As at December 31, 2023, the Company had cash of $1.8 million, included in the net working capital deficiency of $7.0 million. Certain working capital items such as billings in excess of costs and profits on uncompleted contracts do not represent a direct outflow of cash. The Company expects that with its cash, liquidity position, the proceeds available from the strategic investment and access to capital markets it will be able to finance its operations for the foreseeable future.
The Company’s term loan balance at December 31, 2023 was $404,079, and varied only slightly since December 31, 2022. The increase from January 1, 2023, to December 31, 2023, was mainly attributable to the accretion on the Economic Development Agency of Canada loan, which is interest free and will remain so, until the balance is paid over the 60-month period ending March 2029. In July 2023, the Company closed a brokered private placement for $3,030,000, bearing interest at 10%. During December 31, 2023, the Company closed a non-brokered private placement of a convertible loan for gross proceeds of $1,250,000, and bears interest at 3%. The average interest expense on the other term loans and convertible debenture is approximately 10%. The Company does not expect changes to the structure of term loans and convertible debentures and loans in the next twelve-month period. The Company maintained one credit facility which bears interest at a variable rate of prime plus 1%, therefore 8.20% at December 31, 2023. The Company will continue to reimburse the existing credit facility in 2024.
OUTLOOK
Consistent with the Company’s past practice, and in view of the early stage of market adoption of our core lines of business, the Company is not providing specific revenue or net income (loss) guidance for 2024.
Overall Strategy
PyroGenesis provides technology solutions to heavy industry that leverage the Company’s expertise in ultra-high temperature processes. The Company has evolved from its early beginnings of being a specialty-engineering firm to being a provider of a robust technology eco-system for heavy industry that helps address key strategic goals.
The Company believes its strategy to be quite timely, as multiple heavy industries are committing to major carbon and waste reduction programs at the same time as many governments are increasingly funding environmental technologies and infrastructure projects – all the while both are making it a strategy to ensure the availability of critical minerals during the coming decades of increased output demand.
While there can be no guarantees, the Company believes the evolution of its strategy beyond greenhouse gas emission reduction, to an expanded focus that encapsulates the key verticals listed in the section “Q4 Production Highlights”, both (i) improves the Company’s chances for success while (ii) also providing a clearer picture of how the Company’s wide array of offerings work in tandem to support heavy industry goals.
PyroGenesis’ market opportunity is significant, as major industries such as aluminum, steelmaking, manufacturing, cement, chemicals, defense, aeronautics, and government require factory-ready, technology-based solutions to help steer through the paradoxical landscape of increasing demand and tightening regulations and material availability.
As more of the Company’s offerings reach full commercialization, PyroGenesis will remain focused on attracting influential customers in broad markets while at the same time ensuring that operating expenses are controlled to achieve profitable growth.
For 2024, the Company will continue to sharpen the focus on the strategy that structures the Company’s solution ecosystem under the three verticals noted previously: (i) energy transition & emission reduction, (ii) commodity security & optimization, and (iii) waste remediation, while introducing new solutions within each category – some self-initiated, and some in conjunction with (or at the behest of) industry partners.
Cost Controls and Efficiencies
PyroGenesis is competing hard while closely scrutinizing both potential and existing projects to ensure that the utilization of our labour and financial resources are optimized. As we have shown in the past, we will only engage in projects if the potential benefits to PyroGenesis is significant and well-understood. We continue to intensify our focus on project and budgetary clarity during this persistent period of elevated global inflationary pressures, by sourcing alternative suppliers and constantly adjusting project resources. We have also refined our early-stage project assessment process to allow for faster “go / no-go” decisions on project viability.
Enhanced Sales and Marketing
Against the backdrop of this 3-tiered strategy, the Company has been increasing sales, marketing, and R&D efforts in-line with – and in some cases ahead of – the growth curve for industrial change related to greenhouse gas reduction efforts.
Macroeconomic Conditions
With some continued uncertainty in the macroeconomic environment, including ambiguity in the banking sector with regard to interest rate adjustments, and the continued inflationary pressures causing shifting demand dynamics across various industries at different times, it may be difficult to assess the future impact these events and conditions will have on our customer base, the end markets we serve and the resulting effect on our business and operations, both in the short term and in the long term.
Despite these uncertainties, we continue to believe there is an accelerated need for our solutions in the industries we serve as heavy industry looks to continue the now global trends to decarbonization / energy transition, manufacturing utilizing both lighter metals (such as aluminum) and additive manufacturing, and tightening regulations around hazardous waste.
We expect the uncertainties or other macroeconomic conditions in the various geographies in which we operate to continue to cause variability in our revenue quarter to quarter; however, we believe our diversity in both customer base and solution set will continue to be a strong asset of the business.
The various military conflicts in the middle east and Eastern Europe continue to create some level of global economic uncertainty, as well as supply chain disruptions that can change at any time. However, it’s important to note that the Company does not have any operations, customers or supplier relationships in Russia, Belarus or Ukraine, and as such are not directly impacted at a customer level in these countries. The Company does have customer relationships and projects in Poland and will continue to monitor the situation in the region regarding challenges to the completion of current projects, which at this time are not inhibited.
