Hydrogenics Reports Second Quarter 2017 Results
August 02 2017 - 5:30AM
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 second quarter 2017 financial results.
Results are reported in US dollars and are prepared in accordance
with International Financial Reporting Standards (IFRS).
Recent Highlights
“This past quarter was one of the most memorable
in our corporate history, as we saw major developments that clearly
place Hydrogenics on the path to higher growth and profitability,”
said Daryl Wilson, President and Chief Executive Officer. "In June,
we booked our largest Chinese order to date. One of our first
Certified Integration Partners in China – Blue-G New Energy Science
and Technology Corporation – signed a multi-year, $50 million
agreement with Hydrogenics for delivery of 1,000 fuel cell modules
along with ongoing engineering support. Our fuel cells will be used
for zero-emission buses and other applications across the country,
with shipments expected to begin later this year. At the same time,
we won an order for fuel cells to power several Scania hydrogen
trucks owned by ASKO, Norway’s largest grocery wholesaler. These
wins, along with our existing Alstom commuter train and propulsion
contracts, illustrate our recognition as the go-to technology
choice for heavy-duty fuel cell power modules.
“While our second quarter results were impacted
by certain shipments moving to the third quarter and by the
re-estimation of costs on our major propulsion project, we are more
optimistic than ever regarding 2017 and beyond. Most notably,
just before the end of the quarter, we concluded a $21 million
private placement with the Hejili Equity Investment Limited
Partnership, strengthening our balance sheet and paving the way for
additional strategic development initiatives in China. We’re
working with Hejili and their partners on several potential
opportunities across the hydrogen spectrum – from energy storage to
fuel cells to large scale power production. As strong believers in
China’s commitment to clean energy, we are well positioned to
assist the nation in meeting its long-term emission-reduction
goals. Overall, Hydrogenics made huge steps during the quarter that
will benefit our customers, partners, and investors alike for many
years to come.”
Summary of Results for the Quarter June
30, 2017
- The Company posted revenue of $7.5 million for the second
quarter of 2017, a decrease of 19% year-over-year. While
China-related revenue increased in the quarter, overall sales
declined primarily due to delays in delivery of several On-Site
Generation projects until later in 2017. In addition, the pace of
revenue recognition of the Company’s Power Systems propulsion
project was impacted by unanticipated costs incurred in the
quarter. The additional costs related to the development of the
prototype under this contract reduced percentage of completion
cumulative revenue in the quarter by $1.7 million. However
the Company expects this contract to return to the historical
revenue and margin contribution in future quarters.
- The Company has not changed its outlook for substantial revenue
growth for the full year 2017 versus 2016. The Company ended the
second quarter of 2017 with the highest backlog level in its
history at $152.1 million, securing orders of $45.3 million for
Power-to-Gas systems, fueling stations, industrial gas applications
and mobility systems. Order backlog movement during the second
quarter (in $ millions) was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
backlog |
Orders Received |
FX |
Orders Delivered/ Revenue
Recognized |
June 30, 2017
backlog |
OnSite Generation |
$ |
28.4 |
$ |
2.9 |
$ |
1.1 |
$ |
4.1 |
$ |
28.3 |
Power
Systems |
|
81.4 |
|
42.4 |
|
3.4 |
|
3.4 |
|
123.8 |
Total |
$ |
109.8 |
$ |
45.3 |
$ |
4.5 |
$ |
7.5 |
$ |
152.1 |
|
|
|
|
|
|
|
|
|
|
|
- Of the above backlog of $152.1 million, the Company expects to
recognize approximately $65 million in the following 12 months as
revenue. In addition, revenue for the year ending December 31, 2017
will also include orders both received and delivered during the
balance of 2017, an increase of approximately $21 million from the
$44 million in twelve month revenue as of March 31, 2017.
- Gross profit decreased to $0.3 million in the current quarter
vs versus $1.8 million in the prior-year period due to:-- Two
challenging Africa-based projects in the On-Site Generation segment
that met with unanticipated delays and overruns due to delayed
construction and scope changes by the engineering firms responsible
for construction of the facilities where Hydrogenics’ electrolyzers
would be located; and-- The margin impact of the additional costs
incurred on the Power Systems’ propulsion engineering services
contract.In both cases, the Company believes that the impact of the
lower than anticipated margins will be limited to the second
quarter, with a return to improved margin levels in the third
quarter and onward.
- Cash operating costs1 decreased 6%, from $4.3 million to $4.1
million, primarily as a result of certain streamlining initiatives
and lower overhead expenses.
- The Company’s Adjusted EBITDA2 loss increased $1.3 million to
$3.7 million for the three months ended June 30, 2017, versus $2.4
million for the same period last year. This was due to the decrease
in gross profit previously mentioned, partially offset by lower
selling, general and administrative expenses.
- Net loss increased from $3.1 million, or $(0.25) per share, to
$5.7 million, or $(0.45) per share, in the current period,
primarily due to the decrease in gross profit. The recent increase
in the company’s share price also contributed to the higher net
loss, due to certain non-cash compensation expenses being marked to
market and outstanding warrants adjusted to their fair value.
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. EDT on August 2, 2017 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 endedJune
30, |
|
|
Six months endedJune
30, |
|
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
Selling,
general and administrative expenses |
$ |
3,333 |
|
$ |
3,106 |
|
$ |
6,334 |
|
$ |
5,354 |
|
Research and product development expenses |
|
1,492 |
|
|
1,445 |
|
|
2,497 |
|
|
2,568 |
|
Total operating
costs |
$ |
4,825 |
|
$ |
4,551 |
|
$ |
8,831 |
|
$ |
7,922 |
|
Less:
Amortization and depreciation |
|
(107 |
) |
|
(121 |
) |
|
(213 |
) |
|
(200 |
) |
Less: DSUs
recovery (expense) |
|
(459 |
) |
|
76 |
|
|
(724 |
) |
|
106 |
|
Less:
Stock-based compensation expense (including PSUs &
RSUs) |
|
(188 |
) |
|
(161 |
) |
|
(340 |
) |
|
(290 |
) |
Less: Loss on disposal of assets |
|
(3 |
) |
|
|
|
(114 |
) |
|
|
Cash operating costs |
$ |
4,068 |
|
$ |
4,345 |
|
$ |
7,440 |
|
$ |
7,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
Three months endedJune
30 |
|
|
Six months endedJune
30, |
|
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
Net
loss |
$ |
(5,742 |
) |
$ |
(3,092 |
) |
$ |
(8,008 |
) |
$ |
(5,454 |
) |
Finance loss
(income) |
|
1,167 |
|
|
360 |
|
|
2,107 |
|
|
562 |
|
Amortization
and depreciation |
|
202 |
|
|
184 |
|
|
401 |
|
|
356 |
|
DSUs expense
(recovery) |
|
459 |
|
|
(76 |
) |
|
724 |
|
|
(106 |
) |
Stock-based compensation expense (including PSUs &
RSUs) |
|
188 |
|
|
161 |
|
|
340 |
|
|
290 |
|
Adjusted EBITDA |
$ |
(3,726 |
) |
$ |
(2,463 |
) |
$ |
(4,436 |
) |
$ |
(4,352 |
) |
Hydrogenics CorporationCondensed Interim
Consolidated Balance Sheets(in thousands of US
dollars)(unaudited)
|
|
June 30, 2017 |
|
December 31, 2016 |
|
|
|
|
|
Assets |
|
|
|
|
Current
assets |
|
|
|
|
Cash and cash
equivalents |
$ |
27,161 |
|
$ |
10,338 |
|
Restricted cash |
|
1,359 |
|
|
405 |
|
Trade and other
receivables |
|
15,019 |
|
|
9,802 |
|
Inventories |
|
17,819 |
|
|
17,208 |
|
Prepaid
expenses |
|
1,090 |
|
|
918 |
|
|
|
62,448 |
|
|
38,671 |
|
Non-current
assets |
|
|
|
|
Restricted cash |
|
704 |
|
|
535 |
|
Investment in joint
ventures |
|
2,822 |
|
|
1,750 |
|
Property, plant and
equipment |
|
3,684 |
|
|
4,095 |
|
Intangible assets |
|
184 |
|
|
203 |
|
Goodwill |
|
4,346 |
|
|
4,019 |
|
|
|
11,740 |
|
|
10,602 |
|
Total assets |
$ |
74,188 |
|
$ |
49,273 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Current
liabilities |
|
|
|
|
Operating
borrowings |
$ |
2,283 |
|
$ |
2,111 |
|
Trade and other
payables |
|
12,152 |
|
|
7,235 |
|
Financial
liabilities |
|
6,177 |
|
|
3,939 |
|
Warranty
provisions |
|
1,437 |
|
|
1,221 |
|
Deferred revenue |
|
16,400 |
|
|
10,788 |
|
|
|
38,449 |
|
|
25,294 |
|
Non-current
liabilities |
|
|
|
|
Other non-current
liabilities |
|
8,887 |
|
|
9,262 |
|
Non-current warranty
provisions |
|
561 |
|
|
841 |
|
Non-current deferred revenue |
|
2,859 |
|
|
3,494 |
|
|
|
12,307 |
|
|
13,597 |
|
Total liabilities |
|
50,756 |
|
|
38,891 |
|
Equity |
|
|
|
|
Share capital |
|
385,793 |
|
|
365,923 |
|
Contributed
surplus |
|
19,495 |
|
|
19,255 |
|
Accumulated other
comprehensive loss |
|
(2,675 |
) |
|
(3,623 |
) |
Deficit |
|
(379,181 |
) |
|
(371,173 |
) |
Total equity |
|
23,432 |
|
|
10,382 |
|
Total equity and liabilities |
$ |
74,188 |
|
$ |
49,273 |
|
|
|
|
|
|
|
|
Hydrogenics CorporationConsolidated Interim
Statements of Operations and Comprehensive Loss (in thousands of US
dollars, except share and per share amounts)(unaudited)
|
Three months ended |
Six months ended |
|
June 30, |
June 30, |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
Revenues |
$ |
7,487 |
|
$ |
9,198 |
|
$ |
16,324 |
|
$ |
13,527 |
|
Cost of sales |
|
7,237 |
|
|
7,379 |
|
|
13,394 |
|
|
10,497 |
|
Gross profit |
|
250 |
|
|
1,819 |
|
|
2,930 |
|
|
3,030 |
|
|
|
|
|
|
|
|
|
|
Operating
expenses |
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses |
|
3,333 |
|
|
3,106 |
|
|
6,334 |
|
|
5,354 |
|
Research and product
development expenses |
|
1,492 |
|
|
1,445 |
|
|
2,497 |
|
|
2,568 |
|
|
|
4,825 |
|
|
4,551 |
|
|
8,831 |
|
|
7,922 |
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
(4,575 |
) |
|
(2,732 |
) |
|
(5,901 |
) |
|
(4,892 |
) |
|
|
|
|
|
|
|
|
|
Finance income
(loss) |
|
|
|
|
|
|
|
|
Interest expense,
net |
|
(454 |
) |
|
(438 |
) |
|
(923 |
) |
|
(871 |
) |
Foreign currency gains
(losses), net(1) |
|
394 |
|
|
(142 |
) |
|
455 |
|
|
(178 |
) |
Gain (Loss) from joint
ventures |
|
(101 |
) |
|
(4 |
) |
|
(171 |
) |
|
52 |
|
Other
finance gains (losses), net |
|
(1,006 |
) |
|
224 |
|
|
(1,468 |
) |
|
435 |
|
Finance income (loss), net |
|
(1,167 |
) |
|
(360 |
) |
|
(2,107 |
) |
|
(562 |
) |
|
|
|
|
|
|
|
|
|
Loss before
income taxes |
|
(5,742 |
) |
|
(3,092 |
) |
|
(8,008 |
) |
|
(5,454 |
) |
Income tax expense |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Net loss for the period |
|
(5,742 |
) |
|
(3,092 |
) |
|
(8,008 |
) |
|
(5,454 |
) |
|
|
|
|
|
|
|
|
|
Items that may be
reclassified subsequently to net loss |
|
|
|
|
|
|
|
|
Exchange
differences on translating foreign operations |
|
677 |
|
|
(189 |
) |
|
948 |
|
|
197 |
|
Comprehensive loss for the period |
$ |
(5,065 |
) |
$ |
(3,281 |
) |
$ |
(7,060 |
) |
$ |
(5,257 |
) |
|
|
|
|
|
|
|
|
|
Net loss per
share |
|
|
|
|
|
|
|
|
Basic and diluted |
$ |
(0.45 |
) |
$ |
(0.25 |
) |
$ |
(0.64 |
) |
$ |
(0.43 |
) |
|
|
|
|
|
|
|
|
|
Hydrogenics CorporationConsolidated Interim
Statements of Cash Flows (in thousands of US dollars)
(unaudited)
|
|
|
|
Three months ended |
Six months ended |
|
June 30, |
June 30, |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
Cash and cash
equivalents provided by (used
in): |
|
|
|
|
|
|
|
|
Operating
activities |
|
|
|
|
|
|
|
|
Net loss for the
period |
$ |
(5,742 |
) |
$ |
(3,092 |
) |
$ |
(8,008 |
) |
$ |
(5,454 |
) |
Decrease (increase) in
restricted cash |
|
(912 |
) |
|
(223 |
) |
|
(1,002 |
) |
|
7 |
|
Items not affecting
cash |
|
|
|
|
|
|
|
|
Loss on
disposal of assets |
|
3 |
|
|
- |
|
|
114 |
|
|
- |
|
Amortization and depreciation |
|
202 |
|
|
184 |
|
|
401 |
|
|
356 |
|
Unrealized other losses on hedging |
|
- |
|
|
69 |
|
|
- |
|
|
- |
|
Other
finance losses (gains), net |
|
826 |
|
|
(285 |
) |
|
1,246 |
|
|
(416 |
) |
Unrealized foreign exchange losses (gains) |
|
(147 |
) |
|
(17 |
) |
|
(133 |
) |
|
186 |
|
Unrealized loss (gain) on joint ventures |
|
101 |
|
|
4 |
|
|
171 |
|
|
(52 |
) |
Accreted
non-cash and unpaid interest and amortization of deferred financing
fees |
|
318 |
|
|
233 |
|
|
531 |
|
|
598 |
|
Stock-based compensation |
|
188 |
|
|
161 |
|
|
340 |
|
|
290 |
|
Stock-based compensation - DSU’s |
|
459 |
|
|
(76 |
) |
|
724 |
|
|
(106 |
) |
Net change in non-cash operating assets and liabilities |
|
1,865 |
|
|
(2,900 |
) |
|
2,148 |
|
|
(5,401 |
) |
Cash used in operating activities |
|
(2,839 |
) |
|
(5,942 |
) |
|
(3,468 |
) |
|
(9,992 |
) |
|
|
|
|
|
|
|
|
|
Investing
activities |
|
|
|
|
|
|
|
|
Investment in joint
venture |
|
- |
|
|
- |
|
|
(93 |
) |
|
- |
|
Proceeds from disposals
of property, plant and equipment |
|
- |
|
|
- |
|
|
1,035 |
|
|
- |
|
Purchase of property,
plant and equipment |
|
(519 |
) |
|
(276 |
) |
|
(2,075 |
) |
|
(904 |
) |
Receipt of IDF
government funding |
|
1,492 |
|
|
30 |
|
|
1,851 |
|
|
215 |
|
Purchase
of intangible assets |
|
(1 |
) |
|
(5 |
) |
|
(1 |
) |
|
(47 |
) |
Cash provided by (used in) investing
activities |
|
972 |
|
|
(251 |
) |
|
717 |
|
|
(736 |
) |
|
|
|
|
|
|
|
|
|
Financing
activities |
|
|
|
|
|
|
|
|
Common shares issued
and stock options exercised, net of issuance costs |
|
19,770 |
|
|
- |
|
|
19,770 |
|
|
- |
|
Repayment of repayable
government contributions |
|
(56 |
) |
|
(55 |
) |
|
(112 |
) |
|
(109 |
) |
Principal repayment of
long-term debt |
|
(244 |
) |
|
- |
|
|
(678 |
) |
|
- |
|
Proceeds of operating
borrowings |
|
- |
|
|
- |
|
|
190 |
|
|
- |
|
Repayment of operating
borrowings |
|
(1,449 |
) |
|
- |
|
|
- |
|
|
(1,076 |
) |
Cash provided by (used in) financing
activities |
|
18,021 |
|
|
(55 |
) |
|
19,170 |
|
|
(1,185 |
) |
|
|
|
|
|
|
|
|
|
Increase (decrease) in
cash and cash equivalents during the period |
|
16,154 |
|
|
(6,248 |
) |
|
16,419 |
|
|
(11,913 |
) |
Cash and cash
equivalents - Beginning of period |
|
10,608 |
|
|
17,770 |
|
|
10,338 |
|
|
23,398 |
|
Effect of exchange rate
fluctuations on cash and cash equivalents held |
|
399 |
|
|
57 |
|
|
405 |
|
|
94 |
|
Cash and cash equivalents - End of period |
$ |
27,161 |
|
$ |
11,579 |
|
$ |
27,161 |
|
$ |
11,579 |
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure |
|
|
|
|
|
|
|
|
Interest paid |
$ |
317 |
|
$ |
204 |
|
$ |
615 |
|
$ |
204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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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