Hydrogenics Reports Third Quarter 2016 Results
November 07 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 third quarter 2016 financial results.
Results are reported in US dollars and are prepared in accordance
with International Financial Reporting Standards (IFRS).
Third Quarter Highlights
“The third quarter was a very busy time for
Hydrogenics, as we won new orders that increased our backlog to the
highest level in corporate history,” said Daryl Wilson,
Hydrogenics’ CEO and President. “With such awards in hand and given
project timing, we expect stronger revenue in the fourth quarter
and are well-positioned for higher growth in 2017. This quarter saw
Alstom unveil its first fuel cell-powered train, at the InnoTrans
railroad industry trade show in Berlin, and German aerospace leader
DLR with the launch of its four-person HY4 plane, both using
Hydrogenics technology. These were groundbreaking developments that
relied on our applications engineering strength and advanced PEM
fuel cell technology.
“In addition, we recently secured a new five
year, $9 million debt facility. We remain on track with our
long-term contracts for an Enbridge energy storage facility in
Toronto, heavy-duty fuel cells for Alstom, our propulsion
application, and numerous opportunities in China. At the same time
we continue to work diligently with multiple parties in Korea,
including Kolon, on sites that can leverage our hydrogen-based
power generation technology. Demand for fueling continues to rise
with fuel cell vehicle deployment as illustrated in the
recently-announced partnership with StratosFuel to build North
America’s largest renewable hydrogen power plant. We see markets
for our various applications across Asia along with multiple
avenues for growth in China, Europe and in California.”
Summary of Results for the Quarter Ended
September 30, 2016
- Hydrogenics ended the third quarter of 2016 with the highest
backlog in the Company’s history – $106.2 million. During the
quarter, Hydrogenics secured $8.5 million of new orders,
representing both fuel cell and electrolyzer applications. Of the
$106.2 million in total backlog, the Company expects to recognize
approximately $30 million as revenue over the next twelve months,
in addition to what can be booked and billed as revenue during the
same twelve month period.
- Company revenue was $6.7 million for the quarter, a decrease of
30% from the third quarter of 2015. The decline reflects the
absence of several key projects delivered in the prior-year period,
partially offset by increased sales into the Chinese mobility
market.
- Gross profit decreased to $1.0 million in the current quarter
versus $2.1 million in the prior-year period, and the gross margin
declined to 14.9% from 21.8% in the prior-year period. The decrease
was principally attributed to the Company’s Power Systems segment,
which incurred additional costs to support several key projects in
Germany.
- The Company’s Adjusted EBITDA1 loss increased slightly to $1.5
million for the three months ended September 30, 2016 from $1.4
million for the same period last year, reflecting lower gross
profit, partially offset by reduced selling, general and
administrative costs (“SG&A”) and reduced net research and
development expenses (“R&D”).
- Cash operating costs2 decreased $0.9 million to $2.6 million
for the current quarter compared to $3.5 million for the prior-year
period, with the decline due to lower SG&A (excluding
compensation indexed to share price) and R&D expenses. The
decrease in SG&A was related to lower general &
administrative expenses, and higher external funding reduced net
R&D costs.
- The net loss for the quarter was $1.9 million, or $(0.15) per
share, versus $2.2 million, or $(0.22) per share in the prior-year
period.
- Subsequent to September 30, 2016, Hydrogenics secured a new
term loan facility. This long-term facility on favorable terms
strengthens our ability to support the future growth.
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.
- 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.
Conference Call
DetailsHydrogenics will hold a conference call at 10:00
a.m. EST on November 7, 2016 to review the second 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 endedSeptember
30, |
Nine months endedSeptember
30, |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
Selling,
general and administrative expenses |
$ |
|
2,365 |
|
$ |
|
2,566 |
|
$ |
|
7,719 |
|
$ |
|
7,724 |
|
Research and product development expenses |
|
|
263 |
|
|
|
1,045 |
|
|
|
2,831 |
|
|
|
3,106 |
|
Total operating
costs |
$ |
|
2,628 |
|
$ |
|
3,611 |
|
$ |
|
10,550 |
|
$ |
|
10,830 |
|
Less:
Depreciation of property, plant and
equipment and intangible assets |
|
|
(98 |
) |
|
|
(95 |
) |
|
|
(298 |
) |
|
|
(272 |
) |
Less:
Compensation indexed to share price |
|
|
(6 |
) |
|
|
174 |
|
|
|
100 |
|
|
|
408 |
|
Less:
Stock-based compensation expense |
|
|
36 |
|
|
|
(163 |
) |
|
|
(254 |
) |
|
|
(457 |
) |
Cash operating costs |
$ |
|
2,560 |
|
$ |
|
3,527 |
|
$ |
|
10,098 |
|
$ |
|
10,509 |
|
Adjusted EBITDA
|
Three months endedSeptember
30 |
Nine months endedSeptember
30, |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
Net
loss |
$ |
|
(1,899 |
) |
$ |
|
(2,192 |
) |
$ |
|
(7,353 |
) |
$ |
|
(9,319 |
) |
Finance loss
(income) |
|
|
271 |
|
|
|
682 |
|
|
|
833 |
|
|
|
2,785 |
|
Depreciation of
property, plant and equipment and intangible assets |
|
|
192 |
|
|
|
138 |
|
|
|
548 |
|
|
|
448 |
|
Compensation
indexed to share price |
|
|
6 |
|
|
|
(174 |
) |
|
|
(100 |
) |
|
|
(408 |
) |
Stock-based compensation expense |
|
|
(36 |
) |
|
|
163 |
|
|
|
254 |
|
|
|
457 |
|
Adjusted EBITDA |
$ |
|
(1,466 |
) |
$ |
|
(1,383 |
) |
$ |
|
(5,818 |
) |
$ |
|
(6,037 |
) |
Hydrogenics CorporationCondensed Interim
Consolidated Balance Sheets (in thousands of US
dollars)(unaudited)
|
|
September 30, 2016 |
|
December 31, 2015 |
Assets |
|
|
|
|
Current
assets |
|
|
|
|
Cash and cash
equivalents |
$ |
|
9,997 |
|
$ |
|
23,398 |
|
Restricted cash |
|
|
784 |
|
|
|
971 |
|
Trade and other
receivables |
|
|
13,571 |
|
|
|
10,419 |
|
Inventories |
|
|
18,900 |
|
|
|
14,270 |
|
Prepaid expenses |
|
|
924 |
|
|
|
428 |
|
|
|
|
44,176 |
|
|
|
49,486 |
|
Non-current
assets |
|
|
|
|
Restricted cash |
|
|
394 |
|
|
|
532 |
|
Investment in joint
venture |
|
|
2,057 |
|
|
|
1,951 |
|
Property, plant and
equipment |
|
|
3,820 |
|
|
|
3,049 |
|
Intangible assets |
|
|
226 |
|
|
|
215 |
|
Goodwill |
|
|
4,280 |
|
|
|
4,135 |
|
|
|
|
10,777 |
|
|
|
9,882 |
|
Total assets |
$ |
|
54,953 |
|
$ |
|
59,368 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Current
liabilities |
|
|
|
|
Operating
borrowings |
$ |
|
2,248 |
|
$ |
|
1,086 |
|
Trade and other
payables |
|
|
11,353 |
|
|
|
7,776 |
|
Financial
liabilities |
|
|
8,710 |
|
|
|
9,034 |
|
Warranty
provisions |
|
|
1,766 |
|
|
|
2,255 |
|
Deferred revenue |
|
|
9,120 |
|
|
|
10,146 |
|
|
|
|
33,197 |
|
|
|
30,297 |
|
Non-current
liabilities |
|
|
|
|
Other non-current
liabilities |
|
|
3,495 |
|
|
|
3,121 |
|
Non-current warranty
provisions |
|
|
855 |
|
|
|
938 |
|
Non-current deferred revenue |
|
|
3,811 |
|
|
|
4,764 |
|
|
|
|
8,161 |
|
|
|
8,823 |
|
Total liabilities |
|
|
41,358 |
|
|
|
39,120 |
|
Equity |
|
|
|
|
Share capital |
|
|
365,922 |
|
|
|
365,824 |
|
Contributed
surplus |
|
|
19,120 |
|
|
|
18,964 |
|
Accumulated other
comprehensive loss |
|
|
(2,778 |
) |
|
|
(3,224 |
) |
Deficit |
|
|
(368,669 |
) |
|
|
(361,316 |
) |
Total equity |
|
|
13,595 |
|
|
|
20,248 |
|
Total equity and liabilities |
$ |
|
54,953 |
|
$ |
|
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 |
Nine months ended |
|
|
September 30, |
September 30, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
Revenues |
$ |
|
6,733 |
|
$ |
|
9,644 |
|
$ |
|
20,260 |
|
$ |
|
24,543 |
|
Cost of sales |
|
|
5,733 |
|
|
|
7,543 |
|
|
|
16,230 |
|
|
|
20,247 |
|
Gross profit |
|
|
1,000 |
|
|
|
2,101 |
|
|
|
4,030 |
|
|
|
4,296 |
|
|
|
|
|
|
|
|
|
|
Operating
expenses |
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses |
|
|
2,365 |
|
|
|
2,566 |
|
|
|
7,719 |
|
|
|
7,724 |
|
Research and product
development expenses |
|
|
263 |
|
|
|
1,045 |
|
|
|
2,831 |
|
|
|
3,106 |
|
|
|
|
2,628 |
|
|
|
3,611 |
|
|
|
10,550 |
|
|
|
10,830 |
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(1,628 |
) |
|
|
(1,510 |
) |
|
|
(6,520 |
) |
|
|
(6,534 |
) |
|
|
|
|
|
|
|
|
|
Finance income
(expenses) |
|
|
|
|
|
|
|
|
Interest expense,
net |
|
|
(439 |
) |
|
|
(446 |
) |
|
|
(1,310 |
) |
|
|
(942 |
) |
Foreign currency gains
(losses), net |
|
|
139 |
|
|
|
217 |
|
|
|
(39 |
) |
|
|
(381 |
) |
Loss from joint
venture |
|
|
(78 |
) |
|
|
(127 |
) |
|
|
(26 |
) |
|
|
(86 |
) |
Other
finance gains (losses) |
|
|
107 |
|
|
|
(326 |
) |
|
|
542 |
|
|
|
(1,376 |
) |
Finance loss, net |
|
|
(271 |
) |
|
|
(682 |
) |
|
|
(833 |
) |
|
|
(2,785 |
) |
|
|
|
|
|
|
|
|
|
Loss before
income taxes |
|
|
(1,899 |
) |
|
|
(2,192 |
) |
|
|
(7,353 |
) |
|
|
(9,319 |
) |
Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net loss for the period |
|
|
(1,899 |
) |
|
|
(2,192 |
) |
|
|
(7,353 |
) |
|
|
(9,319 |
) |
|
|
|
|
|
|
|
|
|
Items that may be
reclassified subsequently to net loss |
|
|
|
|
|
|
|
|
Exchange differences on translating
foreign operations |
|
|
249 |
|
|
|
(79 |
) |
|
|
446 |
|
|
|
(955 |
) |
Comprehensive loss for the period |
$ |
|
(1,650 |
) |
$ |
|
(2,271 |
) |
$ |
|
(6,907 |
) |
$ |
|
(10,274 |
) |
|
|
|
|
|
|
|
|
|
Net loss per
share |
|
|
|
|
|
|
|
|
Basic and diluted |
$ |
|
(0.15 |
) |
$ |
|
(0.22 |
) |
$ |
|
(0.59 |
) |
$ |
|
(0.92 |
) |
|
|
|
|
|
|
|
|
|
|
Hydrogenics CorporationConsolidated Interim
Statements of Cash Flows (in thousands of US dollars)
(unaudited)
|
Three months ended |
Nine months ended |
|
September 30, |
September 30, |
|
2016 |
2015 |
2016 |
|
2015 |
Cash and cash
equivalents provided by (used
in): |
|
|
|
|
|
|
|
|
Operating
activities |
|
|
|
|
|
|
|
|
Net loss for the
period |
$ |
(1,899 |
) |
$ |
(2,192 |
) |
$ |
(7,353 |
) |
$ |
(9,319 |
) |
(Increase) decrease in
restricted cash |
|
364 |
|
|
118 |
|
|
371 |
|
|
2,065 |
|
Items not affecting
cash |
|
|
|
|
|
|
|
|
Amortization and depreciation |
|
192 |
|
|
138 |
|
|
548 |
|
|
448 |
|
Unrealized losses on hedging |
|
- |
|
|
111 |
|
|
- |
|
|
111 |
|
Warrants |
|
(106 |
) |
|
- |
|
|
(522 |
) |
|
885 |
|
Unrealized foreign exchange (gains)
losses |
|
(41 |
) |
|
227 |
|
|
145 |
|
|
(29 |
) |
Unrealized (gain) loss on joint
venture |
|
78 |
|
|
127 |
|
|
26 |
|
|
86 |
|
Accreted non-cash and unpaid
interest and amortization of
deferred financing fees |
|
229 |
|
|
220 |
|
|
827 |
|
|
685 |
|
Stock-based compensation |
|
(36 |
) |
|
163 |
|
|
254 |
|
|
457 |
|
Stock-based compensation - RSUs and
DSUs |
|
6 |
|
|
(174 |
) |
|
(100 |
) |
|
(408 |
) |
Net change
in non-cash working capital |
|
(1,545 |
) |
|
326 |
|
|
(6,947 |
) |
|
(1,575 |
) |
Cash used in operating activities |
|
(2,758 |
) |
|
(936 |
) |
|
(12,751 |
) |
|
(6,594 |
) |
|
|
|
|
|
|
|
|
|
Investing
activities |
|
|
|
|
|
|
|
|
Purchase of property,
plant and equipment |
|
(1,275 |
) |
|
(674 |
) |
|
(2,178 |
) |
|
(1,553 |
) |
Receipt of government
funding |
|
175 |
|
|
- |
|
|
390 |
|
|
118 |
|
Purchase
of intangible assets |
|
- |
|
|
- |
|
|
(47 |
) |
|
(81 |
) |
Cash used in investing activities |
|
(1,100 |
) |
|
(674 |
) |
|
(1,835 |
) |
|
(1,516 |
) |
|
|
|
|
|
|
|
|
|
Financing
activities |
|
|
|
|
|
|
|
|
Repayment of repayable
government contributions |
|
(55 |
) |
|
(52 |
) |
|
(163 |
) |
|
(162 |
) |
Proceeds of borrowings,
net of transaction costs |
|
- |
|
|
- |
|
|
- |
|
|
6,866 |
|
Repayment of operating
borrowings |
|
- |
|
|
(1,658 |
) |
|
(1,077 |
) |
|
(3,809 |
) |
Proceeds of operating
borrowings |
|
2,248 |
|
|
2,240 |
|
|
2,248 |
|
|
6,062 |
|
Common
shares issued |
|
- |
|
|
- |
|
|
- |
|
|
9 |
|
Cash provided by (used in) financing
activities |
|
2,193 |
|
|
530 |
|
|
1,008 |
|
|
8,966 |
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in
cash and cash equivalents during the period |
|
(1,665 |
) |
|
(1,080 |
) |
|
(13,578 |
) |
|
856 |
|
Cash and cash
equivalents - Beginning of period |
|
11,579 |
|
|
8,016 |
|
|
23,398 |
|
|
6,572 |
|
Effect of exchange rate
fluctuations on cash and cash equivalents held |
|
83 |
|
|
(6 |
) |
|
177 |
|
|
(498 |
) |
Cash and cash equivalents - End of period |
$ |
9,997 |
|
$ |
6,930 |
|
$ |
9,997 |
|
$ |
6,930 |
|
|
|
|
|
|
|
|
|
|
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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