Hydrogenics Reports Third Quarter 2018 Results

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New Awards Mark Continued Progress on Long Term Growth Trajectory; Third Quarter Revenues Reflect Fluctuation in Draw Downs on Orders

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

Recent Highlights

“Hydrogenics achieved several critical commercialization milestones during the third quarter on deployments with key, marquee customers, expected to drive significant value for the Company and support our positive outlook for 2019 and beyond,” said Daryl Wilson, President and Chief Executive Officer. “Ongoing trends for electrification and the disruption of energy systems using hydrogen have brought increasing attention from existing and new strategic partners alike in recent months, building momentum across multiple applications. The world’s first hydrogen-powered train – Alstom’s Coradia iLint – is now in regular, reliable service after making an impressive debut at the recent InnoTrans show in Berlin. This milestone is driving significant interest in Europe and North America, as municipalities, EPC developers, and railway operators are riding these trains and asking for additional information. We still expect our first order from Alstom this year.

“Fluctuations in order draw down are to be expected in new emerging markets and, while evident in the third quarter, it does not affect our longer-term confidence or outlook. Our strong product platforms – diversified across multiple applications and geographies – serve us well in mitigating these variations over the long term. While the flow of funding and support of infrastructure has delayed uptake, we remain optimistic regarding ongoing demand in the coming quarters.

“We continue to announce awards that showcase the versatility of our cutting-edge technology to address a wide-array of hydrogen-related energy requirements the world over. We have numerous opportunities in the bid pipeline, highlighted by a number of projects with global brands in areas such as trucking, trains, aerospace and fueling which, in total, would amount to over $100 million of orders outside of China. We continue to believe Hydrogenics is uniquely-positioned to succeed based on the unmatched strength of our technology and breadth of our product portfolio.”

Summary of Results for the Quarter Ended September 30, 2018

  • Company revenue was $7.7 million in the third quarter of 2018 compared with $12.1 million in 2017, with the year-over-year decline attributable to the quarterly variability in draw down against existing orders for the Chinese market. 
  • Gross profit was $1.5 million, or 19.2% of sales, for the third quarter of 2018 compared with $2.9 million or 24.0% of sales, last year, reflecting lower revenue and a higher overhead absorption rate.
  • Ongoing improvement in the management of cash operating costs1 which decreased by $0.9 million year-over-year.
  • The Company’s Adjusted EBITDA2 decreased $0.6 million for the third quarter of 2018 compared to the same period in 2017, reflecting the lower gross profit, partially offset by the decrease in cash operating costs.
  • Net loss increased to $3.4 million, or $(0.22) per share, in 2018 from 2.0 million, or $(0.13) per share, in the prior year’s comparable period.
  • The Company ended the third quarter of 2018 with the backlog at $132.1 million, securing new orders of $21.4 million year to date. Order backlog movement during the third quarter (in $ millions) was as follows:
 June 30, 2018Orders ReceivedForeign ExchangeRevenue RecognizedSeptember 30, 2018
OnSite Generation20.55.1(0.2)4.520.9
Power Systems111.33.00.1 3.2111.2
Total  131.8   8.1   (0.1)  7.7   132.1
  • Of the above backlog of $132.1 million, Hydrogenics expects to recognize approximately $55.3 million in the following twelve months as revenue. Revenue for the year ending December 31, 2018 will also include orders received and delivered in 2018.


  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 November 2, 2018 to review the third 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 [email protected]

Chris Witty Hydrogenics Investor Relations (646) 438-9385 [email protected] 

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 endedNine months ended 
 September 30, September 30,  
  2018  2017  2018  2017  
Selling, general and administrative expenses$ 3,097 $2,909 $ 8,957 $9,177 
Research and product development expenses  1,316  2,157   5,277  4,654 
Total operating costs$ 4,413 $5,066 $ 14,234 $13,831 
Less: Amortization and depreciation  (130) (101)  (322) (314)
Less: DSUs (expense) recovery  (6) 176   382  (548)
Less: Stock-based compensation expense (including PSUs & RSUs)  (245) (199)  (710) (540)
Less: Gain (loss) on disposal of assets  21  (3)  15  (117)
Cash operating costs$ 4,053 $4,939 $ 13,549 $12,312 

Adjusted EBITDA

 Three months endedNine months ended
 September 30, September 30, 
  2018  2017  2018 2017 
Net loss$ (3,443)$(2,031)$ (10,198)$(9,790)
Finance (income) loss, net  501  (138)  2,474  1,969 
Income tax expense  –   –   300   
Amortization and depreciation  162  199   514  600 
DSUs expense (recovery)  6  (176)  (382) 548 
Stock-based compensation expense (including PSUs & RSUs)  245  199   710  540 
Adjusted EBITDA$ (2,529)$(1,947)$ (6,582)$(6,133)

Hydrogenics Corporation Condensed Consolidated Balance Sheets (in thousands of US dollars) (unaudited)

 September 30,    December 31,   January 1, 
  2018   2017   2017 
Current assets      
Cash and cash equivalents$ 10,813 $ 21,511 $ 10,338 
Restricted cash  792   435   405 
Trade and other receivables  7,461   8,736   5,144 
Contract assets  3,090   6,578   5,572 
Inventories  19,091   15,048   17,130 
Prepaid expenses  1,772   1,374   1,198 
   43,019   53,682   39,787 
Non-current assets      
Restricted cash  292   468   535 
Contract assets  2,469   645   – 
Investment in joint ventures  1,792   2,797   1,750 
Property, plant and equipment  2,587   3,874   4,095 
Intangible assets  228   180   203 
Goodwill  4,419   4,569   4,019 
   11,787   12,533   10,602 
Total assets$ 54,806 $ 66,215 $ 50,389 
Current liabilities      
Operating borrowings$ – $ 1,200 $ 2,111 
Trade and other payables  10,984   10,361   8,059 
Contract liabilities  12,449   11,821   10,268 
Financial liabilities  4,524   4,913   3,939 
Warranty provisions  936   1,174   1,221 
Deferred funding  1,713   880   508 
   30,606   30,349   26,106 
Non-current liabilities      
Other liabilities  7,256   8,516   9,262 
Contract liabilities  1,562   2,223   3,494 
Warranty provisions  806   921   841 
Deferred funding  470   33   12 
   10,094   11,693   13,609 
Total liabilities  40,700   42,042   39,715 
Share capital  387,911   387,746   365,923 
Contributed surplus  20,470   19,885   19,255 
Accumulated other comprehensive loss  (2,441)  (1,822)  (3,623)
Deficit  (391,834)  (381,636)  (370,881)
Total equity  14,106   24,173   10,674 
Total equity and liabilities$ 54,806 $ 66,215 $ 50,389 

Hydrogenics Corporation Consolidated 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,
   2018 2017  2018  2017
Revenues$ 7,665$12,079$ 23,421$ 28,370
Cost of sales  6,194 9,182  16,611  22,360
Gross profit  1,471 2,897  6,810  6,010
Operating expenses        
Selling, general and administrative expenses  3,097 2,909  8,957  9,177
Research and product development expenses  1,316 2,157  5,277  4,654
   4,413 5,066  14,234  13,831
Loss from operations  (2,942) (2,169)  (7,424)  (7,821)
Finance income (loss)        
Interest expense, net on financial instruments measured at amortized cost  (369) (464)  (1,122)  (1,387)
Foreign currency (losses) gains, net  (61) 58  (19)  513
Loss from joint ventures  (15) (87)  (1,576)  (258)
Other finance gains (losses), net  (56)  631  243  (837)
Finance income (loss), net  (501)  138  (2,474)  (1,969)
Loss before income taxes  (3,443)  (2,031)  (9,898)  (9,790)
Income tax expense  –  –  300  –
Net loss for the period  (3,443)  (2,031)  (10,198)  (9,790)
Items that may be reclassified subsequently to net loss        
Exchange differences on translating foreign operations  (61)  409  (619)  1,357
Comprehensive loss for the period$ (3,504)$ (1,622)$ (10,817)$ (8,433)
Net loss per share        
Basic and diluted$ (0.22)$ (0.13)$ (0.66)$ (0.73)
Weighted average number of common shares outstanding, basic and diluted  15,442,416  15,232,905  15,440,081  13,491,562

Hydrogenics Corporation Consolidated Statements of Cash Flows (in thousands of US dollars) (unaudited)

  Three months endedNine months ended
  September 30, September 30, 
   2018  2017  2018  2017 
Cash and cash equivalents provided by (used in):         
Operating activities         
Net loss for the period $ (3,443)$ (2,031)$ (10,198)$ (9,790)
Decrease (increase) in restricted cash   77   133   (202)  (869)
Items not affecting cash:         
Loss (gain) on disposal of property, plant and equipment   (21)  3   (15)  117 
Amortization and depreciation   162   199   514   600 
Loss (gain) from change in fair value of warrants   33   (631)  (323)  615 
Unrealized foreign exchange (gain) loss   64   279   (139)  146 
Unrealized loss on joint ventures   15   87   1,576   258 
Accreted interest   429   467   1,286   1,608 
Stock-based compensation   245   199   710   540 
Stock-based compensation – DSUs   6   (176)  (382)  548 
Net change in non-cash operating assets and liabilities   (217) (6,977)  (1,076)  (5,079)
Cash used in operating activities   (2,650) (8,448)  (8,249)  (11,306)
Investing activities         
Investment in joint venture       –   (93)
Purchase of property, plant and equipment   (204) (180)  (539)  (2,255)
Receipt of government funding   –  32   974   1,883 
Proceeds from disposals of property, plant and equipment   700     700   1,035 
Purchase of intangible assets   (95) (33)  (96)  (34)
Cash provided by (used in) investing activities   401  (181)  1,039   536 
Financing activities         
Proceeds from common shares issued and stock options exercised, net of issuance costs   39  (40)  40   19,730 
Principal repayment of long-term debt   (500)    (1,250)  (500)
Interest payment   (276)    (858)  (788)
Proceeds (repayment) of operating borrowings   –  98   (1,193)  287 
Repayment of repayable government contributions    (1)    (113) 
Cash provided by (used in) financing activities  (737)  57   (3,261)  18,616 
Increase (decrease) in cash and cash equivalents during the period   (2,986  (8,572)  (10,471  7,846 
Cash and cash equivalents – Beginning of period   13,847   27,161  21,511  10,338 
Effect of exchange rate fluctuations on cash and cash equivalents held   (48) (244  (227) 161 
Cash and cash equivalents – End of period $10,813 $ 18,345 $ 10,813 $18,345 

Hydrogenics Reports Third Quarter 2018 Results 1

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