Mr. P. Peter Pascali reports

PYROGENESIS ANNOUNCES 2023 THIRD QUARTER RESULTS

PyroGenesis Canada Inc. has released its financial and operational results for the third quarter ended Sept. 30, 2023.

"We are seeing improvements across industrial supply chains and customer bottlenecks, resulting in two straight quarters of growth coming off of the three-year quarterly low we saw in [first quarter] of this year," said P. Peter Pascali, chief executive officer and president of PyroGenesis. "While we can't guarantee that these early signs of sector-wide recovery will continue at the same pace, our quarterly revenues are steadily increasing from the early year low. Combined with renewed strong demand in traditionally slower business lines such as waste destruction where we have signed contracts for six separate projects so far this year, and the increasing interest in plasma torch applications of two-megawatt power and higher, we have confidence around continued momentum.

"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 short- or long-term potential benefit 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. As always, we maintain our emphasis on developing low-carbon-footprint technology solutions that we believe will take hold with leading global industrial companies during a period of major paradigm shift, namely in energy transition and emissions reduction, commodity security and optimization, and waste remediation," added Mr. Pascali.

PyroGenesis reports in accordance with international financial reporting standards.

Key Q3 financial highlights:

• New project sales of over $6.5-million;
• Backlog of signed and/or awarded contracts of $35-million as at Nov. 9, 2023;
• Revenue of $3.7-million:
  • Up 21 per cent from second quarter 2023 and up 42 per cent from first quarter 2023;
  • Down 35 per cent year over year;
• Margin of 30 per cent;
• Loss per share of three cents.

Outlook and recent developments

Q3 production highlights

The information below represents highlights from the past quarter for each of the company's main business verticals, followed by an outline of the company's strategy and key developments that will impact the subsequent quarters.

In Q3 2023, PyroGenesis continued its focus on advancing its updated business strategy that was first outlined in the company's fourth quarter and year-end 2022 results.

As noted, as the variety of uses for the company's core technologies has expanded, and industry interest has increased, the company is concentrating its activities under three ecosystem solutions that align with economic drivers that are key to global heavy industry:

1. Energy transition and emission reduction:
   • Fuel switching, utilizing the company's electric-powered plasma torches and biogas upgrading technology to help heavy industry reduce fossil fuel use and greenhouse gas emissions;
2. Commodity security and optimization:
   • Recovery of viable metals and optimization of production methods/processes geared to increase output, maximize raw materials and improve availability of critical minerals;
3. Waste remediation:
   • Safe destruction of hazardous materials and the recovery and valorization of underlying substances such as chemicals and minerals.

About PyroGenesis Canada Inc.

PyroGenesis, a high-technology company, is a proud leader in the design, development, manufacture and commercialization of advanced plasma processes and sustainable solutions which reduce greenhouse gases and are economically attractive alternatives to conventional dirty processes. PyroGenesis has created proprietary, patented and advanced plasma technologies that are being vetted and adopted by industry leaders in four massive markets: iron ore pelletization, aluminum, waste management and additive manufacturing. With a team of experienced engineers, scientists and technicians working out of its Montreal office, and its 3,800-square-metre and 2,940-square-metre manufacturing facilities, PyroGenesis maintains its competitive advantage by remaining at the forefront of technology development and commercialization. The operations of PyroGenesis are ISO 9001:2015 and AS9100D certified, having been ISO certified since 1997.

Financial summary

Revenues

PyroGenesis recorded revenue of $3.7-million in the third quarter of 2023, representing a decrease of $2.0-million compared with $5.7-million recorded in the third quarter of 2022. Revenue for the nine-month period ended Sept. 30, 2023, was $9.3-million, a decrease of $6.4-million over revenue of $15.7-million compared with the same period in 2022.

Revenues recorded in Q3 2023 were generated primarily from:

• Purevap-related sales of $415,415 (Q3 2022: $4,243,138);
• Drosrite-related sales of $118,745 (Q3 2022: $71,431);
• Development and support services related to systems supplied to the U.S. Navy of $1,003,592 (Q3 2022: $420,809);
• Torch-related sales of $950,290 (Q3 2022: $684,997);
• Refrigerant destruction (SPARC)-related sales of $104,784 (Q3 2022: $0);
• Biogas upgrading and pollution controls of $768,396 (Q3 2022: $89,698);
• Other sales and services of $324,503 (Q3 2022: $147,710).

Q3 2023 revenues decreased by $2.0-million in comparison with Q3 2022, mainly as a result of:

• Purevap-related sales decreased by $3.9-million due to the completion of the project, with the company announcing the successful silicon pour validating all critical milestones, and with this achievement, the stage is set for discussions in transitioning to commercial production and due to the one-time $3.6-million sale of intellectual property, in 2022, which was not repeated in the current quarter.
• Development and support related to systems supplied to the U.S. Navy increased by $600,000 due to the completion of several milestones and shipment of equipment.
• Torch-related products and services increased by $300,000 due to the three-month on-site support being extended by an additional three months and increased need of consumables and spare parts during operation.
• Biogas upgrading and pollution control related sales increased by $700,000, specifically due to the project advancement of its regenerative thermal oxidizer system.

During the nine-month period ended Sept. 30, 2023, revenues decreased by $6.4-million, mainly as a result of:

• Purevap-related sales decreased by $4.2-million due to the completion of the project and initial phase of testing and one-time $3.6-million sale of IP, in 2022, which was not repeated in the current fiscal year.
• Drosrite-related sales decreased by $1.1-million due to the impact of the continued customer delays in financing for the construction of the on-site facility.
• Torch-related products and services decreased by $600,000, due to the final phase of the project being completed with the installation and commissioning at the customer's facility. Three-month on-site support was extended by an additional three months.
• Biogas upgrading and pollution control sales decrease of $1.8-million is due to the delivery of and agreed completion of projects during the comparable period of the previous year.

As of Nov. 9, 2023, revenue expected to be recognized in the future related to backlog of signed and/or awarded contracts is $35-million. Revenue will be recognized as the company satisfies its performance obligations under long-term contracts, which is expected to occur over a maximum period of approximately three years.

Comprehensive loss

The comprehensive loss for Q3 2023 of $6.3-million compared with a loss of $4.1-million in Q3 2022 represents a variation of $2.2-million:

• A decrease in product and service revenue of $2.0-million arising in Q3 2023;
• An increase in cost of sales and services of $1.0-million, primarily due to a decrease in employee compensation, subcontracting, and manufacturing overhead and other, offset by the increase in direct materials, foreign exchange charge on materials and amortization of intangible assets;
• An increase in selling, general and administrative expenses of $1.7-million arising in Q3 2023 primarily due to an increase in the allowance for credit loss of $2.8-million, offset by decreases in professional fees, other expenses and foreign exchange charge on materials;
• A decrease in share-based expenses of $300,000;
• An increase in research and development expenses of $400,000 primarily due to an increase in employee compensation, materials and equipment, and other expenses;
• An increase in finance costs of $30,000 in Q3 2023 primarily due to the interest and accretion on the convertible debenture and royalty receivable;
• A favourable variation in the fair market value of strategic investments of $3.0-million.

The comprehensive loss for the nine-month period ended Sept. 30, 2023, of $18.7-million, compared with a loss of $21.2-million, for the same period in the prior year, represents a variation of $2.4-million:

• A decrease in product and service revenue of $6.4-million;
• A decrease in cost of sales and services of $1.5-million, primarily due to a decrease in employee compensation, subcontracting, direct materials, manufacturing overhead and other, and foreign exchange charge on materials, offset by the increase in investment tax credits and amortization of intangible assets;
• An increase in SG&A expenses of $3.0-million was primarily due to an increase in employee compensation, travel, depreciation in property and equipment, depreciation of right-of-use assets, foreign exchange charge on materials, and the allowance for credit loss of $4.8-million, offset by a decrease in professional fees, government grants, office and general, and other expenses;
• A decrease in share-based expenses of $1.8-million;
• An increase in R&D expenses of $200,000 primarily due to an increase in employee compensation and other expenses and a decrease in subcontracting, materials and equipment;
• A decrease in net finance costs (income) of $1.7-million is primarily due to the revaluation of balance due on business combination;
• A favourable variation in the fair market value of strategic investments of $8.3-million.

Further information

Additional information relating to company and its business, including the 2022 financial statements, the annual information form, and other filings that the company has made and may make in the future with applicable securities authorities, may be found on or through SEDAR+, EDGAR or the company's website.

Additional information, including director and officer remuneration and indebtedness, principal holders of the company's securities, and securities authorized for issuance under equity compensation plans, is also contained in the company's most recent management information circular for the most recent annual meeting of shareholders of the company.

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