Exhibit 99.1
Hydrogenics Reports Second Quarter 2017 Results
Backlog Breaks $150 Million as Company Bolsters Balance Sheet and Positions for Growth
MISSISSAUGA, Ontario, Aug. 02, 2017 (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 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 Details
Hydrogenics 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 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.
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, | |
| | | 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 ended
June 30 | | | Six months ended
June 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 Corporation
Condensed 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 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, |
| | | 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 Corporation
Consolidated 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
