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Hydrogenics Reports Third Quarter 2008 Results Higher revenues and reduced loss from operations coupled with strong interest in backup power and renewable energy storage applications Highlights Revenues up 53% and 59% for the third quarter and year to date, respectively, representing six consecutive quarters of revenue growth, excluding Test Systems business unit. EBITDA loss of $3.4 million for the third quarter, representing three consecutive quarters of reduced EBITDA losses, excluding Test Systems business unit. OnSite Generation business delivers increased profitability in the third quarter of 2008. Cash operating costs down 35% and 27% for the third quarter and year to date, respectively, excluding Test Systems business unit. Realized a 66% decrease in cash utilization for the nine months ended September 30, 2008 compared to the corresponding period of 2007. MISSISSAUGA, ONTARIO--(MARKET WIRE)--Nov 5, 2008 -- Hydrogenics Corporation (Toronto:HYG.TO - News)(NasdaqGM:HYGS - News), a leading
developer and manufacturer of hydrogen generation and fuel
cell products, is reporting third quarter and nine-month
unaudited results. Results are reported in US dollars and
are prepared in accordance with Canadian generally accepted
accounting principles.
"Our quarterly results show sustained improvement with over 50% revenue growth and 35% reduced cash operating costs. We continue to be encouraged with the growing interest in renewable energy and industrial electrolysis sales. Support for our proprietary fuel cell applications continues with our OEM partners including a new manufacturing supply agreement signed during the quarter with APC," said Daryl Wilson, President and Chief Executive Officer. The improved overall financial results are the result of numerous improvement initiatives throughout the company supported by all of our employees, including: - The quality and reliability of our products and the focused efforts of our sales staff are resulting in more orders and repeat orders from customers. - Our product lines have been narrowed, standardized and cost reduced. - Operating efficiencies and overall productivity is up substantially such that we are delivering 50% more revenue with 35% less people. - Value engineering efforts are paying off with reduced material costs. Technology innovation is supporting ongoing cost reduction. - Our existing facilities have accommodated the growth without any increase in fixed costs and we have identified ways to continue to sustain substantial growth without adding cost. - As an organization, we are setting and meeting challenging targets. We are carefully managing our cash resources and level of expenditures to pace opportunities. The following table provides a breakdown of our revenues for the reported periods (in thousands of dollars):
Three months ended Nine months ended
September 30 September 30
2008 2007 2008 2007
--------------------------------------------
OnSite Generation $ 9,224 $ 6,162 $ 23,134 $ 13,304
Power Systems 1,760 1,010 4,862 4,286
--------------------------------------------
10,984 7,172 27,996 17,590
Test Systems - 3,452 2,489 9,349
--------------------------------------------
$ 10,984 $ 10,624 $ 30,485 $ 26,939
--------------------------------------------
--------------------------------------------In November 2007, we took the decision to begin winding up our test systems business. Results for the third quarter of 2008 compared to the third quarter of 2007 Revenues were $11.0 million for the third quarter of 2008, a 53% increase from the comparable period of 2007, exclusive of Test Systems revenues. This improvement is the result of increased OnSite Generation revenue of $3.1 million resulting from increased revenues from industrial hydrogen markets augmented by additional revenues from fueling and renewable energy applications transportation. This improvement is also the result of increased Power Systems revenues of $0.8 million from early adopting commercial markets including fuel cell hybrid buses, DC backup power markets, light mobility markets. Gross profit, expressed as a percentage of revenues, was 14% (10% in 2007) and primarily reflects increased gross profit generated by our OnSite Generation business unit resulting from operational improvements including standardizing products, enhancing manufacturing and quality processes and reducing product costs through design and supply chain improvements. Cash operating costs, a non-GAAP measure, defined as selling, general and administrative, and research and product development expenses less stock-based compensation expense and compensation expenses indexed to our share price, were $5.2 million, a 35% decrease from $8.0 million in 2007 primarily attributed to streamlining efforts undertaken during 2007. Net loss was $3.7 million for the third quarter of 2008, a decrease of 42% from $6.5 million in 2007. Results for the third quarter of 2008 compared to the second quarter of 2008 Revenues were $11.0 million for the third quarter of 2008, a 26% increase in revenues over the second quarter of 2008, exclusive of Test Systems revenues. Gross profit, expressed as a percentage of revenues, was 14%, compared to 22%, due to a higher proportion of revenues from early adopting commercial market applications such as fuel cell hybrid buses, backup power and light mobility markets, which generally have lower margins as we aim to replace incumbent technologies in these markets. Cash operating costs were $5.2 million, a decrease of 12% from $5.9 million in the second quarter of 2008. Net loss was $3.7 million for the third quarter of 2008, a decrease of 14% from $4.3 million in the second quarter of 2008. Results for the nine months ended September 30, 2008 compared to the nine months ended September 30, 2007 Revenues were $30.5 million for the nine months ended September 30, 2008, a 59% increase from revenues for the comparable period of 2007, exclusive of Test Systems revenues. This increase is attributable to increased revenues of $9.8 million and $0.6 million in our OnSite Generation and Power Systems business units, respectively. Gross profit, expressed as a percentage of revenues, was 17.5% (11.0% in 2007) and primarily reflects increased gross profits generated by our OnSite Generation business unit resulting from operational improvements noted above. Cash operating costs, were $17.2 million, a 27% decrease from $23.4 million in 2007 primarily attributed to the absence of a $2.1 million streamlining charge taken in the first quarter of 2007 and an overall reduced cost structure. Net loss was $12.4 million for the nine months ended September 30, 2008, a decrease of 33% from $18.6 million in 2007. Liquidity Cash and cash equivalents, restricted cash and short-term investments were $23.3 million as at September 30, 2008. The $6.5 million sequential quarterly decrease in cash and cash equivalents, restricted cash and short-term investments is attributable to $6.8 million of net cash outflows from operations, partially offset by: (i) $0.2 million in decreased deferred research and product development grants; and (ii) $0.1 million received on the exercise of stock options. The $6.8 million in net cash outflows from operations during the three months ended September 30, 2008 is the combination of (i) a $3.5 million loss excluding non-cash items and (ii) a $3.8 million increase in non-cash working capital. This increase is primarily the result of the partial delivery of one substantial order for which a $4.2 million prepayment was received during the first quarter of 2008. Order backlog Order backlog as at September 30, 2008 was $26.2 million, as follows (in $ millions):
June 30 Orders Orders Sept. 30
2008 Received Delivered 2008
Backlog Backlog
---------------------------------------------------------------
---------------------------------------------------------------
OnSite Generation $ 20.6 $ 7.1 $ 9.2 $ 18.5
Power Systems 8.1 1.3 1.8 7.7
---------------------------------------------------------------
Total $ 28.7 $ 8.4 $ 11.0 $ 26.2
---------------------------------------------------------------
---------------------------------------------------------------In addition to revenues recognized in the nine months ended September 30, 2008, we expect to deliver, and recognize as revenue in the fourth quarter of 2008 more than 40% of our total order backlog as at September 30, 2008. Third Quarter Highlights - Delivered nine hydrogen generation units for industrial applications as well as two units for fueling and renewable hydrogen applications. - In our OnSite Generation group, we secured $7.1 million of new orders and exited the quarter with an $18.5 million order backlog. New orders include a hydrogen electrolyzer for a hydrogen bus refueling station in the City of Barth, Germany, and units for industrial applications, including glass manufacturing, metallurgy and power generator cooling for customers in Eastern Europe, India and South America. - In Power Systems group, we secured $1.3 million of new orders and exited the quarter with a $7.7 million order backlog. - New orders include an award to deliver a fuel cell midibus for deployment in Europe as well as a fuel cell for a marine application. Conference Call Details Hydrogenics will hold a conference call to review results on November 5, 2008 at 10:30 a.m. (ET). To participate in this conference call, please dial 416-340-8010 approximately ten minutes before the call. Alternatively, a live webcast of the conference call will be available on the Corporation's website at www.hydrogenics.com. Please visit the website at least ten minutes early to register and download any necessary software. Should you be unable to participate, a replay will be available on our website for two weeks. ABOUT HYDROGENICS Hydrogenics Corporation (www.hydrogenics.com) is a globally recognized developer and provider of hydrogen generation and fuel cell products and services, serving the growing industrial and clean energy markets of today and tomorrow. Based in Mississauga, Ontario, Canada, Hydrogenics has operations in North America and Europe. This release contains forward-looking statements about our achievements, future results, goals, levels of activity, performance, and other future events. We believe the expectations reflected in our forward-looking statements are reasonable, although we cannot guarantee achievements, future results, levels of activity, performance, or other future events. These statements are based on management's current expectations and actual results may differ from these forward-looking statements due to numerous factors, including risks related to our ability to raise additional capital, liquidity, operating results, revenue growth, industry, technology and products. Readers should not place undue reliance on Hydrogenics' forward-looking statements. Readers are encouraged to review the section captioned "Risk Factors" in Hydrogenics' regulatory filings with the Canadian securities regulatory authorities and the United States 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 cautionary statement.
Hydrogenics Corporation
Interim Consolidated Balance Sheets
(in thousands of US dollars)
(unaudited)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
September 30 December 31
2008 2007
--------------------------
Assets
Current assets
Cash and cash equivalents $ 17,899 $ 15,460
Restricted cash 5,363 -
Short-term investments - 15,032
Accounts receivable 7,510 12,713
Grants receivable 990 850
Inventories 9,314 12,659
Prepaid expenses 869 1,105
--------------------------
41,945 57,819
Property, plant and equipment 4,034 4,847
Intangible assets 61 249
Goodwill 5,025 5,025
--------------------------
$ 51,065 $ 67,940
--------------------------
--------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 17,882 $ 18,166
Unearned revenue 5,149 9,042
--------------------------
23,031 27,208
Long-term debt - 11
Deferred research and development grants 97 337
--------------------------
23,128 27,556
--------------------------
Shareholders' Equity
Share capital 307,000 306,872
Contributed surplus 16,173 15,606
Deficit (289,470) (277,101)
Accumulated other comprehensive loss (5,766) (4,993)
--------------------------
Total deficit and accumulated other
comprehensive loss (295,236) (282,094)
--------------------------
27,937 40,384
--------------------------
$ 51,065 $ 67,940
--------------------------
--------------------------
Hydrogenics Corporation
Interim Consolidated Statements of Shareholders' Equity
(in thousands of US dollars, except for share and per share amounts)
(unaudited)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Accumu-
lated
other
compre- Total
Common shares Contri- hensive share-
----------------- buted income holders'
Number Amount surplus Deficit (loss) equity
Balance at
Dec. 31, 2006 91,916,466 $ 307,376 $ 13,718 $(249,033) $ (5,304) $ 66,757
Net loss for
the period - - - (18,571) (18,571)
Foreign currency
translation
adjustments - - - 221 221
--------
Comprehensive loss (18,350)
--------
Shares issued:
Shares returned
to treasury (150,775) (504) 335 - - (169)
Stock-based
compensation
expense - - 1,266 - - 1,266
-----------------------------------------------------------
Balance at
Sept. 30, 2007 91,765,691 306,872 15,319 (267,604) (5,083) 49,504
Net loss for
the period - - - (9,497) (9,497)
Foreign currency
translation
adjustments - - - - 90 90
--------
Comprehensive loss - - - - - (9,407)
--------
Shares issued:
Stock-based
compensation
expense - - 287 - - 287
-----------------------------------------------------------
Balance at
Dec. 31, 2007 91,765,691 306,872 15,606 (277,101) (4,993) 40,384
Net loss for
the period - - - (12,369) - (12,369)
Foreign currency
translation
adjustments - - - - (773) (773)
--------
Comprehensive loss (13,142)
--------
Shares issued:
Issuance of
common shares
on exercise
of options 639,980 128 - - - 128
Adjustment for
partial shares (5) - - - - -
Stock-based
compensation
expense - - 567 - 567
-----------------------------------------------------------
Balance at
Sept. 30, 2008 92,405,666 $ 307,000 $ 16,173 $(289,470) $ (5,766) $ 27,937
-----------------------------------------------------------
-----------------------------------------------------------
The authorized capital stock of the Corporation consists of an unlimited
number of common shares and an unlimited number of preferred shares
issuable in series.
Hydrogenics Corporation
Interim Consolidated Statements of Operations
(in thousands of US dollars, except for share and per share amounts)
(unaudited)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Three months Nine months
ended Sept. 30 ended Sept. 30
2008 2007 2008 2007
---------------------------------------------
Revenues $ 10,984 $ 10,624 $ 30,485 $ 26,939
Cost of revenues 9,496 9,544 25,159 23,980
---------------------------------------------
1,488 1,080 5,326 2,959
---------------------------------------------
Operating expenses
Selling, general
and administrative 2,819 5,197 12,191 17,091
Research and
product development 2,115 3,054 5,555 7,606
Amortization of property,
plant and equipment 179 230 700 677
Amortization of
intangible assets 63 63 188 188
---------------------------------------------
5,176 8,544 18,634 25,562
---------------------------------------------
Loss from operations (3,688) (7,464) (13,308) (22,603)
---------------------------------------------
Other income (expenses)
Provincial capital tax - (174) 170 (248)
Interest 158 462 772 1,920
Foreign currency
gains (losses) (77) 704 117 2,373
---------------------------------------------
81 992 1,059 4,045
---------------------------------------------
Loss before income taxes (3,607) (6,472) (12,249) (18,558)
Current income tax expense 121 6 120 13
---------------------------------------------
Net loss for the period $ (3,728) $ (6,478) $ (12,369) $ (18,571)
---------------------------------------------
---------------------------------------------
Net loss per share
Basic and diluted $ (0.04) $ (0.07) $ (0.13) $ (0.20)
Weighted average number
of common
shares outstanding 92,378,737 91,765,691 91,971,529 91,808,770
Hydrogenics Corporation
Interim Consolidated Statements of Cash Flows
(in thousands of U.S. dollars)
(unaudited)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Three months Nine months
ended Sept. 30 ended Sept. 30
2008 2007 2008 2007
---------------------------------------------
Cash and cash equivalents
provided by (used in)
Operating activities
Net loss for the period $ (3,728) $ (6,478) $ (12,369) $ (18,571)
Items not affecting cash
Amortization of property,
plant and equipment 179 407 700 1,208
Amortization of
intangible assets 63 63 188 188
Unrealized foreign
exchange losses (gains) (215) 193 101 274
Stock-based compensation 156 370 567 1,266
Net change in non-cash
working capital (3,228) (180) 3,935 (5,660)
---------------------------------------------
(6,773) (5,625) (6,878) (21,295)
---------------------------------------------
Investing activities
Decrease (increase) in
short-term investments - (14,829) 15,032 39,521
Decrease (increase) in
restricted cash 631 - (5,363) -
Purchase of property,
plant and equipment (5) (378) (330) (885)
---------------------------------------------
626 (15,207) 9,339 38,636
---------------------------------------------
Financing activities
Repayment of long-term debt - - (11) (94)
Deferred research and
development grant 155 60 (139) 70
Common shares issued
(purchased and cancelled),
net of issuance costs 128 - 128 (169)
---------------------------------------------
283 60 (22) (193)
---------------------------------------------
Increase (decrease) in cash
and cash equivalents
during the period (5,864) (20,772) 2,439 17,148
Cash and cash equivalents -
Beginning of period 23,763 43,857 15,460 5,937
--------------------------------------------
Cash and cash equivalents -
End of period $ 17,899 $ 23,085 $ 17,899 $ 23,085
--------------------------------------------
--------------------------------------------
Supplemental disclosure
Interest paid $ 1 $ 9 $ 13 $ 17
Income taxes paid (recovered) 30 (9) (35) 4Contact: Contacts:
Hydrogenics Corporation
Lawrence E. Davis
Chief Financial Officer
(905) 361-3633
Email: ldavis@hydrogenics.com
Website: http://www.hydrogenics.com
Source: Hydrogenics Corporation
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