Mr. Bob Motz reports

HYDROGENICS REPORTS FIRST QUARTER 2018 RESULTS

Hydrogenics Corp. has released its first quarter 2018 financial results. Results are reported in U.S. dollars and are prepared in accordance with international financial reporting standards (IFRS).

Recent highlights

"Our first quarter was particularly busy with major proposals and significant project development," said Daryl Wilson, president and chief executive officer. "Revenue was down slightly year over year, reflecting shipment timing, but our gross margin and gross profit both rose due to improved product mix -- ending the quarter with approximately $19.4-million of cash. We continue to bid on a steady stream of quotes for mobility fuel cells, energy storage systems and fuelling station equipment throughout North America and abroad while remaining particularly bullish on China and parts of Europe.

"We anticipate a strong year of announcements and scale-up of the business, and the company recently won a $5-million government grant in Canada as part of our plans to invest in future growth initiatives. At the same time, the significant shipments to China last year for mobility applications are moving through the test and evaluation phase, prior to the next level of order magnitude. Our current pipeline of opportunities is large and growing, so we view first quarter operating results as not reflective of the potential for top-line expansion this year and beyond. While we are always subject to a degree of uncertainty regarding timing, particularly in China, we're optimistic about order acceleration and the path to profitability due to our leadership position within the industry, continued strong demand for clean, sustainable solutions and the increasing interest in hydrogen-based energy applications."

Summary of results for the quarter ended March 31, 2018

• Company revenue was $8.1-million compared with $8.7-million in the first quarter of 2017, with the year-over-year decline due to shipment timing.
• Gross margin improved to 39.7 per cent in the first quarter of 2018 compared with from 30.6 per cent last year, as the company posted gross profit of $3.2-million in the current quarter versus $2.7-million in the prior-year period. The higher gross margin was principally due to improved product mix.
• Cash operating costs increased $1.5-million to $4.9-million in the 2018 first quarter compared to $3.4-million in 2017 due to $1.1-million of higher net research and development (R&D) expenses, primarily related to final completion of the Enbridge power-to-gas facility in Toronto as well as an increase of $400,000 in cash selling, general and administrative (SG&A) expenses.
• The company's adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) loss was $1.6-million in the first quarter of 2018 versus $700,000 in the prior-year period. This variance reflects the aforementioned increase in cash operating costs, partially offset by higher gross profit.
• The net loss for the quarter improved to $2.0-million, or 13 cents per share, compared with $2.3-million, or 18 cents per share, in the prior-year period.
• The company was awarded government funding in Canada totalling $5-million reflecting a 50-per-cent match on anticipated expenditures related to scale-up of operations at Hydrogenics's headquarters. The first $2.5-million will be received in the second quarter of 2018, with the balance of funds advanced as expenditures are made later in 2018 and 2019.
• The company ended the first quarter of 2018 with backlog of $140.1-million, securing orders of $2.6-million for power-to-gas systems, fuelling stations, industrial gas applications and mobility systems. Order backlog movement during the first quarter (in millions) is shown in the associated table.

 
                          Dec. 31,  IFRS 15     Orders    FX  Orders delivered/ March 31, 2018,
                     2017, backlog     adj.   received       revenue recognized         backlog

OnSite Generation 
(loss)                       $19.9    ($0.8)      $1.6  $0.4               $3.8           $17.3
Power systems (loss)         124.9     (0.3)       1.0   1.5                4.3           122.8
Total (loss)                 144.8     (1.1)       2.6   1.9                8.1           140.1

 

• Of the backlog of $140.1-million, the company expects to recognize $55.0-million in the following 12 months as revenue. Revenue for the year ending Dec. 31, 2018, will also include orders both received and delivered during the balance of 2018.

Conference call details

Hydrogenics will hold a conference call at 1 p.m. Eastern Time on May 11, 2018, to review the first 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.

An archived copy of the conference call and webcast will be available on the company's website approximately six hours following the call.

About Hydrogenics Corp.

Hydrogenics is a world leader in engineering and building the technologies required to enable the acceleration of a global power shift. Headquartered in Mississauga, Ont., 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 United States and Canada.

    CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)
          (in thousands of U.S. dollars, except share and per-share amounts)

                                                                     Three months ended       
                                                                              March 31,                
                                                                      2018         2017
                                                                               restated

Revenues                                                            $8,147       $8,735
Cost of sales                                                        4,909        6,062
Gross profit                                                         3,238        2,673
Operating expenses
Selling, general and administrative expenses                         2,836        3,025
Research and product development expenses                            2,081        1,005
                                                                     4,917        4,030
(Loss) from operations                                              (1,679)      (1,357)
Finance income (loss)
Interest expense, net of financial
instruments measured at amortized (cost)                              (381)        (469)
Foreign currency gains, net(1)                                         219           61
(Loss) from joint ventures                                             (69)         (70)
Other finance gains (losses), net                                      256         (462)
Finance income (loss), net                                              25         (940)
(Loss) before income taxes                                          (1,654)      (2,297)
Income tax expense                                                     300            -
Net (loss) for the period                                           (1,954)      (2,297)
Items that may be reclassified subsequently to net (loss)
Exchange differences on translating foreign operations                 329          271
Comprehensive (loss) for the period                                 (1,625)      (2,026)
Net (loss) per share
Basic and diluted (loss)                                             (0.13)       (0.18)
 

We seek Safe Harbor.