Hydrogenics Corporation reported third quarter 2012 financial results. Results are reported in US dollars and are prepared in accordance with International Financial Reporting Standards (IFRS)1.
"This year has been one of hard work, focus, and execution, and we're pleased to see some tremendous results that validate our technology and hydrogen's role in energy storage," said Daryl Wilson, President and Chief Executive Officer. "Our backlog is at its highest level ever thanks to a breakthrough agreement with a major OEM for our Power Systems applications, under which we'll be providing fuel cells, electronics, and related services over a number of years. In conjunction with this award, we also received an initial payment of over $10 million after the end of the quarter in recognition of the exclusive nature of this design and development contract, strengthening our balance sheet and providing growth capital for 2013. Our revenue increased 60% over 2011 -- and gross margins expanded by three percentage points -- while we continued to bid on a large number of interesting opportunities. Going forward, we'll stay focused on the bottom line as we aggressively pursue new business initiatives that leverage our leadership in hydrogen technology. Energy storage is drawing increasing interest from a multitude of organizations around the world, while our most recent Power Systems win is just the beginning for what we see as Hydrogenics' future. Given current demand trends, we are confident the Company is well positioned for improved financial performance heading into 2013."
Highlights for the Quarter Ended September 30, 2012 (compared to the quarter ended September 30, 2011, unless otherwise noted)
During the quarter Hydrogenics secured the largest award in the Company's history -- a multi-year order worth up to $90 million for hydrogen-based propulsion systems and related services. Hydrogenics will supply integrated fuel cell power systems, electronic converters, associated hardware and propulsion system software. The award includes a firm-fixed-price exclusive design and manufacturing contract valued at approximately $36.0 million, which has been included in the Company's order backlog for the third quarter ended September 30, 2012.
Including the large Power Systems contract, Hydrogenics booked $42.3 million of new orders during the quarter for power systems, renewable energy storage and industrial gas applications. The Company's order backlog rose to $61.4 million as of September 30, 2012 - up nearly 150% year-over-year.
On the strength of its backlog, the Company is currently projecting approximately 45%-55% full year revenue growth versus 2011. Revenues for the third quarter increased 60%, to $7.9 million, reflecting growth in the Company's OnSite Generation business unit fueled by higher demand in industrial markets and growth in energy storage; this was partially offset by a weakening of the Euro relative to the US dollar. Gross profit was $1.7 million, or 21.0% of revenue, a 3.1 percentage point improvement year-over-year, primarily reflecting increased revenue and economies of scale. Cash Operating Costs were $4.7 million, versus $2.9 million in 2011, with such costs nearly equivalent as a percent of revenues in both years. The year-over-year change reflects planned increases in research and development efforts focused on next-generation energy storage product development. In addition, costs for higher marketing and commercial activities as well as compensation costs arising from improved business performance contributed to the increase.
Hydrogenics' Adjusted EBITDA2 loss was $3.2 million, versus $1.9 million in the third quarter of 2011, reflecting; (i) a $0.8 million increase in gross profit; offset by (ii) the above-noted increase in cash operating costs; (iii) the absence of a $0.2 million gain associated with the Company's deferred compensation plans, which are indexed to the share price; and (iv) a $0.1 million increase in stockbased compensation. The Adjusted EBITDA loss as a percent of sales rose slightly year-over-year.
Hydrogenics exited the third quarter with $9.3 million of cash and restricted cash, a $0.4 million decrease over June 30, 2012, reflecting: (i) $3.6 million of cash used in operations; partially offset by (ii) a $2.7 million increase in non-cash working capital; (iii) $0.3 million of proceeds from loan advances; and (iv) a $0.2 million of positive foreign exchange impacts resulting from the strengthening of the Euro relative to the US dollar. Subsequent to the end of the quarter, in October 2012, the Company received $10.2 million in initial payments related to the large design and manufacturing contract previously announced.
Highlights for the Nine Months Ended September 30, 2012 (compared to the nine months ended September 30, 2011, unless otherwise noted)
Total revenues rose to $21.9 million, an increase of 35%, reflecting growth in the Company's Onsite Generation business unit fueled by higher demand in industrial markets and growth in energy storage; this was partially offset by a weakening of the Euro relative to the US dollar. Gross profit was $3.9 million, or 18.0% of revenue, a 3.1 percentage point decrease, primarily reflecting increased material costs. Cost reduction efforts are continuing through supply chain management and product design innovation in order to restore margins to target levels. Cash operating costs1 were $11.7 million, versus $9.1 million last year, with costs as a percent of revenues falling 2.8%. The year-over-year change reflects planned increases in research and development efforts focused on next-generation energy storage product development, additional marketing costs, and increased compensation costs arising from improved business performance. Hydrogenics' Adjusted EBITDA2 loss was $8.6 million, versus $6.9 million in the prior-year period, reflecting: (i) a $0.5 million increase in gross profit; (ii) a $0.2 million decrease in costs and fair value adjustments resulting from the Company's compensation plans, which are indexed to the share price; and (iii) a $0.2 million decrease in stock-based compensation; offset by (iv) the above-noted increase in cash operating costs of $2.6 million. The Adjusted EBITDA loss as a percent of sales fell slightly year-over-year.
