Hydrogenics Corporation's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Hydrogenics Corporation (HYGS)

Q2 2012 Earnings Call

August 1, 2012 10:00 AM ET

Executives

Jennifer Barber – CFO

Daryl Wilson – President and CEO

Analysts

Noah (ph) – ThinkEquity

Jeff Osborne – Stifel Nicolaus

Matt (ph) – ROTH Capital

George Santana – Ascendiant

Larry Litton – Second Line Capital

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Hydrogenics 2012 second quarter earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session with instructions to follow at that time.

(Operator Instructions) As a reminder, this conference is being recorded. I’d now like to turn the call over to your host for today, Ms. Jennifer Barber, Chief Financial Officer. Ma’am, you may begin.

Jennifer Barber

Thanks, Ben (ph). Good morning, and welcome to the Hydrogenics second quarter 2012 conference call. With me today is Daryl Wilson, our President and Chief Executive Officer.

Our second quarter press release, along with our PowerPoint presentation, is available on our website under the investor page at www.hydrogenics.com. We have also uploaded our quarterly report this morning on both SEDAR and EDGAR and would refer you to those sites for our disclosure documents.

As indicated in our press release this morning, all financial references are in US dollars unless otherwise indicated.

I would now like to provide a brief Safe Harbor statement. This call and the accompanying presentation may contain statements that are forward-looking. If statements are based on current expectations and assumptions that are subject to risk and uncertainty.

Actual results could differ materially because of factors discussed in today’s press release and the MD&A section of our interim and most recent annual financial statements or in other reports and filings with the Securities and Exchange Commission and applicable Canadian securities regulators. We do not undertake any duty to update any forward-looking statements. With that, I’ll turn the call over to Daryl. Daryl, please go ahead.

Daryl Wilson

Good morning, and thank you for joining our Q2 earnings call. With very strong financial results and several strategic accomplishments coming into place, Q2 was a very important quarter for Hydrogenics.

Revenue was up more than 100% over Q2 2011 and more than 24% on a year-to-date basis. Our backlog of confirmed orders is up 60% with the addition of more than $10 million of new orders in the quarter. This gives us clear visibility on strong results for the overall year with a projection of approximately 30% to 40% growth year-over-year in revenue.

We entered into a five-year joint development agreement with Enbridge for utility scale energy storage in North America. This agreement was accompanied by an equity investment of $5 million.

Enbridge is a very strong, innovative partner with significant experience and influence in North American energy markets. With a leadership position in gas markets and renewable energy facility deployment, Enbridge is the ideal partner to join with us in opening up the market for Power-to-Gas energy storage in North America.

Turning to Slide 4 in the presentation, we profile the ongoing growth story for the company. Again, we see the importance of the strategic announcements that were made in this recent quarter. Hydrogenics is now well recognized as the leader in the development of Power-to-Gas energy storage technology.

In addition to the relationship with Enbridge, we announced the sale of a two-megawatt Power-to-Gas facility for E.ON, the German-based largest gas and electric utility in the world. This is an important win for us, and just one of several wins in Germany. In the last year more than 15 Power-to-Gas projects have been announced in Germany alone.

In 2012 Hydrogenics has won more than 50% of the projects which have been decided, and while we do not disclose the individual project values, we can say that the overall benefit of these wins to Hydrogenics is in excess of $10 million in revenue in R&D funding. When considered against annual revenues in our electrolysis business at approximately $20 million in 2011, this is very significant indeed.

The compelling value of hydrogen technology is now widely recognized in Germany and we see very significant momentum. We will deliver the project to E.ON by December of this year, illustrating one of the competitive advantages of the solution, speed of deployment.

Competitive storage technology, such as pump hydro or compressed air, can take many years to approve, site, and build. We will deliver this project in just eight months from date of order.

In addition, the Power-to-Gas solution is scalable, flexible, fast responding, and offers unmatched energy storage capacity. These attributes have been thoroughly studied by several utilities and research institutes within Germany.

This has laid the foundation for numerous projects to be developed and the list is still growing. Our experience with industrial hydrogen projects, our patent portfolio, and our technology leadership in scale and efficiency are strong support to our ongoing leadership in this field.

Considering other segments of the business, we looked to hydrogen fueling. Recent announcements from several players in the automotive sector show growing momentum in hydrogen vehicles.

Significant production volume has been announced for 2014 and 2015, and this has been accompanied for new plans for hydrogen fueling infrastructure. In the last month, Germany announced a plan for 50 additional fueling stations.

Again, Hydrogenics is a leader in this space, having just opened the largest station in Europe in February this year, along with our project partners, Linde Gas, and the station’s owner, an electric utility, Vattenfall. While there are many paths for the delivery of hydrogen, the link between electrolysis and renewable generation is very compelling.

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