M. Radin Independent Director
Andrew Abdalla Independent Director
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