7.11.2005: Meldung: Hydrogenics Corp.: Third Quarter 2005 Results

Hydrogenics Reports Third Quarter 2005 Results
Friday November 4, 7:00 am ET
Revenues of $10.5 million, reduction of $2.9 million or 33% in 2005 quarterly cash operating costs and ending order backlog of $14.3 million

MISSISSAUGA, Ontario-- Nov. 4, 2005--Hydrogenics Corporation (TSX:HYG - News; NASDAQ:HYGS - News) is reporting third quarter and nine-month unaudited results. Results are reported in U.S. dollars and are prepared in accordance with Canadian generally accepted accounting principles.

"Our third quarter and nine-month revenues of $10.5 million and $28.1 million, respectively, reflect the collective effort of our three business units, supporting our continued adherence to a diversified business model offering synergistic opportunities and balanced risk," said Pierre Rivard, President and Chief Executive Officer.

"While our order backlog of $14.3 million decreased during the third quarter, we are well advanced on a number of compelling prospects that we anticipate will drive the sale of fuel cell products in stationary and light mobility applications with market leading original equipment manufacturers and end users. We continue to meet meaningful technology milestones positioning us favorably as strong industry trends, including oil and natural gas pricing pressures, recent passage of the U.S. Energy Bill, and the pronounced vulnerability of truck-delivered industrial hydrogen supplies experienced with the recent proliferation of hurricanes, prevail," added Rivard.

Results for the third quarter of 2005 compared to the third quarter of 2004

Revenues were $10.5 million for the third quarter of 2005, a 200% increase from revenues of $3.5 million for the comparable period of 2004, supported by our acquisition of Stuart Energy and organic growth of 32%. Gross profit, expressed as a percentage of revenues, was 15% (18% in 2004) and reflects a heavier weighting of OnSite Generation revenues. Cash operating costs, a non-GAAP measure, defined as selling, general and administrative and research and product development expenses, were $7.0 million, a 37% increase from $5.1 million in 2004 reflecting the incremental costs of Stuart Energy"s operations and $1.0 million in severance costs incurred in the third quarter of 2005. Net loss was $7.5 million for the third quarter of 2005, an increase of 3% from a net loss of $7.3 million in 2004.

Results for the third quarter of 2005 compared to the second quarter of 2005

Revenues were $10.5 million for the third quarter of 2005, a 67% increase in revenues over the second quarter of 2005 due primarily to the timing of deliveries. Gross profit, expressed as a percentage of revenues, was 15%, a decrease of 2% due to the increased weighting of OnSite Generation revenues. Excluding $1.0 million of severance costs incurred in the third quarter as a result of our ongoing efforts to streamline operations, cash operating costs were $5.9 million, a decrease of 15%, or $1.1 million, resulting from the implementation of our integration plan and more prudent spending throughout the organization. Net loss was $7.5 million, a decrease of 21%, or $2.0 million, primarily as a result of higher revenue and lower cash operating costs.

Results for the nine-month period ended September 30, 2005 compared to the nine-month period ended September 30, 2004

Revenues were $28.1 million, a 152% increase due primarily to the acquisition of Stuart Energy in the first quarter of 2005 and 13% organic growth. Gross profit, expressed as a percentage of revenues, was 13%, a decrease of 13% due to a $1.3 million increase in work-in-progress related to the acquisition of Stuart Energy, in accordance with Canadian generally accepted accounting principles, and a higher percentage of OnSite Generation revenues, which have historically generated lower gross margins. Cash operating costs were $23.4 million, a $6.6 million, or 40% increase. Net loss was $28.2 million, a $5.0 million or 22% increase from $23.2 million, primarily as a result of lower gross margins and higher cash operating costs.

We had $90.9 million in cash and cash equivalents and short-term investments as at September 30, 2005. The $6.9 million sequential quarterly decrease in cash and cash equivalents and short-term investments is attributable to:

(i) a $2.9 million loss before depreciation, amortization, stock-based compensation and severance costs;

(ii) $1.0 million of severance costs; and

(iii) $3.0 million of net changes in non-cash items and working capital.

Order backlog

Our order backlog as at September 30, 2005 was $14.3 million as follows:

Q2 Orders Product/Service Q3
Backlog Received Delivered Backlog
OnSite Generation $ 12.3 $ 2.5 $ 6.5 $ 8.3
Power Systems 1.5 1.0 0.6 1.9
Test Systems 5.3 2.2 3.4 4.1
Total $ 19.1 $ 5.7 $ 10.5 $ 14.3

We expect to deliver, and recognize as revenue, the majority of this order backlog in 2005.

Third Quarter Highlights

Progress on markets:

- We received orders for 10 HyPM fuel cell power modules, predominantly for light mobility applications.

- We received a HyPM power module order from John Deere including a contract for in-house power module testing under specified John Deere operating conditions.

- Following a subassembly redesign completed in the third quarter, we delivered one fuel cell power module to American Power Conversion (APC) bringing our cumulative units delivered to six. We anticipate delivering the majority of the initial 25 unit order in 2005. These units are a core component of APC"s AC backup power offering selling under the name InfraStruXure with Integrated Fuel Cells.

- We are nearing completion of a DC backup power prototype and we expect to deploy this unit in the fourth quarter at a Bell Canada telecom site in Burlington, Ontario. Site preparations are underway.

- We received an order from a leading U.S. telecom carrier for a packaged DC backup power system.

- We successfully completed a fuel cell powered forklift deployment at FedEx Canada"s Toronto airport facility and a major GM vehicle manufacturing facility demonstrating what we believe to be industry leading performance levels and achieving in excess of 1,000 hours of real-time operation. We are now preparing bids for commercial opportunities as a result of this successful pilot project.

- We delivered an auxiliary power unit to TACOM (U.S. military) for integration and testing in a light-armored vehicle (LAV).

- We delivered an electrolyzer to Air Liquide for use at a BP hydrogen refueling station in Singapore, supporting a fleet of DaimlerChrysler hydrogen-powered vehicles.

- We experienced an increased level of proposal activity for our electrolyzer products, accelerated by recent natural disasters in the United States disrupting the supply of industrial hydrogen, thereby augmenting our business case for onsite hydrogen generation. As a result of this increased level of activity, we received a purchase order for an electrolyzer for onsite hydrogen generation.

- We received an order for three solid oxide fuel cell (SOFC) test stations from a world-leading SOFC original equipment manufacturer.

Progress on products and technology:

- We completed the design and development of our new S4000 IMET alkaline electrolyzer, ideally suited for integration with renewable technologies such as wind and solar, and are now carrying out validation testing.

- Our PEM electrolyzer stack has now surpassed 8,000 hours of continuous run-time further demonstrating our industry leading technology.

- We commenced testing of our next generation HyPM prototype to specified John Deere operating conditions.

- We commenced development of a new FCATS G100 fuel cell test station to meet lower price point demands.

Progress on corporate matters:

- We reduced our quarterly cash operating costs, excluding severance costs, by $2.9 million or 33.0% since the first quarter of 2005.

- We reorganized into three business units, OnSite Generation, Power Systems and Test Systems in the third quarter to better focus our resources.


We will hold a conference call to review our results on November 4, 2005 at 10:30 a.m. (EDT). To participate in this conference call, please dial 416-695-5259 approximately ten minutes before the call. Alternatively, a live webcast of our conference call will be available on our website at www.hydrogenics.com. Please visit our website at least ten minutes early to register and download any necessary software. Should you be unable to participate, a replay will also be available on our website.


Hydrogenics Corporation (www.hydrogenics.com) is a leading global developer of clean energy solutions, advancing the Hydrogen Economy by commercializing hydrogen and fuel cell products. The company has a portfolio of products and capabilities serving the hydrogen and energy markets of today and tomorrow. Hydrogenics, based in Mississauga, Ontario, Canada, has operations in North America, Europe and Asia.

Hydrogenics Corporation (TSX:HYG - News; NASDAQ:HYGS - News)


Hydrogenics Corporation
Lawrence E. Davis
Chief Financial Officer
(905) 361-3633
[email protected]

Source: Hydrogenics Corporation
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