PyroGenesis Inc.

Good day, and thank you for standing by. Welcome to the PyroGenesis Canada First Quarter 2023 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 your speaker today, Rodina Cofell, Vice President, Investor Relations. Please go ahead.

Good morning, and thank you for joining PyroGenesis 2023 First Quarter Financial Results and Business Update Conference Call. On the call with us today are Steve McCormick, Vice President, Corporate Affairs, Andre Manella, Chief Financial Officer, and Peter Pascali, Chief Executive Officer. The company issued a press release Monday, May 15, 2023, containing a business update and financial results for the first quarter, which ended March 31, 2023, and which can be viewed 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 operational and financial results for the first quarter ended March 31st, 2023. I would like to remind everyone that this discussion will include forward-looking information that is based on certain assumptions and is subject to risks and uncertainties that could cause actual results to defer 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 obligation 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 also be references to certain non-IFRS financial measures, including references to adjusted net loss and adjusted 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 adjusted net loss and adjusted EBITDA to net loss, please refer to the company's management discussion 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 Peter Pascali, CEO. Please go ahead, Peter.

Thanks, Rodina. And thanks to everyone for joining us today on this call. I'm going to start off with a quick review of some business highlights before turning the call over to the company's CFO, Andre Manella. The first quarter of 2023 focused on advancing the company's updated business strategy that the company first outlined in the 2022 year-end results, specifically in acknowledging that the company has grown from 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 number of solutions in different stages from early pilot to full commercialization. The company has better concentrated its offerings under three verticals that align with economic drivers key to heavy industry. These three verticals are, first, energy transition and emission reduction, which focuses on fuel switching. helping heavy industry reduce their fossil fuel use and lower their greenhouse gas emissions by utilizing the company's electric-powered plasma torches and its biogas upgrading technology across varying processing steps. Second is waste remediation, which is the safe destruction of hazardous materials and the recovery and valorization of underlying substances such as chemicals and minerals that can be reused or resold. And third, commodity security and optimization, which is using the company's technology to aid in the recovery of valuable metals and in the optimization of production output. Both actions meant to improve the availability of critical minerals, such as titanium, aluminum, magnesium, and others that are essential for modern manufacturing. With respect to commodity security and optimization, There were several key developments that occurred that may have impact on the company throughout the rest of 2023, with two being of particular note and as part of the vertical, and I'd like to address these now. These and more developments were outlined, by the way, in the news release and are available in the MD&A. The company received notice that Radian Oil and Gas Services Company has commenced transferring the U.S. $1.5 million, or approximately $2 million Canadian dollars, payment against the outstanding receivable of approximately US$9.5 million under the company's existing $25 million Dross-Rite contract. As previously announced, Pyrogenesis agreed to a strategic extension of the payment plan by the customer and its end customer, geared to better align the pressure on the end user's operating cash flows, which have been created by increased business opportunities. Also, the company is in current negotiations with multiple companies for commercial orders of the company's titanium metal powders produced using the company's next-gen plasma atomization system. We expect these orders to be well in excess of $1 million. As stated in the past, the company has spent several years designing, developing, and testing a brand new system to produce what is planned to be among the highest quality titanium metal powders available for the 3D printing and additive manufacturing industries. And more recently has evolved from producing initial test batches measured in grams to sample batches measured in kilograms and then hundreds of kilograms. Our next stated goal has been to book orders by the ton and we're working hard towards that end. We will keep investors appraised of this and other events as they evolve. To read about additional key business line developments, please refer to the corresponding sections of the news release or MD&A, as well as to other sections of the outlook of those documents. Turning now to in-quarter production during the first quarter of 2023, the company can highlight achievements in the following areas. Again, with respect to commodities security and optimization in January, the company announced that further to its press releases dated September 21st, 2022 and November 2nd, 2022, All the findings and recommendations made by a global aerospace company as part of their on-site audit of Pyrogenesis' next-gen metal powder production facility has been successfully completed and accepted. With that, Pyrogenesis moved to the next and final step in a two-year-long supplier qualification process, namely for the client to test, verify, and confirm the chemical and mechanical properties of titanium metal of the titanium metal powders. As noted further down in the news release at MDA, that step is still ongoing. In February, the company provided an update on its Gen 3 PureVap quartz reduction reactor pilot plant project. The update confirmed that process testing referred to in the press release from the client, HBQ Silicon, dated January 19th, 2023, is moving forward as expected and represents, in Pyrogenesis' manager's opinion, a key development in the overall project. The tests were geared to not only confirm that the technology works as expected, but also give input into the subsequent engineering study, which will be geared to determining, amongst other things, the actual number of systems required for commercialization and the profitability of each. The PureVat process is an innovative patented process that will enable the one-step conversion of quartz into high-purity silicon at reduced costs, energy input, and carbon footprint that will propagate its considerable renewable energy potential. High-purity silicon is a key ingredient sought after by electric vehicle and battery manufacturers amongst other industries. Pyrogenesis is the engineering and development producer, but also as part of the terms of the contract with HPQ, pyrogenesis benefits from a royalty payment representing 10% of the client sales with set minimums. Now, with respect to the energy transition and emission reduction segment, in January, the company announced that it had signed an initial energy transition contract with a major European multinational chemical, oil, and gas conglomerate to assess the applicability of pyrogenesis electric plasma torches for use in the client's chemical production process. This agreement outlined initial steps for supporting the client's energy transition goals, with the first step being a computational fluid dynamics study to gather initial data to evaluate the use of plasma in chemical production boilers. Depending on the results, the client indicated that it may proceed to a live experimental validation study within their facilities using pyrogenesis' plasma torches as per a separate to be negotiated agreement. Also in January, the company announced it had signed through Pyro Green Gas, a wholly-owned subsidiary of Pyrogenesis, an emissions reduction contract with a North American lithium-ion battery recycler. The contract was for delivery of a system to decontaminate the dust generated during the battery recycling process, resulting in highly effective destruction of airborne contaminants with minimal energy use, reducing operating costs and environmental impact. Again in January, the company provided an update on its iron ore pelletization projects. The update indicated the successful completion and delivery of four 1-megawatt plasma torch systems to a major international iron ore producer, client B, for use in the client's iron ore pelletization furnaces, a key upstream process in the steelmaking industry that traditionally relies on fossil fuel burners. Excuse me. With the completion of this delivery, client B now has all the necessary components related to the company's plasma torch systems on site at one of their key integrated iron ore mining and processing locations, allowing for the installation and trials, also known as site acceptance testing or SATs, to then proceed at the client's discretion. The company has also reported that the value of the contract has increased by approximately half a million dollars, as a result of additional modifications requested by the client during manufacturing, with the total value of the project now exceeding $6.5 million. The update also confirmed that the previously announced contract and planned trials of its plasma torch system with another very large global iron ore client, Client A, continued to advance, as the client informed Pyrogenesis that, despite the client's own operational delays, all objectives remain the same, and the trials will be going ahead as designed. But the client has already received the contract of plasma system pyrogenesis in advance of the trials. With respect to waste remediation, in January, the company signed the contract to provide the company's Spark hazardous refrigerant waste destruction system to an entity in New Zealand that was subsequently revealed in February to be the Trust for the Destruction of Synthetic Refrigerant. who will use PyroGenesis SPARC system as the core technology for New Zealand's National Hazardous Refrigerant Collection and Destruction Initiative. The SPARC system will be managed and operated by a wholly owned subsidiary of the Trust for use by the New Zealand Government accredited product stewardship program known as CoolSafe, which is run by the Trust. CoolSafe, under various previous names, has been managing refrigerant gas collection and destruction in New Zealand since 1993. And they have a mission to be a significant factor in the New Zealand government stated goal to reduce synthetic refrigerant greenhouse gas emissions by 2035 by at least 35%. This will be achieved by implementing their own 90% reduction target for hazardous refrigerants. Up until now, any of the refrigerants collected by ship to Australia for safe destruction. With the purchase of PyroGenesis' SPARC system, New Zealand will have its own onshore destruction capabilities. As the company has reported in the past, with the relaunch, ongoing marketing and switch from voluntary to mandatory adherence to the safe disposal of synthetic refrigerants, the organization has indicated that they may require another SPARC system as the initiative grows. In March, The company received an order for three waste destruction plasma torches from the U.S. Navy's shipbuilder Newport News Shipbuilding. The three plasma torches ordered are for the USS Gerald R. Ford aircraft carrier, the largest and most technically advanced warship ever built. These plasma torches are to be used in Pyrogenesis' proprietary plasma arc waste destruction system, commonly referred to as PODS. that the company previously built and delivered to the U.S. Navy and which is in operation on that same carrier. With respect to some key financials, the company's margin was 20.3% compared to 25% at the same quarter. I don't think that's a considerable decrease considering that the industries that the company primarily serves have had significant difficulty maintaining 2022 margins. With aluminum industry margins well back of 2022, falling to below 10% from approximately 29% in 2022. Iron and steel is down to approximately 26% from 30%, metal and mining down to 30% from 41%, and aerospace and defense remaining under 50%, all Q1 versus Q1. Clearly, the difficult logistical and inflationary environment for heavy industry and their customers is taking its toll. In terms of the company's specific margin decline, Andre will have more information about a particular one-time event that was primarily responsible for adjusting our margin downward. As stated in previous reports, the company's revenues are likely to continue to fluctuate quarter to quarter as contract-related revenue fluctuates for a variety of reasons. The first being that our revenue is accrued on a percentage of work completed model that varies based on both the nature of the project and the client's own scheduling, or logistical disruptions that can impact pyrogenesis production cycle and milestones and ability to book revenue. During this period of continued supply chain logistical and inflationary challenges, these issues have been more frequent and exasperating. As noted in the 2022 Q4 report, some projects were indeed experiencing longer than expected client logistical or project management delays, impacting the company's ability to conclude key aspects of the projects, such as commissioning, which would advance revenue progression, further impacting anticipated revenue. And this has continued somewhat into 2023. Also noted in Q4 2022 report was additional client caution occurring throughout project phases across the industry, especially for those contemplating significant technological or paradigm change in regard to fuel switching to electricity. As for overall revenue, the company experienced a 38% year-over-year decline for the quarter. Project backlog of signed and awarded contracts stands at a strong $30.6 million. At this point, I'd like to turn the call over to the company's Chief Financial Officer, Andre Manella, to go over the financials in a bit more detail. Andre?