OREANDA-NEWS. 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 2016 financial results. Results are reported in US dollars and are prepared in accordance with International Financial Reporting Standards (IFRS).

Second Quarter Highlights

“Hydrogenics made some notable progress this quarter on a number of fronts – winning new orders which, once again, pushed our backlog over $100 million as we posted solid revenue growth,” said Daryl Wilson, Hydrogenics’ CEO and President. “We announced a major partnership in China with SinoHytec for the delivery of heavy-duty fuel cell modules in a contract valued at $13.5 million and, more recently, were awarded our first contract in Southeast Asia – by the Electricity Generation Authority of Thailand – for a €4.3 million megawatt-scale energy storage facility and fuel cell power plant. These achievements highlight the global demand for our unique hydrogen-based technologies. We’re also on track to deliver the first equipment for our Enbridge energy storage venture later this year, and our contract with Alstom is proceeding on schedule. 

“Our one megawatt pilot power plant project in South Korea has exceeded expectations since it began operations in late 2015. We have completed substantial engineering, planning and negotiation work with our project partners for a 50 megawatt scale-up at the same site, evaluating the risks inherent in a 20 year long-term service agreement along with the capacity of each party to bear the associated uncertainties. Part of this assessment includes investigating alternative risk mitigation structures such as insurance coverage associated with cleantech power projects. To date, no formal order has been issued, as we are facing the normal challenges associated with a first-of–its-kind scale-up of this magnitude. We anticipate further communication on this project in the coming months.” 

Summary of Results for the Quarter Ended June 30, 2016

  • Total revenue increased by $1.8 million, or 25%, to $9.2 million for the three months ended June 30, 2016 compared to $7.4 million for the second quarter of 2015.  The higher sales level was due to a greater number of orders shipped within the Company’s OnSite Generation business, partially offset by lower revenue within the Power Systems segment.
  • Gross profit rose to $1.8 million in the current quarter versus $1.0 million in the prior-year period, and gross margin expanded 570 basis points to 19.8% in 2016 from 14.1% last year. The improvement was due to product mix as well as higher absorption of indirect overhead costs as a result of the increase in revenue.
  • The Company’s Adjusted EBITDA1 loss increased $0.1 million, to $2.4 million, for the three months ended June 30, 2016 from $2.3 million for the same period last year, reflecting higher selling, general and administrative costs and greater research and development expenses, partially offset by an increase in gross profit.
  • Net loss for the quarter was $3.1 million, or $(0.25) per share, versus $3.7 million, or $(0.37) per share, in the prior-year period.
  • Hydrogenics secured $16.2 million of new orders during the quarter, resulting in a contract backlog of $102.9 million as of June 30, 2016. Of the $102.9 million in backlog, the Company expects to recognize approximately $29 million over the next twelve months as revenue in addition to what can be booked and billed as revenue in the same twelve month period.  

Notes

  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 3, 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 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.

 
Reconciliation of Adjusted EBITDA to Net Loss
(in thousands of US dollars)
(unaudited)
 
Adjusted EBITDA
     
  Three months ended
June 30		 Six months ended
June 30,
      2016       2015       2016       2015  
Net loss $   (3,092 ) $   (3,700 ) $   (5,454 ) $   (7,127 )
Finance loss (income)     360       1,124       562       2,103  
Depreciation of property, plant and equipment and intangible assets     184       149       356       310  
Compensation indexed to share price     (76 )     (90 )     (106 )     (234 )
Stock-based compensation expense     161       176       290       294  
Adjusted EBITDA $   (2,463 ) $   (2,341 ) $   (4,352 ) $   (4,654 )
                                 
Hydrogenics Corporation
Condensed Interim Consolidated Balance Sheets
(in thousands of US dollars)
(unaudited)
         
    June 30,
2016		   December 31,
2015
         
Assets        
Current assets        
Cash and cash equivalents $   11,579   $   23,398  
Restricted cash     1,023       971  
Trade and other receivables     10,573       10,419  
Inventories     17,469       14,270  
Prepaid expenses     814       428  
      41,458       49,486  
Non-current assets        
Restricted cash     506       532  
Investment in joint venture     2,040       1,951  
Property, plant and equipment     3,302       3,049  
Intangible assets     238       215  
Goodwill     4,201       4,135  
      10,287       9,882  
Total assets $   51,745   $   59,368  
         
Liabilities        
Current liabilities        
Operating borrowings $   -   $   1,086  
Trade and other payables     7,861       7,776  
Financial liabilities     8,532       9,034  
Warranty provisions     1,659       2,255  
Deferred revenue     9,841       10,146  
      27,893       30,297  
Non-current liabilities        
Other non-current liabilities     3,448       3,121  
Non-current warranty provisions     994       938  
Non-current deferred revenue     4,129       4,764  
      8,571       8,823  
Total liabilities     36,464       39,120  
Equity        
Share capital     365,922       365,824  
Contributed surplus     19,156       18,964  
Accumulated other comprehensive loss     (3,027 )     (3,224 )
Deficit     (366,770 )     (361,316 )
Total equity     15,281       20,248  
Total equity and liabilities $   51,745   $   59,368  
                 
Hydrogenics Corporation
Consolidated 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,
      2016       2015       2016       2015  
Revenues $   9,198   $   7,368   $   13,527   $   14,899  
Cost of sales     7,379       6,326       10,497       12,704  
Gross profit     1,819       1,042       3,030       2,195  
                 
Operating expenses                
Selling, general and administrative expenses     3,106       2,579       5,354       5,158  
Research and product development expenses     1,445       1,039       2,568       2,061  
      4,551       3,618       7,922       7,219  
                 
Loss from operations     (2,732 )     (2,576 )     (4,892 )     (5,024 )
                 
Finance income (expenses)                
Interest expense, net     (438 )     (369 )     (871 )     (496 )
Foreign currency gains (losses), net      (142 )     73       (178 )     (763 )
Gain (loss) from joint venture     (4 )     57       52       41  
Other finance gains (losses)      224       (885 )     435       (885 )
Finance loss, net     (360 )     (1,124 )     (562 )     (2,103 )
                 
Loss before income taxes     (3,092 )     (3,700 )       (5,454 )     (7,127 )
Income tax expense       -       -         -       -  
Net loss for the period     (3,092 )     (3,700 )     (5,454 )     (7,127 )
                 
Items that may be reclassified subsequently to net loss                
Exchange differences on translating foreign  operations     (189 )     185       197       (877 )
Comprehensive loss for the period $   (2,903 ) $   (3,515 ) $   (5,257 ) $   (8,004 )
                 
Net loss per share                
Basic and diluted $   (0.25 ) $   (0.37 ) $   (0.43 ) $   (0.71 )
                   
Hydrogenics Corporation
Consolidated Interim Statements of Cash Flows
(in thousands of US dollars) (unaudited)
     
  Three months ended Six months ended
  June 30, June 30,
      2016   2015       2016     2015  
Cash and cash equivalents provided by (used in):                
Operating activities                
Net loss for the period $    (3,092 ) $   (3,700 ) $    (5,454 ) $   (7,127 )
(Increase) decrease in restricted cash     (223 )     1,410       7       1,947  
Items not affecting cash                
Amortization and depreciation     184       149       356       310  
Unrealized other losses on hedging     69       -       -       -  
Warrants     (285 )     885       (416 )     885  
Unrealized foreign exchange (gains) losses     (17 )     (261 )     186       (257 )
Unrealized (gain) loss on joint venture     4       (58 )     (52 )     (41 )
Accreted non-cash and unpaid interest  and amortization of deferred financing fees     233       345       598       466  
Stock-based compensation     161       176       290       294  
Stock-based compensation - RSUs and DSUs     (76 )     (90 )     (106 )     (234 )
Net change in non-cash working capital     (2,900 )     (3,146 )     (5,401 )     (1,897 )
Cash used in operating activities     (5,942 )     (4,290 )     (9,992 )     (5,654 )
                 
Investing activities                
Purchase of property, plant and equipment     (276 )     (394 )     (904 )     (765 )
Receipt of government funding     30       -       215       -  
Purchase of intangible assets     (5 )     (81 )     (47 )     (81 )
Cash used in investing activities     (251 )     (475 )     (736 )     (846 )
                 
Financing activities                
Repayment of repayable government contributions     (55 )     (110 )     (109 )     (110 )
Proceeds of borrowings, net of transaction costs     -       6,866       -       6,866  
Repayment of operating borrowings     -       (2,151 )   ­(1,076 )     (2,151 )
Proceeds of operating borrowings     -       1,671       -       3,822  
Common shares issued     -       3       -       9  
Cash provided by (used in) financing activities     (55 )     6,279       (1,185 )     8,436  
                 
Increase (decrease) in cash and cash equivalents during the period     (6,248 )     1,514       (11,913 )     1,936  
Cash and cash equivalents - Beginning of period     17,770       6,207       23,398       6,572  
Effect of exchange rate fluctuations on cash and cash equivalents held     57       295       94       (492 )
Cash and cash equivalents - End of period $    11,579   $   8,016   $    11,579   $   8,016