PyroGenesis Inc.

Good day, and thank you for standing by. Welcome to Pyrogenesis Canada Incorporated 2022 Fiscal Year Financial Results and Business Update Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Rodania Caffal, Vice President, Investor Relations. Please go. Go ahead.

Good morning, everyone, and thank you for joining Pyrogenesis 2022 Fiscal Year financial results, and business update conference call. On the call with us today are Steve McCormick, Vice President of Corporate Affairs, Andrea Minella, Chief Financial Officer, Peter Pascali, Chief Executive Officer, who recently underwent knee surgery and is currently recovering, will not be presenting, but he will be able to join us on the call. The company issued a press release today, March 31st, 2023, containing a business update and financial results for the year ended December 31st, 2022, which is also posted on the company's website. If you have any questions after the call or would like any additional information about the company, please contact the IR department. The company's management will now provide prepared remarks reviewing the financial and operational results for the year ended December 31st, 2022. I would like to remind everyone that this discussion will include forward-looking information that is based on certain assumptions and is subject to risk and uncertainties that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information. Forward-looking information provided in this call speaks only as of the date of this call and is based on the plans, beliefs, estimates, projections, expectations, opinions, and assumptions of management as of today's date. There can be no assurance that forward-looking information will prove to be accurate, and you should not place undue reliance on forward-looking information. Pyrogenesis disclaims any obligations to update any forward-looking information or to explain any material difference between subsequent actual events and such forward-looking information, except as required by applicable law. In addition, during the course of this call, there may be also references to certain non-IFRS financial measures, including a reference to modified EBITDA, which do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. For more information about both forward-looking information and non-IFRS financial measures, including a reconciliation of modified EBITDA to net loss, please refer to the company's management discussion and analysis, which along with the financial statements are available on the company's website at www.paragenesis.com and the company's corporate filings on CEDAR at www.cedar.com. With that, I will now turn the call over to Steve McCormick, Vice President of Corporate Affairs. Please go ahead, Steve.

Thanks for Dania and thanks to everyone for joining us on our call today. I'm going to start off with a quick review of business highlights. I'll follow that with some very top line numbers and then add a little general perspective before turning it over to our company CFO, Andre Manella. So 2022 saw a continued advancement by the company beyond its earlier roots as a specialty engineering firm to today where the company is a provider of a growing technology ecosystem for heavy industry. with a variety of solutions that can work together to help address key strategic goals, particularly around industrial decarbonization, but also in new areas that I will outline shortly. Major deliverables and business milestones for 2022 included the following. For the companies developing metal powders for additive manufacturing or 3D printing division, In May, it was announced that the first two commercial size orders for titanium metal powders produced using the next gen plasma atomization process were received and delivered. Both orders were for 100 kilograms, one of which was to the company's strategic partner, Aubert and Duval, a major European supplier of metal powders. The second order was to a confidential customer. While these orders were relatively modest, they represented a very important jump in scale from previous sample batch sizes measured in grams to batches in the hundreds of kilograms. This was both a technological milestone and a commercial one, offering a measure of validation for the next-gen system that the company has been developing and perfecting for the past several years. Additionally for metal powders, in September, the company announced that the large global aerospace OEM the company has been working with for the past few years had conducted an in-house quality audit of Pyrogenesis' metal powder production facility and process. Subsequent to year-end, it was announced that the company had completed the required steps incurred as a result of the client's on-site visit and had passed the audit. As a reminder, This was all part of a more than two-year process of qualification towards an end goal of becoming a certified supplier of metal powders to this firm, to its manufacturing suppliers, and to its service centers. The company was then progressed to the next step, where its metal powders will be chemically tested per client-defined process and scheduling, the timing of which Pyrogenesis has no input into. If testing is successful, Pyrogenesis's titanium metal powders would be recognized as a certified material By the Global Aerospace OEM, the company would be added to the aerospace firm's extensive process, catalog, and procurement system, and the company would be on the roster for potential future material bids or orders by the various manufacturers and service groups that serve the client. Also as a reminder, the company specifically chose this lengthy path. subjecting its powders and process to a very high level of scrutiny with one of the world's most recognized firms as a way of reentering the market at one of the highest possible levels. The company believes the added scrutiny has helped to make Pyrogenesis metal powders division even better than planned and that a successful outcome with this firm may result in a trickle-down effect to other companies through the added recognition and awareness of the quality standards undertaken. Also, the company continued to evolve its metal powder strategy for European market expansion, with the goal to eventually build and operate a metal powder production facility in Europe. Subsequent to year-end, the company announced the hiring of Mr. Olivier Dubois as the company's principal advisor for European operations and sales. An executive of vast experience, including his familiarity of pyrogenesis' metal powders capabilities, while as an executive, At Aubert & Duval, Mr. Dubois will offer key strategic and operational know-how as we move to execute on European and global plans. Turning to PlasmaTorch for iron ore pelletization, the company continued to progress its major initiative to supply clean electric plasma systems to large iron ore companies for first-ever trials in this upstream step of the steelmaking process. In July of 2022, a system was completed and delivered to the first client, and subsequent to year-end, four systems were delivered to a second client. Those two companies are arguably the two largest and most prominent iron ore firms globally, and each has made a significant commitment of time, finances, and logistics while working with Pyrogenesis over the past few years to get to this point, where the testing of plasma to replace fossil fuel-based burners in furnaces will undergo live on-site trials. With the completion of these deliveries, both clients now have all the necessary components on site at major iron ore mining and processing locations, and the installation, trials, and site acceptance testing will proceed at the client's discretion. The company announced a series of new innovations in 2022, including in May, announcing a joint evaluation with a major manufacturer to test plasma torches in aluminum scrap remelting and holding furnaces. In June, a joint initiative with an applied engineering firm to examine the use of plasma and carbon anode baking ovens, a vital component needed for the aluminum production process that traditionally uses natural gas to help form the carbon anodes. In September, the company's selection by our producer to develop and test two processes for use during magnesium production, including cleaning and decontaminating of certain particulate matter and recovery of magnesium from waste stream dross. In November, The company's successful production of hydrogen from methane occurred using clean plasma energy that results in hydrogen categorized as turquoise on the hydrogen color spectrum, turquoise being one of the lowest emission categories. As well, the company continues to progress its development of an innovative solution to safely recover valuable metals and residues from the heavily contaminated carbon-lined cells or pots that form the inside of an aluminum smelter. in conjunction with project partner Aluminier Alouette, the largest primary aluminum smelter in the Americas. Additional technology benchmarks were met during 2022, and the companies have recently made a further, longer commitment, details of which may be discussed at a later date. Now turning to some key top line financials, the company delivered another year of strong margins against what remains a very difficult logistical and inflationary environment for heavy industry manufacturers and their customers. Gross profit margins for 2022 increased to 43% compared to 40% in 2021. This outcome demonstrates both a careful yet committed approach to diversification that allows for various guards against rising inputs such as labor, currency, and supply chain disruption-related costs, as well as a continued focus that the company has undertaken on production refinements. It should be noted that this yearly 43% margin was achieved despite the fourth quarter margin being at a relatively low 14%, the details of which are related to a one-time production expansion in the absence of an impending updated budget for the U.S. Navy that was in process prior to quarter's end. As for overall revenue, the company was disappointed in the year-over-year decline and that a slower pace of technology adoption occurred in 2022 than was anticipated. particularly with our aluminum sector prospects, who face a variety of changing dynamics throughout the year, including energy price spikes, trade volatility, and raw material shortages that cause them to adjust priorities and financial commitments on the fly throughout the year. Additionally, as stated in the MD&A, some projects experience longer than expected client logistical or project management delays, impacting the company's ability to conclude key aspects of projects such as commissioning that would advance revenue progression further impacting expected revenue. The company has noticed a trend in this regard, with additional client caution occurring throughout project phases across the industry, and as mentioned in the news release, the company acknowledges that because it is selling into industries contemplating significant technological change, especially in regards to fuel switching to electricity, that may bring various ramifications, including the possibility for time lags as customers conduct lengthy due diligence to counter the types of concerns likely seen only during major paradigm shifts such as these. As such, revenues are likely to be regular and unpredictable quarter to quarter, and along with the company being at the early stage of wider market adoptions for some of its core lines of business is a key reason why the company does not currently provide forward-looking guidance. That said, the degree of uncertainty around industrial decarbonization was further reduced during 2022. As governments, especially in North America, with the U.S. Inflation Reduction Act, or IRA, and the major increases to Canadian green energy investment tax credits, implemented billion-dollar incentive programs toward a low-carbon economy, pyrogenesis was engaged in several additional industry-requested technology research initiatives. While signed order intake slowed in 2022, customer partner studies and research increased substantially. These R&D related partnerships have for many years been at the core of the company. And while there is no guarantee, we feel that this level of client interaction at the business development level serves to deepen industry relationships and bodes well for future revenue opportunities. As mentioned in my opening statement, the company has been thinking beyond decarbonization. As interest from heavy industry in the company's products continues to increase and the variety of uses for its core technologies has expanded, Pyrogenesis has recently refined its business strategy. While still leveraging off the company's expertise in ultra-high temperature processes, the company is now adjusting its business approach into three major verticals or categories that directly match some of the economic drivers that are key to global heavy industry. The first is energy transition and emission reduction, which focuses on fuel switching, helping heavy industry reduce fossil fuel use and greenhouse gas emissions by utilizing the company's electric-powered plasma torches and biogas upgrading technology in various processing roles. Second is commodity security and optimization, the recovery of viable metals and the optimization of production to increase output to maximize raw materials and improve availability of critical minerals. And third is waste remediation, the safe destruction of hazardous materials and the recovery and valorization of underlying substances such as chemicals and minerals that are contained within the waste. Within each vertical, the company has several solutions already and is working on several more, all at different stages leading up to commercialization and some, of course, already commercialized. A visual graphic showing a partial breakdown of these verticals and the company's underlying solutions was included in today's news release. The company's intention is to roll out more solutions to meet these key economic drivers for heavy industry over future quarters and years. In summary, pyrogenesis believes its market opportunity remains large as major industries such as aluminum, steelmaking, manufacturing, and government require factory-ready, technology-based solutions to help steer them through the paradoxical landscape of increasing demand and tightening regulations and material availability. 2020 was a disappointing year for general revenue, but we believe it remains a foundational year for the company's future. With a deeper understanding of the landscape and the key economic drivers for heavy industry, with ever-deepening relationships, partly as a result of an influx of client-driven and industry-partnered studies and joint initiatives, with a horizon of key milestones in metal powders and plasma torches still to come, and with a revised business strategy, the company's ambitions remain robust. I'll be back at the end with a few more comments, but at this point, I'd like to turn the call over to the company's chief financial officer, Andre Minella, to go over the financials in more detail. Andre?