Source: press release
Conference call: March 2, see below for details.
Successful Follow-On Equity Offering Completed In February 2004 Increases Cash Reserves To Over $100 Million
Company Expenses Stock Options in 2003
TORONTO, March 2 /PRNewswire-FirstCall/ — Hydrogenics Corporation (TSX: HYG and Nasdaq: HYGS), a leading innovator, developer and manufacturer of fuel cell and hydrogen-related technologies, today announced its un-audited financial results for the fourth quarter and year ended December 31, 2003 and highlights of its recent corporate activity. All results are reported in U.S. dollars. Conference call details are provided below.
Hydrogenics' fourth quarter 2003 revenues were $5.9 million, compared with $5.8 million for fourth quarter 2002. Net loss for fourth quarter 2003 was $7.7 million, or $0.14 per share, compared with a net loss of $5.1 million, or $0.11 per share, for the fourth quarter 2002. Excluding $3.2 million in non-cash amortization of intangibles and $0.7 million in stock-based compensation expense, net loss for the fourth quarter 2003 was $3.7 million, or $0.07 per share. Excluding $3.8 million in non-cash amortization of intangibles, net loss for the fourth quarter 2002 was $1.3 million or $0.03 per share.
For the full year 2003, revenues increased 68 percent to $26.7 million compared with $15.8 million for 2002. Net loss for 2003 was $22.1 million, or $0.42 per share, compared with a net loss of $20.6 million, or $0.43 per share, for 2002. Excluding $12.9 million in non-cash amortization of intangibles and $0.7 million in stock-based compensation expense, net loss for 2003 was $8.5 million, or $0.16 per share. Excluding the $15.2 million in non-cash amortization of intangibles, net loss for 2002 was $5.4 million, or $0.11 per share.
Gross profit for fourth quarter 2003 was $1.9 million, or 32 percent of revenues, compared with $2.0 million, or 34 percent of revenues, for the comparable period in 2002. Full year gross profit for 2003 was $8.6 million, or 32 percent of revenues, compared with $5.1 million, or 32 percent of revenues for the comparable period in 2002.
Government grants for fourth quarter 2003 were $0.1 million compared with $0.1 million for the comparable period in 2002. Full year government grants for 2003 were $2.2 million compared with $0.5 million for the comparable period in 2002. Combined gross profits and government grants for the full year 2003 increased 93 percent to $10.8 million, or 41 percent of revenues, compared with $5.6 million, or 35 percent of revenues, for 2002.
The Company chose to early adopt the new Canadian requirement to expense employee stock options on a prospective basis beginning in fourth quarter 2003. Using the Black-Scholes model for valuing stock options granted earlier in the year, the stock-based compensation expense for both the fourth quarter and full year 2003 was $0.7 million. There was no comparable recognition of these non-cash expenses for the prior year. Excluding these stock-based compensation expenses, selling, general and administrative expenses combined with research and development expenses were $6.1 million for the fourth quarter 2003, up 97 percent, compared with $3.1 million for the fourth quarter 2002. For the full year, excluding these stock-based compensation expenses, selling, general and administrative expenses combined with research and development expenses were $21.6 million for 2003, up 98 percent, compared with $10.9 million for 2002.
The increase is largely attributable to the acquisition of Greenlight, combined with increased research and development activity focused on Hydrogenics' emerging portfolio of fuel cell power products and hydrogen refuelers. The Company now has in excess of 230 patent applications, protecting over 100 inventions.
"Although revenues fell short of our guidance established at the beginning of the year, we still achieved our revenue productivity target of approximately $110,000 of revenues per employee –a 38 percent improvement — and approximately $11 million in cash inflows represented by combined gross profits and government grants," said Hydrogenics President and CEO Pierre Rivard. "This underscores our approach of aligning headcount and discretionary spending to the adoption rate of fuel cell technology, thereby minimizing our consumption of cash prior to the emergence of larger commercial markets."
"This was a breakthrough year for Hydrogenics as we: completed and fully integrated our first significant acquisition; successfully defended a patent infringement lawsuit; exceeded our targeted cost reductions on our fuel cell power modules; and exceeded our durability targets as measured by hours of operation as well as the number of start-ups and shutdowns," continued Rivard. "We have also introduced new versions of our industry-leading test equipment and fuel cell products, and continued to build a balanced and carefully- selected portfolio of hydrogen appliances, positioning the Company favorably for the emerging Hydrogen Economy."
FOLLOW-ON EQUITY OFFERING
On February 3, 2004, the Company completed the sale of 11,000,000 common shares of the Company at $5.75 per share for net proceeds of $59.6 million. Subsequent to this sale, the underwriters' over-allotment option was partially exercised resulting in the sale of an additional 373,608 common shares on February 13, 2004 for net proceeds of $2.0 million. Combined with year-end balances, the Company now has approximately $105 million in combined cash and short term investments.
2003 ACCOMPLISHMENTS
Commercial Sustainability — The Company reported an improvement in its productivity that is reflected in annualized revenue per employee of approximately $110,000 for 2003 compared with approximately $80,000 for 2002. In addition to this improved revenue productivity, the Company recorded $2.2 million in government grants during 2003. The Company does not record these grants as revenues but rather as an offset to its gross R&D. Combined gross profits and R&D grants per employee for 2003 were approximately $44,000, up 63 percent, compared with $27,000 for 2002.
"As we move towards commercialization of our power module and hydrogen generation technologies, we have not lost sight of our goal to be the first public fuel cell company to achieve breakeven operating cash flow," said Rivard. "Our increase in spending on product development has been deliberate, and is matched to the market and revenue opportunities before us. Our product development successes in 2003, combined with a substantial increase in the number of potential partners interested in exploring the use of fuel cells in their existing product platforms, give us confidence to invest more aggressively in product and market development activities — at a level just slightly ahead of our combined gross profits and government grants. By continuing to target premium markets for our power products and focusing aggressively on product cost reductions, we are intent on demonstrating that there is a growing commercial market for fuel cells."
Strategic Alliances
Hydrogenics continues to work closely with John Deere to integrate HyPM power module technology into a variety of John Deere demonstrator vehicles as a key element of Hydrogenics' light mobility initiative. Subsequent to year end, two additional alliances have come to fruition in support of this same initiative — one to develop a fuel cell delivery van and refueler with Purolator Courier Ltd, and the other a strategic development agreement with Maxwell Technologies with regard to the use of ultracapacitors in certain areas of our light mobility initiatives. During the year the Company initiated and played a leadership role in establishing a thirty-member Hydrogen Village consortium for a multi-year, multi-technology Toronto demonstration. This consortium is now seeking government assistance to proceed with specific projects. Two government-funded initiatives for early-adopting markets were announced during the year: one is an agreement with IdaTech, a leader in fuel processing technology, to develop a 50 kW fuel cell energy station with DOE funding, and the other funded through Industry Canada (SDTC) to lead a group of companies including GM Canada, NACCO, and John Deere, to develop fuel cell powered forklifts. Hydrogenics also developed new working relationships with leading system integrators, particularly hybrid bus system integrators such as Enova, ISE Research, and Azure Dynamics.
Commercial Fuel Cell Products
Hydrogenics' launch of the prototype 10 kW HyPM power module in April 2003 was followed by a new commercial configuration in November, with substantial design advances and cost reductions. This 10 kW design supplements the Company's earlier 20 kW HyPM, and together offers a broad power range suitable for early market applications. In terms of cost reductions, the Company has achieved a 50% cost reduction year-over-year in its power module configuration in each of the past three years, even without the benefit of economies of scale. The Company's wholly-owned subsidiary, Greenlight Power Technologies launched a new G-Series FCATS' product during the year. This new design is the first that combines the best of Hydrogenics' and Greenlight's test system expertise, and utilizes the combined entity's increased purchasing power, market presence, and synergies. The Company continued to capture existing commercial opportunities ahead of a mass-market adoption of fuel cell technology by: — securing multiple new and repeat orders in Asia and Europe following the introduction of our next generation test equipment;
— delivering 18 HyPM fuel cell modules to a range of OEMs and systems integrators primarily for off-road mobility and hybrid bus applications;
— successfully bidding HyPM power module technology against competition into U.S. and Canadian government-sponsored demonstrations, e.g. DOE-sponsored stationary power demonstration with IdaTech, hybrid bus for use on an Air Force base in Hawaii, and fuel cell powered forklift development with Industry Canada (SDTC) funding;
— introducing Hydrogenics' on-site 'demonstration-ready' hydrogen refueling capabilities, both PEM electrolysis and reformer based;
— designing, delivering and demonstrating the HyPORT-E 5kW regenerative fuel cell APU to the U.S. military;
— developing second generation HyPORT C for delivery to US Army Communications Electronics Command (CECOM);
— securing and consolidating critical patents in the Vehicle-to-Grid and off-board electrification areas;
— demonstrating the scalability and modularity of its technology, by stacking dual units of the Company's 10kW power module in a hybrid bus configuration, paving the way for further hybrid-fuel cell applications, in mobility and back-up power markets.
Global Reach
Hydrogenics' global reach was expanded with the addition of new test equipment customers in all key regions, and by achieving repeat sales with many of its established customers. The Company now has an installed base of over 450 test stations worldwide at approximately 55 customer sites. Initiatives are now underway to further diversify business in Europe and Asia by introducing power module and hydrogen generation products, in addition to a new product line of Greenlight test equipment.
FUEL CELL TECHNOLOGY PRIORITIES
Research and development spending over the past three years has resulted in both cost reductions as well as durability breakthroughs. Since the beginning of 2001, the cost of a power module has declined at the rate of 50 percent per year — a rate of decline faster than was experienced in the semiconductor technology. The Company's reliance on the rapidly developing supply chain combined with the elimination of a significant number of component parts has contributed to this improvement in cost performance, ahead of any "economies of scale" effect.
The Company's experience as a leading test equipment provider has enabled it to develop proprietary innovations which have directly contributed to durability breakthroughs, as measured by significant increases in hours of operation and in other important metrics, including the number of start-ups/shutdowns without substantial degradation.
Commenting on the pace of cost reductions and durability of fuel cell technology, Rivard said, "Following the acquisition of Greenlight, we made a concerted effort to drive down costs and increase the durability of our fuel cell power modules. Our effective partnering with suppliers and productive spending on research and development has contributed to the exciting progress we have made in 2003. We are looking forward to showcasing our product capabilities in an increasing number of deployments in 2004."
HYDROGENICS 2004 GOALS
Building on its achievements in 2003, the Company has set the following new goals for 2004:
Commercial Sustainability
— Strengthen financial position;
— Achieve breakeven operating cash flow for our test segment, demonstrating commercial sustainability;
— Align headcount with anticipated market opportunities, resulting in improved productivity, as measured by revenue per employee;
— Increase gross profits and government grants from approximately $11 million achieved in 2003.
Strategic Alliances
— Partner with industry leaders and government agencies to access funding, technology and market opportunities in both fuel cell power and hydrogen generation-refueling initiatives.
Commercial Fuel Cell Products
— Continue to drive cost reductions in parts, material and labor;
— Deliver prototypes for field testing in multiple premium power markets, in stationary, mobile and portable applications;
— Develop and test new HyPM models to accommodate a wider array of applications and power ranges;
— Develop and test new hydrogen refueling packages as companion products to our power module and test equipment offerings;
— Expand test and diagnostic product line.
Global Reach
— Expand customer base in all regions for test, hydrogen generation and fuel cell power products.
OUTLOOK
For 2004, Hydrogenics has set a number of measurable short-term goals in order to provide a meaningful way for investors and other stakeholders to track the Company's progress on its strategic initiatives. The Company is targeting a modest year-over-year increase in revenues which will be driven predominantly by sales growth in power products and hydrogen refuelers. These revenues are expected to be supplemented by an increase in government sponsored demonstrations which, may, in some situations be recorded as R&D grants and in others as revenues. Headcount, which currently stands at 260 employees, is expected to increase modestly over the course of 2004. The Company is targeting an approximate 20 percent improvement in revenue productivity, as measured by annual revenues over average number of employees. Given the Company's focus on aligning headcount with current market and revenue opportunities, there is no expectation for a significant net increase in employees during 2004. Given the current rate of exchange for the Canadian dollar, a modest EBITDA loss in the range of $4 million to $7 million is projected for fiscal 2004 allowing for these anticipated productivity improvements, as well as an increased product and market initiatives in Hydrogenics' emerging value streams.
"Hydrogenics' financial results to-date have largely been driven by our continued success selling test equipment, a fact which underscores our decision to acquire Greenlight earlier this year," Rivard continues. "Given that this decision was also based on our desire to focus on the development of fuel cell power products at our Mississauga operation, we are pleased to report that we have shipped, or have under contract, over twenty fuel cell power modules for a variety of mobility, portable and stationary applications."
"The recent announcement of our initiatives in 'off-road' light mobility markets is already proving to be opportune," commented Rivard. "Follow-on announcements with Maxwell and Purolator underscore the significance of our reliance on key suppliers and strategic partners. Although we are in the unique position of being able to rely on our test equipment business to drive positive EBITDA today, we feel the time is right to increase, albeit with discipline, our investment in product and market development, to capture the emerging 'off-road' light mobility and fuel cell hybrid-vehicle opportunities with our portfolio of technologies."
Earnings before interest, taxes, depreciation and amortization (EBITDA) is recognized as a widely accepted performance indicator, although it should be noted that under Generally Accepted Accounting Principles (GAAP), this indicator is not a measure of liquidity or of financial performance. EBITDA, as referenced in this release, is defined by the Company as Loss from Operations, excluding non-cash expenses such as amortization, depreciation, stock-based compensation and non-recurring expenses such as integration costs. EBITDA, as defined, may not be comparable to similarly titled measures reported by other companies and should not be considered in isolation or as an alternative to net income or cash flows as determined under GAAP.
CONFERENCE CALL DETAILS
The Company will hold a conference call with senior management to discuss the financial results in detail at 10:30 a.m. Eastern Time / 7:30 a.m. Pacific Time on March 2, 2004. To access the conference call participants should dial (913) 981-5533. A live Webcast of the conference call will be available on the Company's Web site at www.hydrogenics.com. Please visit the website at least 15 minutes early to register for the teleconference Webcast and download any necessary software. A replay of the Webcast will be available following the conference call on the Hydrogenics corporate Web site.
Loading...