Hydrogenics Reports First Quarter 2016 Results
May 11 2016 - 6:30AM
Hydrogenics Corporation
(NASDAQ:HYGS) (TSX:HYG) ("Hydrogenics" or "the Company"), a
leading developer and manufacturer of hydrogen generation and
hydrogen-based power modules, today reported first quarter 2016
financial results. Results are reported in US dollars and are
prepared in accordance with International Financial Reporting
Standards (IFRS).
First Quarter Highlights
“The first quarter of 2016 was challenging for
Hydrogenics, as a few booked projects were pushed out and certain
contract awards delayed," said Daryl Wilson, Hydrogenics' CEO.
"While our backlog grew and the Company's balance sheet remained
strong, several programs were impacted by slower-than-anticipated
progress payments and delays in customer site readiness, causing a
deferral of revenue recognition until the second quarter.
Nevertheless, higher overall gross margins allowed us to deliver a
5% improvement in gross profit relative to a year ago and an 18%
lower Adjusted EBITDA loss. We anticipate that overall gross
margins should remain higher than in 2015.
“We continue to lay the groundwork for the major
initiatives we’ve spoken about in the past – including the next
phase of multi-megawatt power generation orders in Korea. As I said
last quarter, the final structure required for this 50 megawatt
contract’s implementation is quite complex due to its size and
first-of-its-kind application. The parties that are involved with
this large transaction are making solid progress with regard to the
requisite financing, legal structure, and power purchase agreement,
and we believe that, subject to final approval by all parties, more
details should soon be forthcoming on this groundbreaking
undertaking. It is clearly our nearest-term priority. In the
meantime, we continue to pursue many opportunities in China,
Europe, Japan, and North America that leverage our leading
platforms in electrolyzers and fuel cells. Our unique technology
provides for scalable applications that can transform both the
industry as well as our Company, and we believe the coming quarters
should see increased order intake – positioning Hydrogenics for
stronger growth this year and next. The delays we’re experiencing
are, unfortunately, part of the growth process, but we are working
diligently to address any issues and accelerate Hydrogenics’
expansion going forward.”
Summary of Results for the Quarter Ended
March 31, 2016
- Revenue declined by 43% to $4.3 million from $7.5 million last
year, reflecting the deferral of revenue associated with several
shipments in both Power Systems and OnSite Generation from the
first to second quarter. The delays were principally driven by the
timing of customer site readiness to accept shipments combined with
delivery delays associated with awaiting customer progress
payments.
- Gross profit increased to 28% of revenue for the quarter,
versus 15% in the prior-year period, reflecting increased
engineering work and improved product mix.
- Adjusted EBITDA1 loss decreased to $1.9 million for the quarter
compared with an Adjusted EBITDA1 loss of $2.3 million in the first
quarter of 2015, reflecting the aforementioned items.
- Net loss for the quarter was $2.4 million or $(0.19) per share,
versus $3.4 million, or $(0.34) per share, in the prior-year
period.
- Hydrogenics secured $5.8 million of orders during the quarter,
resulting in an order backlog of $98.0 million as of March 31,
2016. Of the $98.0 million in backlog, the Company expects to
recognize approximately $30 million over the next twelve months as
revenue. In addition, revenue for the year ending December 31, 2016
will also include a portion of orders received and delivered during
2016.
- The Company exited the first quarter with $19.1 million of cash
and restricted cash, a $5.8 million decrease from December 31, 2015
primarily reflecting: (i) $4.1 million of cash used in operating
activities; (ii) $1.1 million repayment of operating borrowings;
(iii) $0.5 million related to the purchase of property, plant and
equipment and intangible assets; and (iv) the foreign exchange
impact on euro and Canadian-denominated cash balances.
Notes
- Adjusted EBITDA is defined as net loss excluding stock based
compensation (both cash settled long term compensation indexed to
share price and share based compensation), other finance income and
expenses, depreciation and amortization. These items are considered
by management to be outside of Hydrogenics’ ongoing operational
results. Adjusted EBITDA is a non-IFRS measure and may not be
comparable to similar measures used by other companies.
Conference Call DetailsHydrogenics will hold a
conference call at 1:00 p.m. EDT on May 11, 2016 to review the
first quarter results. The telephone number for the conference call
is (877) 307-1373 or, for international callers, (678)
224-7873. A live webcast of the call will also be available
on the company's website, www.hydrogenics.com.
An archived copy of the conference call and
webcast will be available on the company's website,
www.hydrogenics.com, approximately six hours following the
call.
About HydrogenicsHydrogenics
Corporation is a world leader in engineering and building the
technologies required to enable the acceleration of a global power
shift. Headquartered in Mississauga, Ontario, Hydrogenics provides
hydrogen generation, energy storage and hydrogen power modules to
its customers and partners around the world. Hydrogenics has
manufacturing sites in Germany, Belgium and Canada and service
centres in Russia, Europe, the US and Canada.
Forward-looking StatementsThis
release contains forward-looking statements within the meaning of
the “safe harbor” provisions of the U.S. Private Securities
Litigation Reform Act of 1995, and under applicable Canadian
securities law. These statements are based on management’s current
expectations and actual results may differ from these
forward-looking statements due to numerous factors, including: our
inability to increase our revenues or raise additional funding to
continue operations, execute our business plan, or to grow our
business; inability to address a slow return to economic growth,
and its impact on our business, results of operations and
consolidated financial condition; our limited operating history;
inability to implement our business strategy; fluctuations in
our quarterly results; failure to maintain our customer base that
generates the majority of our revenues; currency fluctuations;
failure to maintain sufficient insurance coverage; changes in value
of our goodwill; failure of a significant market to develop
for our products; failure of hydrogen being readily available on a
cost-effective basis; changes in government policies and
regulations; failure of uniform codes and standards for hydrogen
fuelled vehicles and related infrastructure to develop; liability
for environmental damages resulting from our research, development
or manufacturing operations; failure to compete with other
developers and manufacturers of products in our industry; failure
to compete with developers and manufacturers of traditional and
alternative technologies; failure to develop partnerships with
original equipment manufacturers, governments, systems integrators
and other third parties; inability to obtain sufficient materials
and components for our products from suppliers; failure to manage
expansion of our operations; failure to manage foreign sales and
operations; failure to recruit, train and retain key management
personnel; inability to integrate acquisitions; failure to develop
adequate manufacturing processes and capabilities; failure to
complete the development of commercially viable products; failure
to produce cost-competitive products; failure or delay in field
testing of our products; failure to produce products free of
defects or errors; inability to adapt to technological advances or
new codes and standards; failure to protect our intellectual
property; our involvement in intellectual property litigation;
exposure to product liability claims; failure to meet rules
regarding passive foreign investment companies; actions of our
significant and principal shareholders; dilution as a result of
significant issuances of our common shares and preferred shares;
inability of US investors to enforce US civil liability judgments
against us; volatility of our common share price; and dilution as a
result of the exercise of options. Readers should not place undue
reliance on Hydrogenics’ forward-looking statements. Investors are
encouraged to review the section captioned “Risk Factors” in
Hydrogenics’ regulatory filings with the Canadian securities
regulatory authorities and the US Securities and Exchange
Commission for a more complete discussion of factors that could
affect Hydrogenics’ future performance. Furthermore, the
forward-looking statements contained herein are made as of the date
of this release, and Hydrogenics undertakes no obligations to
revise or update any forward-looking statements in order to reflect
events or circumstances that may arise after the date of this
release, unless otherwise required by law. The forward-looking
statements contained in this release are expressly qualified by
this.
Reconciliation of Cash Operating Costs to
Operating Costs and Adjusted EBITDA to Net Loss |
(in
thousands of US dollars) |
(unaudited) |
|
Cash operating costs |
|
|
|
Three months endedMarch
31 |
|
|
|
2016 |
|
|
|
2015 |
|
Selling,
general and administrative expenses |
|
$ |
2,248 |
|
|
$ |
2,579 |
|
Research and product development expenses |
|
|
1,123 |
|
|
|
1,022 |
|
Total operating
costs |
|
$ |
3,371 |
|
|
$ |
3,601 |
|
Less:
Depreciation of property, plant and equipment and intangibles
|
|
|
(79 |
) |
|
|
(93 |
) |
Less:
Compensation costs indexed to share price |
|
|
30 |
|
|
|
144 |
|
Less:
Stock-based compensation losses |
|
|
(129 |
) |
|
|
(118 |
) |
Cash operating costs |
|
$ |
3,193 |
|
|
$ |
3,534 |
|
Adjusted EBITDA |
|
|
Three months endedMarch
31 |
|
|
|
2016 |
|
|
|
2015 |
|
Net
loss |
|
$ |
(2,362 |
) |
|
$ |
(3,427 |
) |
Finance loss
(income) |
|
|
202 |
|
|
|
979 |
|
Depreciation of
property, plant and equipment and intangible assets
|
|
|
172 |
|
|
|
161 |
|
Compensation
indexed to share price |
|
|
(30 |
) |
|
|
(144 |
) |
Stock-based compensation expense |
|
|
129 |
|
|
|
118 |
|
Adjusted EBITDA |
|
$ |
(1,889 |
) |
|
$ |
(2,313 |
) |
Hydrogenics Corporation |
Condensed Interim Consolidated Balance Sheets |
(in
thousands of US dollars) |
(unaudited) |
|
|
|
March 31, 2016 |
|
December 31, 2015 |
|
|
|
|
|
Assets |
|
|
|
|
Current
assets |
|
|
|
|
Cash and cash
equivalents |
|
$ |
17,770 |
|
|
$ |
23,398 |
|
Restricted cash |
|
|
707 |
|
|
|
971 |
|
Trade and other
receivables |
|
|
10,341 |
|
|
|
10,419 |
|
Inventories |
|
|
18,352 |
|
|
|
14,270 |
|
Prepaid expenses |
|
|
593 |
|
|
|
428 |
|
Derivative asset |
|
|
26 |
|
|
|
- |
|
|
|
|
47,789 |
|
|
|
49,486 |
|
Non-current
assets |
|
|
|
|
Restricted cash |
|
|
624 |
|
|
|
532 |
|
Investment in joint
venture |
|
|
2,184 |
|
|
|
1,951 |
|
Property, plant and
equipment |
|
|
3,271 |
|
|
|
3,049 |
|
Intangible assets |
|
|
255 |
|
|
|
215 |
|
Goodwill |
|
|
4,333 |
|
|
|
4,135 |
|
|
|
|
10,667 |
|
|
|
9,882 |
|
Total assets |
|
$ |
58,456 |
|
|
$ |
59,368 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Current
liabilities |
|
|
|
|
Operating
borrowings |
|
$ |
- |
|
|
$ |
1,086 |
|
Trade and other
payables |
|
|
8,434 |
|
|
|
7,776 |
|
Financial
liabilities |
|
|
8,787 |
|
|
|
9,034 |
|
Warranty
provisions |
|
|
2,128 |
|
|
|
2,255 |
|
Deferred revenue |
|
|
11,957 |
|
|
|
10,146 |
|
|
|
|
31,306 |
|
|
|
30,297 |
|
Non-current
liabilities |
|
|
|
|
Other non-current
liabilities |
|
|
3,392 |
|
|
|
3,121 |
|
Non-current warranty
provisions |
|
|
910 |
|
|
|
938 |
|
Non-current deferred revenue |
|
|
4,447 |
|
|
|
4,764 |
|
|
|
|
8,749 |
|
|
|
8,823 |
|
Total liabilities |
|
|
40,055 |
|
|
|
39,120 |
|
Equity |
|
|
|
|
Share capital |
|
|
365,824 |
|
|
|
365,824 |
|
Contributed
surplus |
|
|
19,093 |
|
|
|
18,964 |
|
Accumulated other
comprehensive loss |
|
|
(2,838 |
) |
|
|
(3,224 |
) |
Deficit |
|
|
(363,678 |
) |
|
|
(361,316 |
) |
Total equity |
|
|
18,401 |
|
|
|
20,248 |
|
Total equity and liabilities |
|
$ |
58,456 |
|
|
$ |
59,368 |
|
Hydrogenics Corporation |
Consolidated Interim Statements of Operations and
Comprehensive Loss |
(in
thousands of US dollars, except share and per share amounts) |
(unaudited) |
|
|
|
|
Three months ended |
|
|
|
March 31 |
|
|
|
|
2016 |
|
|
|
2015 |
|
Revenues |
|
|
$ |
4,329 |
|
|
$ |
7,531 |
|
Cost of sales |
|
|
|
3,118 |
|
|
|
6,378 |
|
Gross profit |
|
|
|
1,211 |
|
|
|
1,153 |
|
|
|
|
|
|
|
Operating
expenses |
|
|
|
|
|
Selling, general and
administrative expenses |
|
|
|
2,248 |
|
|
|
2,579 |
|
Research and product
development expenses |
|
|
|
1,123 |
|
|
|
1,022 |
|
|
|
|
|
3,371 |
|
|
|
3,601 |
|
|
|
|
|
|
|
Loss from operations |
|
|
|
(2,160 |
) |
|
|
(2,448 |
) |
|
|
|
|
|
|
Finance income
(expenses) |
|
|
|
|
|
Interest expense,
net |
|
|
|
(433 |
) |
|
|
(127 |
) |
Foreign currency
losses, net |
|
|
|
(36 |
) |
|
|
(836 |
) |
Gain (loss) from joint
venture |
|
|
|
56 |
|
|
|
(16 |
) |
Other
finance gains |
|
|
|
211 |
|
|
|
- |
|
Finance loss, net |
|
|
|
(202 |
) |
|
|
(979 |
) |
|
|
|
|
|
|
Loss before
income taxes |
|
|
|
(2,362 |
) |
|
|
(3,427 |
) |
Income tax expense |
|
|
|
- |
|
|
|
- |
|
Net loss for the period |
|
|
|
(2,362 |
) |
|
|
(3,427 |
) |
|
|
|
|
|
|
Items that may be
reclassified subsequently to net loss |
|
|
|
|
|
Exchange
differences on translating foreign operations |
|
|
|
386 |
|
|
|
(1,061 |
) |
Comprehensive loss for the period |
|
|
$ |
(1,976 |
) |
|
$ |
(4,488 |
) |
|
|
|
|
|
|
Net loss per
share |
|
|
|
|
|
Basic and diluted |
|
|
$ |
(0.19 |
) |
|
$ |
(0.34 |
) |
|
|
|
|
|
|
Hydrogenics Corporation |
Consolidated Interim Statements of Cash Flows |
(in
thousands of US dollars) (unaudited) |
|
|
|
Three months
ended |
|
|
March 31, |
|
|
|
2016 |
|
|
|
2015 |
|
Cash and cash
equivalents provided by (used
in): |
|
|
|
|
Operating
activities |
|
|
|
|
Net loss for the
period |
|
$ |
(2,362 |
) |
|
$ |
(3,427 |
) |
Decrease in restricted
cash |
|
|
230 |
|
|
|
537 |
|
Items not affecting
cash |
|
|
|
|
Amortization and depreciation |
|
|
172 |
|
|
|
161 |
|
Unrealized other gains and losses on hedging |
|
|
(69 |
) |
|
|
- |
|
Other
finance gain, net |
|
|
(131 |
) |
|
|
- |
|
Unrealized foreign exchange losses |
|
|
127 |
|
|
|
5 |
|
Unrealized (gain) loss on joint venture |
|
|
(56 |
) |
|
|
16 |
|
Accreted
non-cash and unpaid interest and amortization of deferred
financing fees |
|
|
365 |
|
|
|
121 |
|
Stock-based compensation |
|
|
129 |
|
|
|
118 |
|
Stock-based compensation - RSUs and DSUs |
|
|
(30 |
) |
|
|
(144 |
) |
Net change in non-cash working capital |
|
|
(2,502 |
) |
|
|
1,249 |
|
Cash used in operating activities |
|
|
(4,127 |
) |
|
|
(1,364 |
) |
|
|
|
|
|
Investing
activities |
|
|
|
|
Purchase of property,
plant and equipment |
|
|
(628 |
) |
|
|
(371 |
) |
Receipt of government
funding |
|
|
185 |
|
|
|
- |
|
Purchase
of intangible assets |
|
|
(42 |
) |
|
|
- |
|
Cash used in investing activities |
|
|
(485 |
) |
|
|
(371 |
) |
|
|
|
|
|
Financing
activities |
|
|
|
|
Repayment of repayable
government contributions |
|
|
(54 |
) |
|
|
- |
|
Repayment of operating
borrowings |
|
|
(1,076 |
) |
|
|
- |
|
Proceeds of operating
borrowings |
|
|
- |
|
|
|
2,151 |
|
Common
shares issued and stock options exercised, net of issuance
costs |
|
|
- |
|
|
|
6 |
|
Cash provided by (used in) financing
activities |
|
|
(1,130 |
) |
|
|
2,157 |
|
|
|
|
|
|
Increase (decrease) in
cash and cash equivalents during the period |
|
|
(5,742 |
) |
|
|
422 |
|
Cash and cash
equivalents - Beginning of period |
|
|
23,398 |
|
|
|
6,572 |
|
Effect of exchange rate
fluctuations on cash and cash equivalents held |
|
|
114 |
|
|
|
(787 |
) |
Cash and cash equivalents - End of period |
|
$ |
17,770 |
|
|
$ |
6,207 |
|
|
|
|
|
|
Hydrogenics Contacts:
Bob Motz, Chief Financial Officer
Hydrogenics Corporation
(905) 361-3660
investors@hydrogenics.com
Chris Witty
Hydrogenics Investor Relations
(646) 438-9385
cwitty@darrowir.com
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