Hydrogenics Reports Fourth Quarter and Full Year 2016 Results
March 08 2017 - 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 fourth quarter and full year 2016 financial
results. Results are reported in US dollars and are prepared in
accordance with International Financial Reporting Standards (IFRS).
2016 Highlights
“We ended the year with lower revenue than 2015 but our
strongest backlog ever, along with increased optimism about the
order flow for 2017 and beyond,” said Daryl Wilson, Hydrogenics’
CEO. “As anticipated, fourth quarter revenue was an increase
sequentially over the third quarter. This increase reflects the
first of our pre-commercial fuel cell shipments to Alstom Transport
to be used in first of a kind zero emission fuel cell powered
commuter trains. In addition, we realized additional sales to China
of fuel cell power modules to power buses in major metropolitan
areas. We anticipate an increase in revenue this year reflecting
deliveries out of backlog along with new orders signed and
delivered in 2017. We continue to pursue hydrogen-based energy
production applications throughout Asia with Kolon and, at the same
time, look forward to the opening of our Power-to-Gas facility in
Toronto this spring – which will provide ongoing recurring revenue
to Hydrogenics as well as the opportunity for enhancements,
upgrades, and additional orders.
“Going forward, we see strong interest in our
products across China and are upbeat that growth trends here will
positively impact Hydrogenics as well as the entire fuel cell
industry. Hydrogenics is also expected to benefit from the trend
towards increased energy storage and hydrogen fueling station
applications as well as higher demand for electrolyzers for
industrial, fueling and energy storage applications across key
markets such as Europe and Russia. In total, we believe revenue for
2017 will well surpass 2016 leaving us optimistic about the
quarters to come.”
Summary of Results for the Quarter Ended
December 31, 2016 (compared to the Quarter Ended December 31, 2015
unless otherwise noted)
- Company revenue was $8.7 million for the fourth quarter of
2016, a decrease of 23% year-over-year. The decline reflects lower
revenue within the Company’s OnSite Generation business due to the
timing deliveries, partially offset by an increase in shipments
within the Company’s Power Systems business related to Chinese
mobility orders and commuter trains in Europe.
- Gross profit was $2.0 million (22.5% of revenue) compared to
$1.7 million (14.7% of revenue) in the fourth quarter of 2015. The
increase in gross profit was principally due to product mix with a
large lower-margin project included in results in the fourth
quarter of 2015.
- Cash operating costs1 increased $0.2 million to $3.8 million
for the current quarter compared to $3.6 million for the prior-year
period due to higher SG&A, partially offset by a $0.2 million
reduction in net R&D expense.
- The Company’s Adjusted EBITDA2 loss decreased slightly to
$1.7 million for the three months ended December 31, 2016 from $1.8
million for the same period in 2015. This change reflects the net
of the increases in gross profit and cash operating costs noted
above.
- The net loss for the quarter was $2.5 million, or $(0.20) per
share, versus $2.1 million, or $(0.20) per share, in the prior-year
period.
- Hydrogenics secured $13.4 million of orders for renewable
energy storage, industrial gas and power system applications during
the quarter, resulting in an order backlog of $106.6 million as of
December 31, 2016. Order backlog movement during the fourth quarter
(in $ millions) was as follows:
|
|
|
|
|
|
|
|
|
September 30, 2016 backlog |
Orders Received |
FX |
Orders Delivered/ Revenue
Recognized |
December 31, 2016 backlog |
| OnSite Generation |
$ |
17.1 |
$ |
8.1 |
$ |
(0.6 |
) |
$ |
3.8 |
$ |
20.8 |
| Power
Systems |
|
89.1 |
|
5.3 |
|
(3.7 |
) |
|
4.9 |
|
85.8 |
|
Total |
$ |
106.2 |
$ |
13.4 |
$ |
(4.3 |
) |
$ |
8.7 |
$ |
106.6 |
- Of the above backlog of $106.6 million, Hydrogenics expects to
recognize approximately $38 million in the following twelve months
as revenue. In addition, revenue for the year ending December 31,
2017 will also include orders received and delivered in 2017.
Summary of Results for the Year Ended
December 31, 2016 (compared to the Year Ended December 31, 2015,
unless otherwise noted)
- Revenue decreased by $7.0 million, or 19%, to $29.0 million for
the year ended December 31, 2016 compared to $35.9 million in the
prior year. The year-over-year decrease was due to (i) a decline in
electrolyzer sales for energy storage and industrial applications,
reflecting market dynamics; and (ii) the delivery of certain
significant projects in 2015 that were not repeated in 2016;
partially offset by (iii) higher sales to the Chinese mobility
market in 2016; and (iv) increased shipments to Europe for commuter
rail fuel cell systems.
- Gross margin increased to 20.7% in 2016 from 16.6% in 2015,
reflecting the fact that several first-of-their-kind projects with
lower margin profiles negatively impacted results in 2015. Fiscal
2016 was also positively impacted by increased revenue within the
Chinese mobility market, partially offset by lower absorption of
indirect fixed overhead costs and changes in product mix (including
a lower proportion of custom projects such as engineering
services).
- Cash operating costs were $13.9 million in 2016 compared to
$14.1 million for 2015, with the lower costs a result of a decrease
in net R&D expenditures, partially offset by the increase in
SG&A expense excluding stock-based compensation and
amortization and depreciation.
- Hydrogenics’ Adjusted EBITDA loss decreased to $7.6 million for
the year ended December 31, 2016 from $7.9 million in the
prior-year period due to a reduction in net R&D expenditures of
$0.5 million, partially offset by an increase in SG&A expense
(excluding stock-based compensation and depreciation and
amortization) of $0.2 million.
- Net loss for the year ended December 31, 2016, was $9.9
million, or $(0.79) per share, compared to a net loss of $11.4
million, or $(1.12) per share, for the prior year. The net loss in
2016 reflects a year-over-year increase in “other finance gains
(losses)” of $2.1 million given a change in the fair value of
outstanding warrants of $0.8 million due to a decrease in
Hydrogenics’ share price. The 2015 figures included the issuance of
warrants ($0.9 million) as well as fair value adjustments related
to foreign exchange forward contracts ($0.6 million). Also
contributing to the decrease in net loss was a decline in R&D
expense, as noted above. This change was partially offset by an
increase in SG&A expense of $0.6 million and higher interest
expense of $0.4 million due to debt outstanding for a greater
period of the year.
Notes
- Cash operating costs are defined as the sum of SG&A and
R&D, less amortization and depreciation, and stock-based
compensation expense inclusive of compensation costs indexed to the
Company’s share price. This is a non-IFRS measure and may not be
comparable to similar measures used by other companies. Management
uses this measure as a rough estimate of the amount of fixed costs
to operate the Corporation and believes this is a useful measure
for investors for the same purpose.
- 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 10:00
a.m. EST on March 8, 2017 to review the fourth 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
centers 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
fueled 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 endedDecember
31 |
|
Twelve months endedDecember
31 |
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
| Selling,
general and administrative expenses |
$ |
3,106 |
|
$ |
2,491 |
|
$ |
10,825 |
|
$ |
10,215 |
|
|
|
Research and product development expenses |
|
745 |
|
|
963 |
|
|
3,576 |
|
|
4,070 |
|
|
| Total operating
costs |
$ |
3,851 |
|
$ |
3,454 |
|
$ |
14,401 |
|
$ |
14,285 |
|
|
| Less:
Depreciation of property, plant and equipment and
intangibles |
|
(109 |
) |
|
(102 |
) |
|
(407 |
) |
|
(374 |
) |
|
| Less:
Compensation costs indexed to share price |
|
190 |
|
|
(173 |
) |
|
290 |
|
|
234 |
|
|
| Less:
Stock-based compensation losses |
|
(136 |
) |
|
414 |
|
|
(390 |
) |
|
(43 |
) |
|
|
Cash operating costs |
$ |
3,796 |
|
$ |
3,593 |
|
$ |
13,894 |
|
$ |
14,102 |
|
|
| Adjusted EBITDA |
| |
|
Three months endedDecember 31 |
|
|
Twelve months endedDecember 31 |
|
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
| Net
loss |
$ |
(2,504 |
) |
$ |
(2,122 |
) |
$ |
(9,857 |
) |
$ |
(11,442 |
) |
| Finance loss
(income) |
|
618 |
|
|
343 |
|
|
1,451 |
|
|
3,128 |
|
| Depreciation of
property, plant and equipment and intangible assets |
|
203 |
|
|
182 |
|
|
751 |
|
|
630 |
|
| Compensation
indexed to share price |
|
(190 |
) |
|
173 |
|
|
(290 |
) |
|
(234 |
) |
|
Stock-based compensation expense |
|
136 |
|
|
(414 |
) |
|
390 |
|
|
43 |
|
|
Adjusted EBITDA |
$ |
(1,737 |
) |
$ |
(1,838 |
) |
$ |
(7,555 |
) |
$ |
(7,875 |
) |
|
Hydrogenics CorporationCondensed Interim
Consolidated Balance Sheets(in thousands of US
dollars)(unaudited) |
| |
|
|
|
December 31, 2016 |
|
December 31, 2015 |
|
Assets |
|
|
|
|
| Current
assets |
|
|
|
|
| Cash and cash
equivalents |
$ |
10,338 |
|
$ |
23,398 |
|
| Restricted cash |
|
405 |
|
|
971 |
|
| Trade and other
receivables |
|
9,802 |
|
|
10,419 |
|
| Inventories |
|
17,208 |
|
|
14,270 |
|
| Prepaid expenses |
|
918 |
|
|
428 |
|
|
|
|
38,671 |
|
|
49,486 |
|
| Non-current
assets |
|
|
|
|
| Restricted cash |
|
535 |
|
|
532 |
|
| Investment in joint
venture |
|
1,750 |
|
|
1,951 |
|
| Property, plant and
equipment |
|
4,095 |
|
|
3,049 |
|
| Intangible assets |
|
203 |
|
|
215 |
|
|
Goodwill |
|
4,019 |
|
|
4,135 |
|
|
|
|
10,602 |
|
|
9,882 |
|
|
Total assets |
$ |
49,273 |
|
$ |
59,368 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
| Current
liabilities |
|
|
|
|
| Operating
borrowings |
$ |
2,111 |
|
$ |
1,086 |
|
| Trade and other
payables |
|
7,235 |
|
|
7,776 |
|
| Financial
liabilities |
|
3,939 |
|
|
9,034 |
|
| Warranty
provisions |
|
1,221 |
|
|
2,255 |
|
| Deferred revenue |
|
10,788 |
|
|
10,146 |
|
|
|
|
25,294 |
|
|
30,297 |
|
| Non-current
liabilities |
|
|
|
|
| Other non-current
liabilities |
|
9,262 |
|
|
3,121 |
|
| Non-current warranty
provisions |
|
841 |
|
|
938 |
|
|
Non-current deferred revenue |
|
3,494 |
|
|
4,764 |
|
|
|
|
13,597 |
|
|
8,823 |
|
|
Total liabilities |
|
38,891 |
|
|
39,120 |
|
|
Equity |
|
|
|
|
| Share capital |
|
365,923 |
|
|
365,824 |
|
| Contributed
surplus |
|
19,255 |
|
|
18,964 |
|
| Accumulated other
comprehensive loss |
|
(3,623 |
) |
|
(3,224 |
) |
|
Deficit |
|
(371,173 |
) |
|
(361,316 |
) |
|
Total equity |
|
10,382 |
|
|
20,248 |
|
|
Total equity and liabilities |
$ |
49,273 |
|
$ |
59,368 |
|
|
Hydrogenics CorporationConsolidated Interim
Statements of Operations and Comprehensive Loss (in thousands of US
dollars, except share and per share amounts)(unaudited) |
| |
| |
Three months ended |
Twelve months ended |
|
|
December 31, |
December 31, |
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
Revenues |
$ |
8,730 |
|
$ |
11,321 |
|
$ |
28,990 |
|
$ |
35,864 |
|
|
Cost of sales |
|
6,765 |
|
|
9,646 |
|
|
22,995 |
|
|
29,893 |
|
|
Gross profit |
|
1,965 |
|
|
1,675 |
|
|
5,995 |
|
|
5,971 |
|
| Operating
expenses |
|
|
|
|
|
|
|
|
| Selling, general and
administrative expenses |
|
3,106 |
|
|
2,491 |
|
|
10,825 |
|
|
10,215 |
|
| Research and product
development expenses |
|
745 |
|
|
963 |
|
|
3,576 |
|
|
4,070 |
|
|
|
|
3,851 |
|
|
3,454 |
|
|
14,401 |
|
|
14,285 |
|
|
Loss from operations |
|
(1,886 |
) |
|
(1,779 |
) |
|
(8,406 |
) |
|
(8,314 |
) |
|
|
|
|
|
|
|
|
|
|
| Finance income
(expenses) |
|
|
|
|
|
|
|
|
| Interest expense,
net |
|
(452 |
) |
|
(379 |
) |
|
(1,762 |
) |
|
(1,322 |
) |
| Foreign currency gains
(losses), net |
|
(229 |
) |
|
(47 |
) |
|
(268 |
) |
|
(428 |
) |
| Loss from joint
venture |
|
(130 |
) |
|
45 |
|
|
(156 |
) |
|
(40 |
) |
| Other
finance gains (losses) |
|
193 |
|
|
38 |
|
|
735 |
|
|
(1,338 |
) |
|
Finance loss, net |
|
(618 |
) |
|
(343 |
) |
|
(1,451 |
) |
|
(3,128 |
) |
| |
|
|
|
|
|
|
|
|
| Loss before
income taxes |
|
(2,504 |
) |
|
(2,122 |
) |
|
(9,857 |
) |
|
(11,442 |
) |
|
Income tax expense |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Net loss for the period |
|
(2,504 |
) |
|
(2,122 |
) |
|
(9,857 |
) |
|
(11,442 |
) |
|
|
|
|
|
|
|
|
|
|
| Items that will not be
reclassified subsequently to net loss: |
|
|
|
|
|
|
|
|
|
Re-measurement of actuarial liability |
|
(101 |
) |
|
(96 |
) |
|
(101 |
) |
|
(104 |
) |
| Items that may be
reclassified subsequently to net loss |
|
|
|
|
|
|
|
|
| Exchange
differences on translating foreign operations |
|
(744 |
) |
|
(336 |
) |
|
(298 |
) |
|
(1,284 |
) |
|
Comprehensive loss for the period |
$ |
(3,349 |
) |
$ |
(2,554 |
) |
$ |
(10,256 |
) |
$ |
(12,830 |
) |
|
|
|
|
|
|
|
|
|
|
| Net loss per
share |
|
|
|
|
|
|
|
|
| Basic and diluted |
$ |
(0.20 |
) |
$ |
(0.20 |
) |
$ |
(0.79 |
) |
$ |
(1.12 |
) |
|
Hydrogenics CorporationConsolidated Interim
Statements of Cash Flows(in thousands of US dollars)
(unaudited) |
| |
|
|
Three months ended |
Twelve months ended |
|
|
December 31, |
December 31, |
|
|
2016 |
|
2015 |
|
2016 |
|
|
2015 |
|
| Cash and cash
equivalents provided by (used
in): |
|
|
|
|
|
|
|
|
| Operating
activities |
|
|
|
|
|
|
|
|
| Net loss for the
period |
$ |
(2,504 |
) |
$ |
(2,122 |
) |
$ |
(9,857 |
) |
$ |
(11,442 |
) |
| (Increase) decrease in
restricted cash |
|
171 |
|
|
107 |
|
|
542 |
|
|
2,172 |
|
| Items not affecting
cash |
|
|
|
|
|
|
|
|
| Loss on
disposal of assets |
|
5 |
|
|
9 |
|
|
5 |
|
|
9 |
|
|
Amortization and depreciation |
|
203 |
|
|
182 |
|
|
751 |
|
|
630 |
|
|
Unrealized losses on hedging |
|
- |
|
|
(68 |
) |
|
- |
|
|
43 |
|
|
Other finance losses (gains), net |
|
(238 |
) |
|
(133 |
) |
|
(760 |
) |
|
752 |
|
|
Unrealized foreign exchange (gains) losses |
|
1 |
|
|
(339 |
) |
|
146 |
|
|
(369 |
) |
|
Unrealized (gain) loss on joint venture |
|
130 |
|
|
(45 |
) |
|
156 |
|
|
40 |
|
|
Accreted non-cash and unpaid interest and amortization
of deferred financing fees |
|
259 |
|
|
237 |
|
|
1,086 |
|
|
920 |
|
|
Stock-based compensation |
|
136 |
|
|
(414 |
) |
|
390 |
|
|
43 |
|
|
Stock-based compensation - RSUs and DSUs |
|
(190 |
) |
|
173 |
|
|
(290 |
) |
|
(234 |
) |
|
Net change in non-cash working capital |
|
1,565 |
|
|
3,173 |
|
|
(5,382 |
) |
|
1,598 |
|
|
Cash used in operating activities |
|
(462 |
) |
|
760 |
|
|
(13,213 |
) |
|
(5,838 |
) |
| |
|
|
|
|
|
|
|
|
| Investing
activities |
|
|
|
|
|
|
|
|
| Purchase of property,
plant and equipment |
|
(777 |
) |
|
(475 |
) |
|
(2,955 |
) |
|
(2,028 |
) |
| Receipt of government
funding |
|
811 |
|
|
- |
|
|
1,201 |
|
|
118 |
|
| Purchase
of intangible assets |
|
(1 |
) |
|
(24 |
) |
|
(48 |
) |
|
(105 |
) |
|
Cash used in investing activities |
|
33 |
|
|
(499 |
) |
|
(1,802 |
) |
|
(2,015 |
) |
| |
|
|
|
|
|
|
|
|
| Financing
activities |
|
|
|
|
|
|
|
|
| Repayment of long-term
debt - institutional |
|
(7,500) |
|
- |
|
|
(7,500) |
|
- |
|
| Repayment of repayable
government contributions and long-term debt - Province of
Ontario |
|
(211 |
) |
|
(51 |
) |
|
(374 |
) |
|
(213 |
) |
| Proceeds of borrowings,
net of transaction costs |
|
8,715 |
|
|
- |
|
|
8,715 |
|
|
6,866 |
|
| Proceeds (repayment) of
operating borrowings |
|
(99 |
) |
|
(1,139 |
) |
|
1,072 |
|
1,113 |
|
| Common
shares issued and stock options exercised, net of issuance costs
(note 18) |
|
- |
|
|
17,550 |
|
|
- |
|
|
17,559 |
|
|
Cash provided by (used in) financing
activities |
|
905 |
|
|
16,360 |
|
|
1,913 |
|
|
25,325 |
|
|
|
|
|
|
|
|
|
|
|
| Increase (decrease) in
cash and cash equivalents during the period |
|
476 |
|
|
16,621 |
|
|
(13,102 |
) |
|
17,472 |
|
| Cash and cash
equivalents - Beginning of period |
|
9,997 |
|
|
6,930 |
|
|
23,398 |
|
|
6,572 |
|
| Effect of exchange rate
fluctuations on cash and cash equivalents held |
|
(135 |
) |
|
(153 |
) |
|
42 |
|
|
(646 |
) |
|
Cash and cash equivalents - End of period |
$ |
10,338 |
|
$ |
23,398 |
|
$ |
10,338 |
|
$ |
23,398 |
|
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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