HYGS
$6.80
Hydrogenics
$.70
11.48%
Earnings Details
2nd Quarter June 2018
Thursday, August 2, 2018 6:30:00 AM
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Summary

Hydrogenics (HYGS) Recent Earnings

Hydrogenics (HYGS) reported a 2nd Quarter June 2018 loss of $0.31 per share on revenue of $7.6 million. The consensus estimate was a loss of $0.12 per share on revenue of $10.7 million. Revenue grew 1.6% on a year-over-year basis.

Hydrogenics Corp along with its subsidiaries, designs, develops and manufactures hydrogen generation and fuel cell products based on water electrolysis technology and proton exchange membrane technology.

Results
Reported Earnings
($0.31)
Earnings Whisper
-
Consensus Estimate
($0.12)
Reported Revenue
$7.6 Mil
Revenue Estimate
$10.7 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Hydrogenics Reports Second Quarter 2018 Results

MISSISSAUGA, Ontario, Aug. 02, 2018 (GLOBE NEWSWIRE) -- 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 2018 financial results. Results are reported in US dollars and are prepared in accordance with International Financial Reporting Standards (IFRS).

Recent Highlights

“While top line results reflected continued lumpiness in orders and delivery timing, gross margins rose significantly year-over-year, reflecting improved product mix as well as our focus on supply chain management and ongoing efficiency initiatives,” said Daryl Wilson, President and Chief Executive Officer. “Our backlog remains solid and the outlook strong as we prepare for anticipated increases in product shipments to China during the second half of 2018. Notably, we also made advances in the quarter expanding our technology penetration into new markets, securing our first development contract for a high-speed marine application. We are delighted to partner with Golden Gate Zero Emission Marine on this important endeavor, which complements and bolsters our existing leadership position providing fuel cell modules for rail, bus and other heavy-duty power systems.

“In addition to the progress experienced in our mobility business, we continue to see momentum across a variety of other renewable hydrogen applications, including energy storage. The impetus of positive regulatory changes, such as the June 15 adoption of the EU’s Renewable Energy Directive Part ii, is driving significant activity within our sales pipeline for large Power-to-Gas projects in the 10-25 MW scale. We remain convinced that the unmatched energy density and size advantage of our industry-leading PEM electrolyzer technology positions us well for these opportunities, and we now have a showcase site – with Enbridge – up and running in North America. Given our unique leadership in the space, increasing demand within the markets where we operate, and our strong relationships with customers and partners worldwide, we're optimistic about the quarters to come.”

Summary of Results for the Quarter Ended June 30, 2018

  • The Company posted revenue of $7.6 million for the second quarter of 2018, comparable to the same period last year.  
  • Gross margin improved to 27.6% in the second quarter of 2018 compared with to 5.8% last year, as the Company posted gross profit of $2.1 million in the current quarter versus $0.4 million in the prior-year period. The higher gross margin was achieved via cost reductions secured through our supply chain, process efficiency improvements as well as product mix.
  • Cash operating costs1 increased $0.7 million to $4.6 million in the 2018 second quarter compared to $3.9 million in 2017 due to $0.4 million of higher net research and development (“R&D”) expenses, primarily related to ongoing product development initiatives and $0.3 million of higher selling expenses related to a refreshed corporate branding, marketing and business development.
  • The Company’s Adjusted EBITDA2 loss improved $1.0 million to $2.4 million in the second quarter of 2018 from $3.4 million in the prior-year period. This variance reflects the increase in gross profit offset by higher cash operating costs noted above.
  • Net loss decreased from $5.5 million, or $(0.43) per share, to $4.8 million, or $(0.31) per share, in the current period, primarily due to the increase in gross profit, offset by the increase in net R&D expenses, losses from our joint venture investments and the increase in SG&A net of non-cash gains from revaluation of deferred stock unit (“DSU”) obligations.
  • The Company ended the second quarter of 2018 with the backlog at $131.8 million, securing orders of $10.7 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
2018 backlog
 Orders
Received
 FX  Orders Delivered/
Revenue Recognized
 Orders Cancelled June 30
2018 backlog
OnSite Generation$17.3$8.1$(0.1)$4.8$-$20.5
Power Systems 122.8 2.6 (3.8) 2.8 7.5 111.3
Total$  140.1$  10.7$  (3.9)$  7.6$7.5$  131.8
  • Of the above backlog of $131.8 million, the Company expects to recognize $51.8 million in the following 12 months as revenue. In addition, revenue for the year ending December 31, 2018 will also include orders both received and delivered during the balance of 2018.

Notes

  1. 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.
  1. 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 Details
Hydrogenics will hold a conference call at 10:00 a.m. EDT on August 2, 2018 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 Hydrogenics
Hydrogenics 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 Statements
This 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.

Hydrogenics Contacts:

Marc Beisheim, Chief Financial Officer
Hydrogenics Corporation
(905) 361-3660
investors@hydrogenics.com

Chris Witty
Hydrogenics Investor Relations
(646) 438-9385
cwitty@darrowir.com

      
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 ended
June 30,
  Six months ended
June 30,
 
  2018   2017 Restated  2018  2017 Restated 
Selling, general and administrative expenses$3,024 $3,243 $5,860 $6,269 
Research and product development expenses 1,880  1,492  3,961  2,497 
Total operating costs$4,904 $4,735 $9,821 $8,766 
Less: Amortization and depreciation (89) (107) (192) (213)
Less: DSUs recovery (expense) 62  (459) 388  (724)
Less: Stock-based compensation expense (243) (189) (465) (340)
Less: Loss on disposal of assets (3) (3) (6) (114)
Cash operating costs$4,631 $3,977 $9,546 $7,375 
             


       
Adjusted EBITDA      
       
  Three months ended
June 30
  Six months ended
June 30,
 
  2018  2017 Restated  2018  2017 Restated 
Net loss$(4,801)$(5,462)$(6,755)$(7,760)
Finance loss, net 1,998  1,167  1,973  2,107 
Income tax expense  -  -  300  - 
Amortization and depreciation 175  202  352  401 
DSUs expense (recovery) (62) 459  (388) 724 
Stock-based compensation expense  243  189  465  340 
Adjusted EBITDA$(2,447)$(3,446)$(4,053)$(4,188)
             
Note: Prior period results restated to reflect the implementation of IFRS 15 revenue standard.


     
Hydrogenics Corporation
Condensed Interim Consolidated Balance Sheets
(in thousands of US dollars)
(unaudited)
  
June 30,
2018
  December 31,
2017
Restated
 
     
Assets    
Current assets    
Cash and cash equivalents$ 13,847 $21,511 
Restricted cash  875  435 
Trade and other receivables  7,900  8,736 
Contract assets  4,560  6,578 
Inventories  18,501  15,048 
Prepaid expenses  1,174  1,374 
   46,857  53,682 
Non-current assets    
Restricted cash  281  468 
Contract assets  2,409  645 
Investment in joint ventures  1,121  2,797 
Property, plant and equipment  3,889  3,874 
Intangible assets  150  180 
Goodwill  4,442  4,569 
   12,292  12,533 
Total assets$ 59,149 $66,215 
     
Liabilities    
Current liabilities    
Operating borrowings$ – $1,200 
Trade and other payables  7,705  10,361 
Contract liabilities  12,179  11,821 
Financial liabilities  4,447  4,913 
Warranty provisions  961  1,174 
Deferred funding  3,514  880 
   28,806  30,349 
Non-current liabilities    
Other liabilities  7,618  8,516 
Contract liabilities  4,181  2,223 
Warranty provisions  747  921 
Deferred funding  472  33 
    13,018  11,693 
Total liabilities  41,824  42,042 
Equity    
Share capital  387,843  387,746 
Contributed surplus  20,253  19,885 
Accumulated other comprehensive loss  (2,380) (1,822)
Deficit   (388,391) (381,636)
Total equity  17,325  24,173 
Total equity and liabilities$59,149
 $66,215 
       
Note: Prior period results restated to reflect the implementation of IFRS 15 revenue standard.
       


   
Hydrogenics Corporation
Condensed Interim Consolidated 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,
    2018  2017 Restated    2018  2017
Restated
 
Revenues$ 7,609 $7,556 $ 15,756 $16,291 
Cost of sales  5,508  7,116   10,417  13,178 
Gross profit  2,101  440   5,339  3,113 
         
Operating expenses        
Selling, general and administrative expenses  3,024  3,243   5,860  6,269 
Research and product development expenses  1,880  1,492   3,961  2,497 
   4,904  4,735   9,821  8,766 
         
Loss from operations  (2,803) (4,295)  (4,482) (5,653)
         
Finance income (loss)        
Interest expense, net of financial instruments measured at amortized cost  (372) (454)  (753) (923)
Foreign currency (losses) gains, net  (177) 394   42  455 
Loss on joint ventures  (1,492) (101)  (1,561) (171)
Other finance gains (losses), net  43  (1,006)  299  (1,468)
Finance loss, net  (1,998) (1,167)  (1,973) (2,107)
         
Loss before income taxes  (4,801) (5,462)  (6,455) (7,760)
Income tax expense  –     300   
Net loss for the period  (4,801) (5,462)  (6,755) (7,760)
         
Items that may be reclassified subsequently to net loss        
Exchange differences on translating foreign operations  (887) 677   (558) 948 
Comprehensive loss for the period$ (5,688)$(4,785)$ (7,313)$(6,812)
         
Net loss per share        
Basic and diluted$ (0.31)$(0.43)$ (0.44)$(0.62)
Weighted Average number of common shares outstanding, basic and diluted 

15,440,888
 12,667,167 15,438,894 12,606,459 
         
Note: Prior period results restated to reflect the implementation of IFRS 15 revenue standard.
         


      
Hydrogenics Corporation
Condensed Interim Consolidated Statements of Cash Flows
(in thousands of US dollars) (unaudited)
      
    
Three months ended
    Six months ended
    June 30,
    June 30
     2018  2017     2018  2017 
       Restated       Restated 
Cash and cash equivalents provided by (used in):             
Operating activities             
Net loss for the period  $ (4,801)$(5,462)  $ (6,755)$(7,760)
Increase in restricted cash    (266) (912)    (279) (1,002)
Items not affecting cash:             
Loss on disposal of assets    3  3     6  114 
Amortization and depreciation    175  202     352  401 
Warrants    (70) 826     (356) 1,246 
Unrealized foreign exchange gains    (179) (147)    (203) (133)
Unrealized loss on joint ventures    1,492  101    1,561
  171 
Accreted interest    413  629     857  1,141 
Stock-based compensation    243  189     465  340 
Stock-based compensation - DSUs    (62) 459     (388) 724 
Net change in non-cash operating assets and liabilities    (1,416) 1,584     (859) 1,899 
Cash used in operating activities    (4,468) (2,528)    (5,599) (2,859)
Investing activities             
Investment in joint venture – Enbridge          –  (93)
Purchase of property, plant and equipment    (101) (519)    (335) (2,075)
Receipt of government funding    974  1,492     974  1,851 
Proceeds from disposals of property, plant and equipment    –       –  1,035 
Purchase of intangible assets    (1) (1)    (1) (1)
Cash provided by investing activities    872  972     638  717 
Financing activities             
Proceeds from common shares issued and stock options exercised, net of issuance costs    1  19,770     1  19,770 
Principal repayment of long-term debt    (500) (250)    (750) (500)
Interest payment    (286) (305)    (582) (788)
Proceeds (repayment) of operating borrowings     (1,449)    (1,193) 190 
Repayment of repayable government contributions    –  (56)    –  (112)
Cash provided by (used in) financing activities    (785) 17,710     (2,524) 18,560 
Increase (decrease) in cash and cash equivalents during the period    (4,381) 16,154     (7,485) 16,418 
Cash and cash equivalents – Beginning of period    18,482  10,608     21,511  10,338 
Effect of exchange rate fluctuations on cash and cash equivalents held    (254) 399     (179) 405 
Cash and cash equivalents – End of period  $ 13,847 $27,161   $ 13,847 $27,161 
                 
Note: Prior period results restated to reflect the implementation of IFRS 15 revenue standard.
                 


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Source: Hydrogenics Corporation