Hydrogenics Corp.: Q3 Results
MISSISSAUGA, Ontario - Hydrogenics Corporation (HYGS), a leading developer and manufacturer of hydrogen generation and hydrogen-based power modules, reported third quarter 2013 financial results. Results are reported in US dollars and are prepared in accordance with International Financial Reporting Standards (IFRS).
"We remain on track in our results with solid revenue growth year-over-year and substantial margin expansion," said Daryl Wilson, president and chief executive officer. "Total sales rose 17 per cent in the quarter and 44 per cent year to date, fuelled by our robust power systems business, and gross margins increased to 30 per cent -- up 950 basis points from last year's 21.6 per cent. In addition, the company's backlog grew during the quarter and our adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) loss declined to $500,000, as we continued to execute on a path to profitability. A significant number of potential orders remain in our bid pipeline, and we believe this will position us well heading into 2014. Hydrogenics is making substantial progress toward increased shareholder returns as we invest in new business development, expand our leadership across industries and target markets, and focus on the burgeoning demand for energy storage across the globe."
Highlights for the quarter ended Sept. 30, 2013 (compared with the quarter ended Sept. 30, 2012, unless otherwise noted)
Revenue increased 17 per cent to $9.2-million, reflecting higher bookings within Hydrogenics's power systems business unit partially offset by lower results from the company's OnSite Generation business unit.
Hydrogenics secured $12.1-million of orders for renewable energy storage, industrial gas and power system applications during the quarter, resulting in an order backlog of $52.7-million as of Sept. 30, 2013.
ORDER BACKLOG MOVEMENT DURING THE THIRD QUARTER
(in millions of dollars)
June 30, 2013, Orders Orders Sept. 30, 2013,
backlog received delivered backlog
OnSite Generation $13.2 $9.7 $5.8 $17.1
Power systems 36.6 2.4 3.4 35.6
Total 49.8 12.1 9.2 52.7
Gross profit was $2.7-million, or 29.6 per cent of revenue, an eight-percentage-point increase year over year, primarily reflecting improved product mix of higher-margin power systems business.
Comprehensive loss was $100,000, a $2.8-million decrease compared with the third quarter of 2012.
Cash operating costs were $3.1-million for the quarter, a decrease of 34 per cent compared with the third quarter of 2012, primarily resulting from a $1.0-million decline in net research and development expenditures reflecting timing differences on research and development activity and a increase in government funding in the period, as well as a $600,000 decline in selling, general and administrative (SG&A) costs related to timing differences in costs related to general activities and one-time compensation costs related to improved business incurred in 2012.
The company's adjusted EBITDA loss decreased to a loss of $500,000 from a loss of $3.1-million in last year's third quarter for the reasons previously noted as well as the impact of the recovery of compensation expense tied to the company's stock price, reflecting a recovery of $500,000 in the current quarter compared with an expense of $300,000 in the third quarter of 2012.
The company exited the third quarter with $14.6-million of cash and restricted cash, a $1.4-million decrease over June 30, 2013, primarily reflecting: a $1.2-million decrease in working capital; $200,000 related to the purchase of property, plant and equipment; partially offset by $400,000 of proceeds from loan advances; and $400,000 of positive foreign exchange impact resulting from the strengthening of the euro relative to the U.S. dollar. Working capital changed by $1.2-million primarily due to a $2.3-million net increase in inventory and receivables, partially offset by an increase in deferred revenue and trade and other payables of $1-million.
Highlights for the nine months ended Sept. 30, 2013 (compared with the nine months ended Sept. 30, 2012, unless otherwise noted)
Revenue rose $9.5-million to $31.4-million, an increase of 44 per cent, reflecting higher shipments within Hydrogenics's power systems group including revenue from the company's previously announced propulsion system contract and backup power orders for CommScope.
Gross profit increased $5.4-million to $9.4-million, or 29.8 per cent of revenue, primarily reflecting improved product mix tied to the higher proportion of power systems revenue versus the prior-year period.
Cash operating costs were $10.4-million, versus $11.7-million for the comparable period in 2012, with costs as a percent of revenue falling to 33 per cent versus 53 per cent in the prior-year period. The decrease reflects a $1.2-million decrease in net research and development expenses attributable to the timing of spending as well as increased government funding recognized during the first nine months of 2013.
Adjusted EBITDA loss declined 57 per cent to $3.7-million versus $8.6-million in the prior-year period. The improvement reflects the previously noted: increase in gross profit of $5.4-million; and $1.3-million decrease in net research and development expenses; partially offset by a $1.7-increase in SG&A expenses, of which $1.8-million relates to stock-based compensation indexed to the company's share price relative to the comparable period.
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 centres in Russia, Europe, the US and Canada.
Investor Relations Contacts:
Bob Motz, Chief Financial Officer
Hydrogenics Investor Relations