Third Quarter 2026 Business Update Conference Call - PYROGENESIS CANADA INC

Financial Performance:

• Q3 2026 revenue was $3.07 million (a 5% YoY decrease), while first nine months (YTD) revenue reached $12.4 million, a 34% increase YoY against $9.2 million in 2025.
• Q3 gross margin improved to 35% from 24% in the prior year period; YTD gross margin was 33% with gross profit increasing by $0.8 million.
• Q3 net loss was $3.2 million (vs. $2.3 million), primarily driven by a non-cash share-based compensation increase of $1.5 million; YTD net loss narrowed to $5.4 million (vs. $9.4 million), a $4 million improvement.
• Modified EBITDA improved significantly in Q3 to a loss of $1.5 million (from $1.9 million loss) and for YTD to a loss of $2.3 million (from $7 million loss), a $4.7 million improvement.
• SG&A expenses were $4.0 million in Q3 (vs. $2.6 million) due to share-based compensation, but YTD SG&A decreased to $9.3 million (vs. $9.9 million) reflecting cost discipline.
• Net financial expenses were $0.1 million in Q3 and $0.6 million YTD, lower than 2025 due to fewer leases, loan maturities, and the non-recurrence of a $1 million one-time finance income in 2025.
• Backlog stood at $39.9 million, remaining stable near the previous quarter's $40 million, expected to be recognized over 6 to 36 months.

Guidance and Future Outlook:

• Management anticipates quarterly revenue will continue to fluctuate based on project timing and revenue recognition milestones.
• The company is on track to conclude 2026 strongly, citing the best nine-month revenue total since 2022.
• Strategic focus remains on executing the backlog, converting commercial opportunities into contracts, maintaining cost discipline, and building shareholder value.
• No specific numerical forward guidance for the full year 2026 was provided, but the trajectory for the remainder of the year is positive based on YTD momentum.

Business Segments and Product Lines:

• Materials Production: Secured multiple contracts for Ti-64 coarse and fine-cut titanium powder (additive manufacturing) with U.S. DoD/NASA-supported facilities, an OEM serving the aerospace/defense sector, and a U.S. materials distributor (potential monthly supply up to 1,000 kg). Three new clients secured, two of whom are recurring.
• Energy Transition: Signed a $1.4 million contract to supply two plasma torches (300 kW and 40 kW) to a European mining and metallurgy entity for high-temperature applications and decarbonization.
• Waste Processing: Subsidiary Pyro Green Gas received a final acceptance certificate for a major Tata Steel project, completing the one-year operational liability period for a system producing 99.9999% purity hydrogen from coke oven gas.
• Strategic Acquisitions: Completed the acquisition of 50% ownership in HPQ Pulver, solidifying long-term rights to the fume silica reactor technology.
• Fume Silica: Announced potential projects with a global manufacturer, a potential JV partner, a downstream user, and a Middle Eastern customer for plant development.

Market and Competitive Landscape:

• Operating in heavy industry and manufacturing where margins are generally resilient but compressed due to rising input costs for energy, commodities, and shipping.
• Metal alloy prices have spiked significantly in 2026; copper hit all-time highs (25% higher than 2025), new aluminum up 7.5%, and scrap aluminum up 23%.
• Supply chains remain disrupted by security threats affecting international shipping lanes.
• Pyrogenesis serves diverse verticals including aerospace, defense, chemical manufacturing, and metal mining, positioning itself as a technology provider for ultra-high temperature and plasma processes.

Risks and Challenges:

• Revenue recognition is irregular quarter-to-quarter due to the percentage-of-completion accounting model and client scheduling/logistical decisions.
• Clients face cash flow and scheduling challenges in the fluctuating economic landscape, which can impact production milestones and revenue booking.
• Gross margins are subject to variation based on project mix, execution stage, and volatile direct material/subcontracting costs.
• Forward-looking information is subject to risks and uncertainties that could cause actual results to differ materially from projections.

Management Commentary and Tone:

• Tone was confident and positive regarding YTD performance, highlighting diversified revenue streams and progress in commercializing new technologies.
• Management emphasized the importance of YTD results (34% revenue growth) over volatile quarterly fluctuations to assess business health.
• CFO Andre Manella noted that the YTD improvement was supported by multiple platforms rather than a single isolated project.
• CEO Peter Pascali characterized Q3 as a key quarter for finalizing initiatives, bringing on new clients, and driving recurring business.

Analyst Questions and Answers:

• The transcript provided does not contain a recorded Q&A session; it concludes with prepared remarks and closing statements.
• Management directed investors to the press release and website for additional information and to the IR department for specific questions.

Other Key Points:

• The company utilizes Canadian GAAP where revenue is accrued based on work completed rather than sales.
• Non-IFRS measures including EBITDA, Modified EBITDA, and Backlog are used and defined in the MD&A.
• Other income for YTD included a $0.9 million gain from lease modification and an $80,000 gain from equipment sales.
• R&D expenses decreased YTD to $0.5 million (from $0.9 million) due to timing of development programs, not a reduction in long-term innovation commitment.