MISSISSAUGA, ONTARIO, Oct. 26, 2009 (Marketwire) --
MISSISSAUGA, ONTARIO -- (Marketwire) -- 10/26/09 -- Hydrogenics Corporation (TSX: HYG)(NASDAQ: HYGS), a leading developer and manufacturer of hydrogen generation and fuel cell products, today reported third quarter 2009 results. Results are reported in US dollars and are prepared in accordance with Canadian generally accepted accounting principles.
Financial Highlights
- Revenues decreased to $3.6 million and $14.6 million for the three and nine months ended September 30, 2009 due to project timing and customer credit issues which has impacted revenue recognition. Meanwhile, since July of this year, our electrolyzer production has been at the same record levels we saw in 2008. Based on recent sales activity, the company anticipates a recovery to pre-recession levels over the coming quarters.
- Despite reduced revenues, cost management activities resulted in an increase in gross margin to 20.9% for the nine months ended September 30, 2009, a rise of 3.4 percentage points from the nine months ended September 30, 2008.
- Cash operating costs increased by $1.8 million as a result of transaction-related expenses with the non-dilutive financing with Algonquin Power Income Fund. This arrangement is anticipated to close imminently and generate proceeds of C$10.8 million, prior to transaction costs.
- Coming into the second half of 2009, selling and quotation activity has been active with renewable energy projects and industrial hydrogen. Hydrogenics' sales pipeline has been refilling, and the order backlog as at September 30, 2009 was $19.1 million, approximately one-third of which we anticipate delivering in the fourth quarter of 2009.
"As the global economy stabilizes, our strategic growth initiatives remain on track - with increasing visibility and order flow for renewable energy projects, fuel cells, and industrial hydrogen applications alike, pointing to a recovery in our end markets," said Daryl Wilson, President and Chief Executive Officer. "The company is well positioned for top line growth and margin expansion, and we look forward to sequential gains in the quarters to come. With the imminent closing of our $10.8 million non-dilutive financing with the trustees of Algonquin Power Income Fund, our cash position is immediately bolstered allowing us to pursue other initiatives to fund our operations."
Results for the third quarter of 2009 compared to the third quarter of 2008
Revenues decreased $7.4 million, or 68%, reflecting lower revenues in our OnSite Generation and Power Systems business units due to timing of project execution, which we believe in the case of our OnSite Generation business unit are the result of prevailing conditions in credit markets and the current global economy.
Gross profit, expressed as a percentage of revenues, was 16.2% (13.5% in the third quarter of 2008), attributed to product mix and product cost reductions in our Power Systems business unit offset by decreased cost synergies and overhead absorption in our OnSite Generation business unit resulting from lower revenues.
Cash operating costs, a non-GAAP measure, defined as selling, general and administrative expenses, and research and product development expenses, net, less stock-based compensation expense, were $5.6 million, an 18% increase from $4.8 million in the third quarter of 2008. Cash operating costs for the third quarter of 2009 include: (i) $1.8 million of transaction related expenses associated with our proposed transaction with the trustees of Algonquin Power Income Fund, which is anticipated to generate approximately C$10.8 million of gross proceeds; (ii) $0.3 million of deferred compensation costs indexed to our share price; and (iii) $0.2 million of costs attributable to our Test Systems business unit.
Net loss was $5.4 million for the third quarter of 2009, a 46% increase from $3.7 million in the third quarter of 2008.
Results for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008
Revenues, exclusive of our Test Systems business unit, decreased $13.4 million or 48%, primarily reflecting lower revenues in our OnSite Generation business unit.
Gross profit, expressed as a percentage of revenues, was 20.9% (17.5% in 2008) primarily reflecting improved gross profits in both our OnSite Generation and Power Systems business units. The improvement in gross profit in our OnSite Generation business unit is the result of operational improvements, partially offset by decreased cost synergies and overhead absorption resulting from lower revenues. The improvement in gross profit in our Power Systems business unit is the result of product mix and product cost reductions.
Cash operating costs were $17.2 million, consistent with the nine months ended September 30, 2008. Cash operating costs for the nine months ended September 30, 2009 include: (i) $3.0 million of transaction related expenses associated with our proposed transaction with the trustees of Algonquin Power Income Fund; (ii) $0.7 million of deferred compensation costs indexed to our share price; (iii) $0.6 million of costs associated with business streamlining initiatives; and (iv) $0.4 million of costs attributable to our Test Systems business unit.
Net loss was $15.4 million for the nine months ended September 30, 2009, an increase of 26% from $12.4 million in 2008.
Liquidity
Cash and cash equivalents, restricted cash and short-term investments were $7.3 million as at September 30, 2009, a $4.6 million sequential quarterly decrease from the second quarter of 2009 reflecting: (i) a $5.1 million EBITDA loss; partially offset by (ii) a $0.5 million decrease in non-cash working capital.
Order backlog
Order backlog as at September 30, 2009 was $19.1 million, as follows (in $ millions):
Jun. 30, 2009 Orders Orders Sept. 30, 2009
Backlog Received Delivered Backlog
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OnSite Generation $ 10.3 $ 7.1 $ 2.6 $ 14.8
Power Systems 5.0 0.3 1.0 4.3
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Total $ 15.3 $ 7.4 $ 3.6 $ 19.1
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In addition to the $14.6 million in revenue for the nine months ended September 30, 2009, we currently anticipate delivering and recognizing as revenue a minimum of one-third of our current backlog in the fourth quarter of 2009.
Conference Call Details
Hydrogenics will hold a conference at 10 a.m. ET on October 27, 2009 to review the third quarter 2009 results. The conference call number is (866) 223-7781. A live webcast of the call will also be available at www.hydrogenics.com.
The webcast will be archived on the site, and investors will be able to access an encore recording of the conference call for one week by calling (416) 695-5800, conference ID # 8746412. The encore recording will be available two hours after the conference call has concluded.
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.
