Hydrogenics Corporation
TSX : HYG
NASDAQ : HYGS

Hydrogenics Corporation

March 25, 2009 07:00 ET

Hydrogenics Reports Fourth Quarter and 2008 Results

2008 Revenue Growth of 43% and 54% Reduction in EBITDA Loss, Excluding Test Systems

MISSISSAUGA, ONTARIO--(Marketwire - March 25, 2009) - Hydrogenics Corporation (TSX:HYG)(NASDAQ:HYGS), a leading developer and manufacturer of hydrogen generation and fuel cell products, today reported fourth quarter and 2008 results. Results are reported in US dollars and are prepared in accordance with Canadian generally accepted accounting principles.

Financial Highlights

- Revenues, exclusive of our test systems business unit, were $8.9 million for the fourth quarter of 2008 and $36.9 million for the full year, an increase of 9% and 43%, respectively.

- Gross margin was 29% for the fourth quarter of 2008 and 20% for the full year, increases of 16 and 8 percentage points, respectively.

- EBITDA loss was $2.0 million for the fourth quarter of 2008 and $14.4 million for the full year, a reduction of $7.6 million or 79% and $16.9 million or 54%, respectively.

- Cash and cash equivalents, restricted cash and short-term investments were $22.7 million at December 31, 2008, a nominal $0.5 million sequential reduction from the third quarter of 2008.

- Ending backlog was $22.2 million, more than 90% of which is anticipated to be delivered and recognized as revenue in 2009.

"Hydrogenics' strong fourth quarter results were evidenced by higher revenues and gross margin, decreased operating expenses and a 74% reduction in annual cash consumption," said Daryl Wilson, President and Chief Executive Officer. "We made significant progress throughout 2008 to position the Corporation for sustainable growth, focusing our resources on product development and market engagement initiatives with leading OEMs, oil and gas companies and progressive electrical utilities throughout the world. We also made significant strides to advance our product readiness in terms of performance, cost, reliability and quality. We are mindful of the current economic situation and continue to take steps to conserve our cash to best capture compelling opportunities across a number of markets," added Wilson.

Results for the fourth quarter of 2008 compared to the fourth quarter of 2007

Revenues, exclusive of our test systems business unit, were $8.9 million in 2008, an increase of 9%, reflecting stronger OnSite Generation revenues across all markets.

Gross profit, expressed as a percentage of revenues, was 29% (13% in 2007) attributed to operational improvements, product cost reductions and a more favourable absorption of overhead.

Cash operating costs, a non-GAAP measure, defined as selling, general and administrative expenses, and research and product development expenses less stock-based compensation expense and compensation expenses indexed to our share price, were $4.4 million, a 49% decrease from $8.7 million in 2007 attributed to our ongoing streamlining initiatives.

Net loss was $2.0 million, a 79% decrease from $9.5 million in 2007.

Results for 2008 compared to 2007

Revenues, exclusive of our test systems business unit, were $36.9 million, an increase of 43%, driven by an $11.6 million or 59% growth in revenue in our OnSite Generation business unit.

Gross profit, expressed as a percentage of revenues, was 20% (12% in 2007) attributed to operational improvements in our OnSite Generation business achieved throughout the year.

Cash operating costs were $21.6 million, a 33% decrease from $32.1 million in 2007 resulting from our business streamlining initiatives, the decision to wind up our fuel cell test equipment business and the absence of $6.1 million in severance and related expenses.

Net loss was $14.3 million, a decrease of 49% from $28.1 million in 2007.

Liquidity

Cash and cash equivalents, restricted cash and short-term investments were $22.7 million as at December 31, 2008. This $0.5 million sequential quarterly decrease reflects minimal net cash inflows from operations, $0.6 million of capital expenditures, and $0.1 million of decreased deferred research and product development funding from third parties.

Order backlog

Order backlog as at December 31, 2008 was $22.2 million, as follows (in $ millions):



Sep. 30, Orders Orders Dec. 31,
2008 Received Delivered 2008
Backlog Backlog
-------------------------------------------------------------------------
-------------------------------------------------------------------------

OnSite Generation $ 18.5 $ 4.2 $ 8.1 $ 14.6
Power Systems 7.7 0.7 0.8 7.6
-------------------------------------------------------------------------
Total $ 26.2 $ 4.9 $ 8.9 $ 22.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------


We expect to deliver and recognize as revenue, more than 90% of our total order backlog in 2009.

Conference Call Details

Hydrogenics will hold a conference at 10:00 a.m. ET on March 25, 2009 to review the fourth quarter and 2008 results. The conference call number is (866) 540-8136. A live webcast of the call will also be available at www.hydrogenics.com. The webcast will be archived for one week by calling (416) 695-5800 and entering conference ID #3282932.

ABOUT HYDROGENICS

Hydrogenics Corporation (www.hydrogenics.com) is a globally recognized developer and provider of hydrogen generation and fuel cell products and services, serving the growing industrial and clean energy markets of today and tomorrow. Based in Mississauga, Ontario, Canada, Hydrogenics has operations in North America and Europe.

This release contains forward-looking statements and other statements concerning Hydrogenics' objectives and strategies and management's beliefs, plans, estimates and intentions about our achievements, future results, goals, levels of activity, performance, and other future events. We believe the expectations reflected in our forward-looking statements are reasonable, although we cannot guarantee achievements, future results, levels of activity, performance, or other future events. These statements are based on management's current expectations and actual results may differ from these forward-looking statements due to numerous factors, including risks related to our ability successfully execute our business plan which includes an increase in revenue and obtaining additional capital; our liquidity; our operating results; our revenue growth; our industry; our technology and products. Readers should not place undue reliance on Hydrogenics' forward-looking statements. Readers are encouraged to review the section captioned "Risk Factors" in Hydrogenics' regulatory filings with the Canadian securities regulatory authorities and the United States 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 cautionary statement.



Hydrogenics Corporation
Consolidated Balance Sheets
(in thousands of US dollars)
(unaudited)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
2008 2007
ASSETS

Current assets
Cash and cash equivalents $ 21,601 $ 15,460
Restricted cash 1,130 -
Short-term investments - 15,032
Accounts receivable 3,974 12,713
Grants receivable 505 850
Inventories 10,101 12,659
Prepaid expenses 1,161 1,077
--------- ---------
38,472 57,791

Property, plant and equipment 4,082 4,847
Intangible assets - 249
Goodwill 5,025 5,025
Other non-current assets - 28
--------- ---------
$ 47,579 $ 67,940
--------- ---------
--------- ---------

LIABILITIES

Current liabilities
Accounts payable and accrued liabilities $ 17,298 $ 18,166
Unearned revenue 4,785 9,042
--------- ---------
22,083 27,208

Long-term debt - 11
Deferred research and development grants 13 337
--------- ---------
22,096 27,556
--------- ---------

Shareholders' Equity
Share capital 307,000 306,872
Contributed surplus 16,300 15,606
Deficit (291,420) (277,101)
Accumulated other comprehensive loss (6,397) (4,993)
--------- ---------
Total deficit and accumulated other comprehensive loss (297,817) (282,094)
--------- ---------
25,483 40,384
--------- ---------
$ 47,579 $ 67,940
--------- ---------
--------- ---------



Hydrogenics Corporation
Interim Consolidated Statements of Operations
(in thousands of US dollars, except for share and per share amounts)
(unaudited)
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Three months ended
Dec. 31 Year ended Dec. 31
2008 2007 2008 2007
------------------------------------------------

Revenues $ 8,855 $ 11,051 $ 39,340 $ 37,990

Cost of revenues 6,287 9,621 31,446 33,601
------------------------------------------------
2,568 1,430 7,894 4,389
------------------------------------------------
Operating expenses
Selling, general and
administrative 2,831 6,915 15,022 24,006
Research and product
development 1,741 2,084 7,296 9,690
Windup of fuel cell test
equipment business - 2,016 - 2,016
Amortization of property,
plant and equipment 155 226 855 903
Amortization of intangible
assets 61 63 249 251
------------------------------------------------
4,788 11,304 23,422 36,866
------------------------------------------------
Loss from operations (2,220) (9,874) (15,528) (32,477)
------------------------------------------------

Other income (expenses)
Gain on sale of assets 44 - 44 -
Provincial capital tax - 121 170 (127)
Loss on disposal of assets - (308) - (308)
Interest 151 329 923 2,249
Foreign currency gains 71 244 188 2,617
------------------------------------------------
266 386 1,325 4,431
------------------------------------------------

Loss before income taxes (1,954) (9,488) (14,203) (28,046)
Current income tax expense
(recovery) (4) 9 116 22
------------------------------------------------
Net loss for the period $ (1,950) (9,497) $ (14,319) $ (28,068)
------------------------------------------------
------------------------------------------------


Net loss per share
Basic and diluted $ (0.02) $ (0.10) $ (0.16) $ (0.31)


Weighted average number of
common shares outstanding 92,405,666 91,765,691 92,080,656 91,797,911



Hydrogenics Corporation
Interim Consolidated Statements of Cash Flows
(in thousands of US dollars)
(unaudited)
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Three months ended
Dec. 31 Year ended Dec. 31
2008 2007 2008 2007
-----------------------------------------

Cash and cash equivalents
provided by (used in)
Operating activities
Net loss for the period $ (1,950) $ (9,497) $ (14,319) $ (28,068)
Items not affecting cash
Amortization of property, plant
and equipment 406 403 1,106 1,611
Amortization of intangible
assets 61 63 249 251
Loss on disposal of capital
assets - 308 - 308
Unrealized foreign exchange
losses (gains) 594 (245) 695 29
Stock-based compensation 127 287 694 1,553
Gain on sale of assets (44) - (44) -
Net change in non-cash working
capital 882 1,560 4,817 (4,100)
-----------------------------------------
76 (7,121) (6,802) (28,416)
-----------------------------------------

Investing activities
Decrease (increase) in
short-term investments - (203) 15,032 39,318
Decrease (increase) in
restricted cash 4,233 - (1,130) -
Proceeds from sale of assets 44 - 44 -
Purchase of property, plant and
equipment (555) (446) (885) (1,331)
-----------------------------------------
3,722 (649) 13,061 37,987
-----------------------------------------

Financing activities
Increase is (repayment) of
long-term debt - 11 (11) (83)
Deferred research and
development grant (96) 134 (235) 204
Common shares issued (purchased
and cancelled), net of
issuance costs - - 128 (169)
-----------------------------------------
(96) 145 (118) (48)
-----------------------------------------

Increase (decrease) in cash
and cash equivalents
during the period 3,702 (7,625) 6,141 9,523

Cash and cash equivalents -
Beginning of period 17,899 23,085 15,460 5,937
-----------------------------------------
Cash and cash equivalents -
End of period $ 21,601 $ 15,460 $ 21,601 $ 15,460
-----------------------------------------
-----------------------------------------



Hydrogenics Corporation
Consolidated Statements of Shareholders' Equity
(in thousands of US dollars, except for share and per share amounts)
(unaudited)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accum-
ulated
other
comp- Total
Common shares Contri- rehen- share-
--------------------- buted sive holders'
Number Amount surplus Deficit loss equity
Balance at
Dec. 31,
2005 91,679,670 $306,957 $ 11,847 $(118,274) $(5,023) $195,507
Comprehensive
loss:
Net loss
for the
year - - - (130,759) - (130,759)
Foreign
currency
translation
adjustments - - - - (281) (281)
---------
Comprehensive
loss (131,040)
---------
Issuance
of common
shares on
exercise
of options 236,796 419 419
Stock-based
consulting
expense - - 39 - - 39
Employee
stock-based
compensation
expense - - 1,832 - - 1,832
---------------------------------------------------------------
Balance at
Dec. 31,
2006 91,916,466 307,376 13,718 (249,033) (5,304) 66,757
---------------------------------------------------------------
Comprehensive
loss:
Net loss
for the
year - - - (28,068) - (28,068)
Foreign
currency
translation
adjustments - - - - 311 311
---------
Comprehensive
loss (27,757)
---------
Shares
returned
to treasury (150,775) (504) 335 - - (169)
Employee
stock-based
compensation
expense - - 1,553 - - 1,553
---------------------------------------------------------------
Balance at
Dec. 31,
2007 91,765,691 306,872 15,606 (277,101) (4,993) 40,384
---------------------------------------------------------------
Comprehensive
loss:
Net loss
for the
year - - - (14,319) - (14,319)
Foreign
currency
translation
adjustments - - - - (1,404) (1,404)
---------
Comprehensive
loss (15,723)
---------
Issuance
of common
shares on
exercise
of options 639,980 128 - - - 128
Adjustment
for partial
shares (5) - - - - -
Employee
stock-based
compensation
expense - - 694 - - 694
---------------------------------------------------------------
Balance at
Dec. 31,
2008 92,405,666 $307,000 $ 16,300 $ (291,420) $(6,397) $25,483
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