Hello, and welcome to PyroGenesis Fourth Quarter and Fiscal Year 2024 Financial Results and Business Update Conference Call. All participants are on a listen-only mode. I would now like to turn the conference over to Rodayna Kafal. You may begin.
Thank you, and good morning. I'm Rodayna Kafal, Vice President of Investor Relations for PyroGenesis. Thank you for joining PyroGenesis 2024 Fourth Quarter and Year-End Financial Results and Business Update Conference Call. On the call with us today are Mr. Andre Mainella, the company's Chief Financial Officer, and Mr. Steve McCormick, Vice President of Corporate Affairs. The company issued a press release on Monday, March 31, 2025, containing the financial results and a business update for the fourth quarter and year-end December 31, 2024, 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 Investor Relations Department, and we will try as best as possible to answer questions that are of public nature.
The company's management will shortly provide prepared remarks reviewing the operational and financial results for the fourth quarter and year-end December 31, 2024. 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 differ materially from historical results or from 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 your 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 EBITDA, Modified EBITDA, and Backlog, 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 EBITDA and Modified EBITDA, please refer to the company's management discussion and analysis, which, along with the financial statements, are available on the company's website at pyrogenesis.com and at sedarplus.ca.
Also, a reminder that PyroGenesis follows Canadian Generally Accepted Accounting Principles, or GAAP, where revenue is accrued not on sales but on a model that reflects a percentage of the work completed for a given contract during the period, which can vary based on both the nature of the project in-house and on the client's own scheduling and logistical decisions, both of which can impact production milestones and the company's ability to book revenue. During these recent years of supply chain, logistical, and inflationary uncertainties, those issues have been more frequent and exacerbating. As stated in previous reports, the company's revenues are likely to be irregular and unpredictable quarter to quarter, as contract-related revenue fluctuates based on various reasons, including those just explained. With that, I will now turn the call over to Steve McCormick, Vice President of Corporate Affairs. Please go ahead, Steve.
Good morning. Thanks very much, Rodayna, and thanks to everyone for joining us today. I'm going to start off with a quick review of some of the company's top-line results, followed by a summary of key business activities that occurred during the quarter, before turning the call over to the company's Chief Financial Officer, Andre Mainella. For the fourth quarter of 2024, the company exited the quarter with revenues of CAD 4.22 million, with a net income or profit of CAD 145,000. As stated in yesterday's news release, this is an increase of 40% year over year, and this result represents four consecutive quarters of year-over-year growth, with every quarter in 2024 surpassing its equivalent 2023 quarter. For gross margin for the fourth quarter, it was 41.3%, an 18 percentage point increase from the 23% margin of the same period one year ago, for an improvement of 78%.
The Q4 margin of 41.3% almost mirrors the 42% margin seen in the third quarter, displaying a margin consistency that the company continues to aim for, and supporting the production and cost controls that the company has been undertaking to regain margin momentum, address cash flow challenges, and strive for profitability. In comparison to some of the industries we serve or support, the company's margins were strong, as the aluminum industry is currently reporting a 25% margin for the fourth quarter. Metals mining is at 33%. Aerospace and defense is at a 14% margin. Iron and steel is at 17%. Renewable energy services and equipment is at a 22% margin, and industrial machinery and components is at a 39% margin. For the full year, revenue was CAD 15.65 million.
This represents a 27% increase in revenue year over year, and margin for the full year was 34%, a six-point improvement on 2023's full-year margin of 28%. Now on to Backlog, which stands at a very robust $54.4 million. For those that need clarity on Backlog, Backlog is signed or awarded contracts, or what some companies refer to as order book, containing future revenues for the company that will be added to the financial results over subsequent quarters, as projects are started or project milestones are reached on a percentage of work completed basis. For context as to why management feels this number is important, for many years, PyroGenesis was a company with a Backlog that hovered between $5-$10 million.
In management's opinion, a Backlog above $50 million indicates improvement in sales efforts, the strength of existing customer relationships, the increasing size of individual contracts, and the wide variety of different types of contracts the company can secure, which is what the company's President, Peter Pascali, has often referred to as the company's multi-legged stool identity. Now on to some key production highlights for the quarter. Please note that projects or potential projects previously announced that do not appear in this summary update or within the MD&A or Outlook should not be considered at risk. Noteworthy developments can occur at any time based on project stages, and the information presented is merely a reflection of information on hand of some, but not all projects, and projects not mentioned may simply not have passed milestones worthy of discussion.
Starting with a very brief reminder of the company's business strategy, PyroGenesis leverages an expertise in ultra-high temperature processes to create a technology ecosystem for heavy industry. Spanning early-stage pilot to full commercialization, the solution set is concentrated under three verticals that align with economic drivers that are key to heavy industry. First, for the energy transition and emission reduction vertical, which focuses on fuel switching or helping heavy industry change their energy mix to include more electrically powered process steps or add more renewable energy to their grid by utilizing the company's electrically powered plasma torches and its biogas upgrading technology. During the quarter in this vertical, PyroGenesis had a couple of very notable announcements.
Obviously, one of the company's biggest announcements in its history and the one that has helped drive the Backlog up above the $50 million plateau, on October 21, the company announced a contract valued at approximately $27 million for the development of a plasma torch system powered at an incredible 20 megawatts for an existing U.S. client that regularly serves as a prime contractor for the U.S. government and who provides technology and test services geared to solving critical defense, military, aeronautics, and space exploration challenges. This is the same client that had ordered a 4.5-megawatt plasma torch from PyroGenesis back in August of 2023, which at that time was the company's highest-powered plasma torch ordered.
As the company has stated several times, a plasma torch at this 20-megawatt power level, based on the company's own research, represents one of the most powerful, if not the most powerful, plasma torches ever to be produced commercially. On November 19th, the company announced a contract with one of the three largest steel manufacturers globally to assess the applicability of PyroGenesis plasma torches for use in the customer's electric arc furnace, or EAF, steelmaking and casting processes. The client's goal is to determine how or where plasma can be used in the steps following the EAF process, which turns scrap metal and directly reduces iron into molten steel. Of note, PyroGenesis had previously been awarded official supplier status to this client as part of the build-up to this contract.
In the waste remediation vertical, which provides technology for the safe destruction of hazardous materials and the recovery and dollarization of underlying substances such as chemicals and minerals that can be reused or resold, the company's development in the fourth quarter included a $1 million after-sales component contract related to the company's plasma-based waste destruction systems that are installed or being installed on the U.S. Navy's fleet of Gerald R. Ford-class aircraft carriers. In December, the company completed commissioning of the plasma torch system to destroy harmful perfluoroalkyl and polyfluoroalkyl substances, or PFAS for short, which are widely known as the forever chemicals due to a strong molecular bond that resists degradation and which have been connected to worldwide health issues.
This particular plasma torch, which was part of a previously announced $2.25 million contract, was operating at full capacity and had, to the date of the announcement, helped successfully destroy more than 300 tons of PFAS-contaminated materials at the client's facility. For commodity security and optimization, this is the vertical that provides technology to aid in the recovery of viable metals and in the optimization of production output, both of which are meant to improve the availability of critical minerals such as titanium, aluminum, silica, and others that are essential for modern manufacturing. While there were no announcements during the quarter, post-quarter end, the company announced it had produced the first material from its fumed silica reactor project, which was designed to produce commercial-grade fumed silica from quartz in a single eco-friendly step, while eliminating the use of harmful chemicals currently used in the conventional production method.
Later, the company released performance data for 2024 for its next-gen plasma atomized metal powder production system, which outlined improved results, including increased yields of up to 33-50% for its key titanium metal powder used in the later laser powder bed fusion printing process, what the company refers to as the laser-cut powder, increased operational uptime of more than 25%, and a reduction of operational costs by approximately 20%. To read about these and other events and updates, as well as ongoing projects not discussed on this call, please refer to the corresponding section of the news release or the management discussion and analysis, in particular the Outlook sections of those documents.
I'll be back at the end for some final thoughts, but at this point, I'd like to turn the call over to the company's Chief Financial Officer, Andre Mainella, to discuss the financials in more detail. Andre?
Thank you, Steve, for the comprehensive operational overview. Now let's turn our attention to PyroGenesis's financial performance for Q4 2024 and the full year. As highlighted in the operational updates, we continue to make strong progress across all verticals, translating into improved financial results. In this section, I'll walk you through our revenue growth and cost management, providing insights into our performance for the quarter and the full year. For the full year 2024, we are pleased to report sustained revenue increases and operational improvements. Our revenue saw another quarter of sequential growth, with Q4 increasing to $4.2 million, up from $3 million of revenue in the same period last year. This momentum contributed to a total annual revenue of $15.7 million, which is a year-over-year increase of $3.3 million, or almost 27%.
Key highlights for this Q4 compared to Q4 2023 include DROSRITE sales increasing by $1.9 million, driven by significant progress with our Saudi customer, successful client-site trials, and higher spare parts and service orders. Biogas upgrading and pollution controls-related sales increased by $0.6 million due to the advancement of the company's gas desulphurization project. Offsetting factors include a reduction in revenue from systems supplied to the U.S. Navy, torches, and refrigerant destruction due to either the current stage of the project or due to the project being completed and delivered. For the full year, we saw continued expansion across key business segments. DROSRITE-related sales increased by $3 million, reflecting the successful execution of ongoing projects, completion of trials, and incremental revenue from storage services and spare parts.
Torch-related products and services increased by $1.8 million and saw strong growth, benefiting from strategic projects and key milestones reached throughout the year, including the successful completion of the PFAS destruction project and advancement on the 4.5-megawatt torch project. However, we also saw year-over-year reductions in PureVap and U.S. Navy projects, totaling $1.7 million, which is a reflection of the current phase of the projects. As of March 31, 2025, the backlog stands at $54.4 million, and it's important to note that a large part of it is in foreign currency. In fact, 87% of that amount is in U.S. dollars. A significant portion of the backlog relates to our energy transition through electrification initiatives as we collaborate with industry leaders. Now let's discuss gross margin and expenses.
For Q4, we are pleased to report a gross profit of $1.7 million, which represents 41% of revenue, an improvement compared to 23% gross margin reported in Q4 2023. The improvement was driven by a reduction in direct material costs and a decrease in the amortization of intangible assets. From an annual view, the gross margin was 34% versus 28% in fiscal 2023, and also due to the reduction of amortization of intangible assets, in addition to the employee compensation used in the manufacturing process. Our SG&A expenses for the quarter totaled $1.3 million, a sharp decline from $9.4 million in Q4 2023. This reduction was attributed to several factors. A substantial reduction in the expense for expected credit loss, which varied favorably by $3.8 million, following the receipt and settlement of previously provisioned receivables.
Also, the absence of a $2.7 million goodwill impairment charge that was recorded in Q4 2023. In addition to the absence of a change in assumption of $0.5 million to the royalty receivables, also recorded in 2023. In the current quarter, the company also recognized a foreign exchange gain of $0.5 million due to the FX rate of the Canadian versus the U.S. dollar. The other expense category decreased because of the company's insurance premiums. Finally, improved cost optimization across legal, consulting, and professional expenses helped to reduce the SG&A expenses for the quarter. This commentary was the main reason for the year-over-year variation, whereby SG&A decreased from $31 million down to $11 million. The variation in the expected credit loss alone accounted for $12 million of this change, in addition to the share-based expense variation for an extra $1 million benefit.
Net R&D expenses were reduced to $72,000 compared to $500,000 for Q4 2023, as the company focused on prioritizing strategic initiatives. This decrease is explained by the reduction in employee compensation, materials, and equipment costs, as the company continues to carefully evaluate opportunities while managing resource allocation. This translates to an annual net R&D expense of $800,000 versus $2.2 million spent in all of 2023. In terms of quarterly finance costs, it remained stable at $250,000, representing a slight decrease due to the interest accretion and reevaluation on the balance due on business combination. Interest on lease liabilities and the convertible loan decreased as the maturity dates approached and the capital diminished. The accretion on the convertible loan increased given that the loan was outstanding for all of Q4 2024, as opposed to a very short time in December 2023.
This translated to an annual net finance expense of $1.1 million. The fair value adjustment of strategic investments resulted in a modest loss for Q4, but showed a $0.5 million improvement compared to Q4 of 2023. For the full year, the adjustment resulted in a $0.2 million loss, improving by $80,000 from fiscal 2023. The decrease is due to changes in the market value of our HPQ and BGF shares. Also note, in April, the company completed a block sale of nearly 3.8 million shares of HPQ for proceeds of $660,000. Moving now to other income. During the year, the company settled a legal claim with a third party, which was also a customer of the company. As a result, PyroGenesis received $1.5 million. Of this amount, $1.2 million was recognized as a gain, and the remainder was to settle the accounts receivable balance.
Moving on to our comprehensive income for Q4, we reported an income of $0.1 million, a favorable improvement of $9.9 million compared to the same quarter last year. This was driven by increased revenue, higher margins, significantly reduced SG&A expenses, and finance costs, as described earlier. For Q4 2024, we also saw notable improvements in modified EBITDA, which came in at a positive $1.8 million, an improvement of $9.7 million from Q4 2023. The full-year modified EBITDA improved to a loss of $1.9 million, up from a loss of $24.4 million in 2023. That is an improvement exceeding $22 million. The improvements in Q4 modified EBITDA, which was driven by the same factors contributing to the EBITDA, which is essentially the decrease in comprehensive loss and adding back similar amounts for depreciation and amortization.
This quarter's EBITDA adds back share-based expense and changes in fair value of strategic investments for a non-cash total of approximately $1.2 million. That wraps up the financial highlights for Q4 and fiscal 2024. Thank you. I will hand it back to Steve for any further remarks.
Thanks, Andre. I'm pleased to report on behalf of management that PyroGenesis's fourth quarter and year-end financials have kept the company well on track. While there is much work still to do to ensure continued momentum and the type of long-term success and profitability to which the company aspires, there are many positive data points coming out of 2024 supporting this optimism. The company reversed the revenue downtrend of 2023 with a 27% revenue improvement year-over-year. Revenue has grown for four successive quarters and for six quarters out of the last seven. Margins continue in the targeted territory above 40%.
Cost-cutting, efficiency measures, receivable collection, and project advancement continue to have a positive effect and combine to help produce a profit during the fourth quarter, a major improvement versus a loss of almost $10 million in the same period a year ago, while also serving to help address the cash flow constraints that the company and many others have experienced in this current economic climate.
Lastly, the concurrent advancements in power levels and the gains in efficiency and performance revealed during the quarter have worked together to help the company attract both larger clients in more intensive, heavy industries who have greater process demands and whose needs can now possibly be met by plasma, while also attracting smaller clients with lower heat and lower power demands who can benefit from the performance improvements and the resulting cost and efficiency benefits to make their business cases for using plasma much more viable. The net result is the continuing expansion of the overall addressable market for plasma at both the higher and lower ends of the heavy industry client spectrum. As stated by the company's President, Mr.
Peter Pascali, in yesterday's news release, with a solid backlog in place and continued interest from existing and new customers, we believe we are well positioned for continued improvements in the upcoming fiscal quarters. We are committed to making PyroGenesis not just the go-to supplier of ultra-high temperature technology to the world's leading companies, but also to be an essential part of the final mile of industrial energy grid infrastructure during the coming period of major grid expansion and widespread changes to the industrial energy mix. On behalf of the company and our board of directors, I'd like to affirm that the company remains committed to driving shareholder value and continues to focus on innovating, improving efficiency, growing a customer base, and engaging with existing and potential new customers around the world on a variety of new business opportunities.
Thank you once again for joining today, and I'll now pass it back to Rodayna Kafal. Rodayna?
Thank you, Steve. That will mark the end of today's call. We look forward to providing you with additional updates in the very near future. A reminder to submit any questions you may have about the company and its projects to our investor relations department. Thank you again, and have a good day.
Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.