Investor Presentation
September 2014
1
1
Safe Harbor Statement
This presentation contains "forward-looking information," within the meaning of applicable Canadian securities laws and "forward-looking statements" within the
meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively referred to herein as "forward-looking statements"). Forward-looking
statements can be identified by the use of words, such as "plans," "expects," or "is expected," "budget," "scheduled," "estimates," "forecasts," "intends," "anticipates,"
or "believes" or variations of such words and phrases or state that certain actions, events or results "may," "could," "would," "might" or "will" be taken, occur or be
achieved. These forward-looking statements relate to, among other things, our future results, levels of activity, performance, goals or achievements or other future
events. These forward-looking statements are based on current expectations and various assumptions and analyses made by us in light of our experience and our
perceptions of historical trends, current conditions and expected future developments and other factors that we believe are appropriate in the circumstances. These
forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those
anticipated in our forward-looking statements.
These risks, uncertainties and factors include, but are not limited to: our inability to execute our business plan, or to grow our business; inability to address a slow
return to economic growth, and its impact on our business, results of operations and consolidated financial condition; our limited operating history; inability to
implement our business strategy; fluctuations in our quarterly results; failure to maintain our customer base that generates the majority of our revenues; currency
fluctuations; failure to maintain sufficient insurance coverage; changes in value of our goodwill; failure of a significant market to develop for our products; failure of
hydrogen being readily available on a cost-effective basis; changes in government policies and regulations; lack of new government policies and regulations for the
energy storage technologies; failure of uniform codes and standards for hydrogen fuelled vehicles and related infrastructure to develop; liability for environmental
damages resulting from our research, development or manufacturing operations; failure to compete with other developers and manufacturers of products in our
industry; failure to compete with developers and manufacturers of traditional and alternative technologies; failure to develop partnerships with original equipment
manufacturers, governments, systems integrators and other third parties; inability to obtain sufficient materials and components for our products from suppliers;
failure to manage expansion of our operations; failure to manage foreign sales and operations; failure to recruit, train and retain key management personnel; inability
to integrate acquisitions; failure to develop adequate manufacturing processes and capabilities; failure to complete the development of commercially viable products;
failure to produce cost-competitive products; failure or delay in field testing of our products; failure to produce products free of defects or errors; inability to adapt to
technological advances or new codes and standards; failure to protect our intellectual property; our involvement in intellectual property litigation; exposure to product
liability claims; failure to meet rules regarding passive foreign investment companies; actions of our significant and principal shareholders; failure to maintain the
requirements for continued listing on NASDAQ; dilution as a result of significant issuances of our common shares and preferred shares; inability of U.S. investors to
enforce U.S. civil liability judgments against us; volatility of our common share price; and dilution as a result of the exercise of options.
Readers should not place undue reliance on our forward-looking statements and are encouraged to review the section captioned "Risk Factors" in our regulatory
filings with the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission for a more complete discussion of factors that could
affect our future performance. Furthermore, the forward-looking statements contained herein are made as of the date of this presentation, and we undertake no
obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this presentation, unless
otherwise required by law. The forward-looking statements contained in this presentation are expressly qualified by this.
2
Our Company
• Global provider of energy storage, electrolysis
products hydrogen energy systems and services
• Incorporated in 1995 [NASDAQ: HYGS; TSX: HYG]
• Headquartered in Canada with European facilities in
Germany and Belgium
• 145 patents and patent applications
• More than 2,000 products deployed in 100 countries
worldwide
• Strong professional management team and BOD
3
Growth with Quality Fundamentals
USD’000s
Hydrogenics Revenue Growth
40
45,000
Hydrogenics Corporation - HYGS
35
40,000
35,000
30
30,000
25
25,000
20
20,000
15
15,000
10
10,000
5
5,000
0
2010
2011
2012
2013
2011
2012
•
Smart strategy in emergent technology field for 20 years
•
Strong differentiated position – Technology/Partners/References
•
Partner credibility:
4
2013
2014
Lines of Business
OnSite Generation
Power Systems
Water Electrolyzers
Power Modules
Industrial hydrogen
Hydrogen fueling
Backup power
Energy Storage
Load Control, Smart Grid and Remote Communities
5
Mobility power
OnSite Generation: Industrial Electrolysis
65 years of technology leadership
1999
2001
2003
2005
2009
2012
Application spectrum
Glass
Steel
Solar Silicone
Food
Power Plant
Positioning
Megawatt Scale
6
Top Performance
+500
Reference Sites
OnSite Generation: Hydrogen Fueling Stations
•
Toyota, Honda, Daimler and Hyundai
launch mass production fuel cell
vehicles 2015 – 2017
•
Hydrogenics has delivered 45 stations
•
4 wins thus far in 2014
Hamburg, Germany
California, USA
Stuttgart, Germany
7
MW Fuel Cell Systems for Power Generation & Back-up
Cost, performance, scale and zero carbon emissions now enable new
markets for continuous power generation at utility scale
• Kolon JV
 Kolon Water and Energy provides excellent market access and
has already secured first customers
 South Korean renewable energy policy favors fuel cell solutions and
particularly supports elimination of otherwise wasted hydrogen energy
 First deployments will occur in Q1 2015 with rapid uptake anticipated
after confirmation period
• More than 100MW of accessible market identified, with first
1MW through 10MW already secured
• As key conditions are met trajectory beyond $100M in revenue is
clear
• New build-own-operate model with long term service agreements
appears attractive
• HYGS’ work with Microsoft and CommScope on fuel cell
integration for Data Centers recently reported in technical press
8
CommScope / Microsoft: NFCRC/UC Irvine
•
Primary (Hydrogen Fuel) Powered “Distributed Power
Architecture” Solution
•
Direct Current (380VDC) “Emerge Alliance” Standard - Power
Architecture
•
Inherent IT Rack-Level Redundancy
– CapEx (16 - 20)% Savings
– OpEx up-to (4)% Savings
References:
1) Microsoft Testing @ NFCRC – UC Irvine published results – November 2013:
•
http://research.microsoft.com/pubs/203898/FCDC.pdf
2) Microsoft Testing @ NFCRC – UC Irvine published results – June 2014:
•
Acknowledgement of Hydrogenics and CommScope – Technical Support
•
http://research.microsoft.com/pubs/217361/ES-FuelCell2014.pdf
9
Hydrogen Powered
Integrated (FC/PS) IT Rack
Fuel Cell Power Modules: Mobility Markets
10
•
Electrification of mobility continues as a strong
trend
•
Limitation of batteries becoming more evident
•
Value proposition driven by energy capacity of
hydrogen and high efficiency
•
Completed shipment of 20 units for bus range
extension and airport ground support equipment to
USA and Chinese customers
•
Starting to see demand for train, delivery van, bus
and truck applications
•
Work continues on track with large propulsion order
(up to $90M value). Of total, $36M has been in
current backlog – balance of $54M expected to
come into backlog as milestones achieved
Power Systems: Backup Power
Cell Tower & Data Center Applications
• Viewed as largest fuel cell end market (>1% penetration
of USA Market from all suppliers)
• Developed five products across 2.4kW to 16kW power
• Partner CommScope – $3B telecom company
– First commercial orders delivered in 2013
• Longer energy provision (> 4 hrs) and smaller footprint
– Marketing in US for extended run - 2 yr payback
• Distributed power application to support large data
centers and server farms
11
Power Systems: Propulsion
$90M Order Awarded September 2012
•
8 year history with confidential customer
•
First prototype delivered in 2012
•
Customer has elected to commercialize
Gen 2.0 of product
•
$10M for exclusivity over 8 years
•
$30M firm order commitment
•
$90M total potential value over 10 years
•
$10M recognition in 2013
12
A Big Theme: Energy Storage
•
A 30B emergent opportunity at 14,000 megawatts by 20221
•
Like data storage, many needs many solutions
•
E.ON – “Only Hydrogen has the Capacity”2
•
California – 1325 MW procurement call
•
Germany – 1500 MW government funding
•
Ontario – IESO/OPA 35 MW (400 bids)
•
At approx $1M/MW – BIG INDEED
1Navigant. 2E.ON
13
Quote
ENERGY STORAGE
Renewable fuel, power or heat when and where needed
14
What if We Used the Entire Energy System to Address Challenges?
Energy Silos
36%
35%
19%
10%
Transport Fuels
Natural Gas
Electricity
Other
Source data: National Energy Board secondary energy demand forecast, Rethinking Energy Conservation in Ontario, May 2010 report
15
Energy Storage: Major North American Win
•
Selected as preferred respondent on long sought critical
North American reference site project in Ontario, Canada,
with Enbridge
•
Procurement by the Independent Electricity System
Operator (IESO) designed as a structured learning
platform to screen multiple technologies against rigorous
criterion
•
First of its kind contract for Energy Storage services and
capacity
•
2MW project will use next-generation PEM platform and
include 8MWhr of storage
•
Services contact will be administered in a special purpose
vehicle with HYGS’ partner Enbridge
•
Other partners include the Canadian Gas Association and
Rodan Energy
16
Energy Storage
•
Saw opening of E.ON 2 MW
Falkenhagen facility in 2013
– Serves as showcase for HYGS
Power-to-Gas technology
•
First PEM 1 MW facility, also
with E.ON now under
development – delivery in Q4-14
•
Largest PEM electrolysis
installation producing
hydrogen worldwide
•
Ontario IESO award will provide
first North American reference
site
•
Hydrogenics leads the field with
4 of 5 largest installations
17
Energy Storage Commercial Support Moves Ahead
Germany
Ontario, Canada
Annual Demand: 550 TWh
Annual Demand: 275 TWh
Annual Demand: 140 TWh
2012 RE Generation: 24%
2012 RE Generation: 20%
2012 RE Generation: 3½%
Renewable Target: 50% by 2030
RPS Target: 33% by 2020
FIT Target: 10,700MW by 2021
Integration Challenge:
• 33% curtailment of wind today
• Major transmission constraints
Integration Challenge:
• Morning and evening ramping
for increasing solar
Integration Challenge:
• Increasing penetration of RE
with frequent periods of surplus
baseload nuclear generation
Energy Storage:
Energy Storage:
• 40+ Demonstration Projects
• 1,325 MW procurement by 2020
• 18 Power-to-Gas Demo Projects
Building H2 Fueling Infrastructure
18
California
Building H2 Fueling Infrastructure
Energy Storage:
• 10MW procurement for regulation
• Plan to procure 50MW energy
storage announced in LTEP
Renewable Hydrogen Displaces Conventional Sources
40MW Power-to-Gas Plant
4.3 million kg
Hydrogen annually
A Solution
With
Meaningful
Scale
Renewable Gas Options
Industrial H2
Displaces
19
4,300,000
gallons of
gasoline
102,000
MWh
550,000
MMBTU
867,000
MMBTU of
natural gas
Growth Catalysts to Drive Higher Demand for Hydrogenics
• Increasing evidence that the Energy Storage sector is reaching a
tipping point
• Strong, active pipeline of P2G opportunities, including a greater
number of larger, EU projects
• Move towards multi-megawatt fuel cell power generation for utilities
and data centers
• Expanding technology-intensive fuel cell integration programs
• Launch of fuel cell vehicles by major OEMs planned for 2015
• Growing hydrogen fueling station infrastructure requirements
Company Expertise + Industry Sector + Applications =
MOMENTUM
20
Inflection Point
Portfolio Tipping Points:
Hydrogenics Corporation
USD’000s
Revenue & Adjusted EBITDA - 2010-13
50,000
45,000
40,000
35,000
30,000
1. Single MW
Multi MW Storage
25,000
20,000
15,000
10,000
5,000
(5,000)
2010
2011
2012
2013
2014
2. kW Fuel Cell
(10,000)
Revenue
Adjusted EBITDA
Multi MW Fuel Cell
3. Industry Sector Sentiment Shift
–
Vehicle announcements:
Hyundai, Toyota
20 years Surviving to Thriving
21
–
Hydrogen fueling starts to ramp
Order Backlog
As at June 30, 2014
($M)
Mar. 1/14
Backlog
OnSite Generation
$
Power Systems
Total
$
Orders
Received
24.5
$
FX
5.6
-
34.0
13.6
0.1
58.5
$ 19.2
0.1
Orders
Delivered
Expected Revenue Recognition
22
During next 12 mo
Beyond next 12 mo
OnSite Generation
22.1
0.5
Power Systems
18.0
26.5
Total
40.1
27.0
$
7.5
June 30/14
Backlog
$
3.2
$
10.7
22.6
44.5
$
67.1
Q2 Results
(in $ millions)
Three months ended June 30
2014
Change
2013
$
%
9.8
0.9
9
3.2
2.8
0.4
14
30.2
28.1
Selling, general and administrative
(excluding stock-based compensation,
amortization and depreciation)
2.6
2.8
0.2
7
Research and product development
0.9
0.9
-
-
(0.9)
0.6
67
Revenue
$
Gross Profit
Percentage of revenues
10.7
$
Operating Expenses
Adjusted EBITDA
$
(0.3)
$
Notes
• Adjusted EBITDA is defined as net loss excluding: cash settled long term compensation indexed to share price,
share settled stock-based compensation expense, net finance income and expenses, depreciation and
amortization. Adjusted EBITDA is a non-IFRS measure and may not be comparable to similar measures used by
other companies.
• Management uses Adjusted EBITDA as a useful measure of ongoing operational results. Refer to slide 15 for a
reconciliation of this measure to net loss.
23
YTD Results
(in $ millions)
Six months ended June 30
2014
Change
2013
$
%
22.2
(3.4)
(15)
5.2
6.6
(1.4)
(21)
27.5
29.9
Selling, general and administrative
(excluding stock-based compensation,
amortization and depreciation)
5.4
5.5
0.1
2
Research and product development
1.8
1.8
-
-
(0.7)
(1.3)
187
Revenue
$
Gross Profit
Percentage of revenues
18.8
$
Operating Expenses
Adjusted EBITDA
Notes
$
(2.0)
$
• Adjusted EBITDA is defined as net loss excluding: cash settled long term compensation indexed to share price,
share settled stock-based compensation expense, net finance income and expenses, depreciation and
amortization. Adjusted EBITDA is a non-IFRS measure and may not be comparable to similar measures used by
other companies.
• Management uses Adjusted EBITDA as a useful measure of ongoing operational results. Refer to slide 15 for a
reconciliation of this measure to net loss.
24
Consolidated Balance Sheet Highlights
($M)
June 30,
2014
Cash and cash equivalents
and restricted cash
8.0
5.4
2.6
48
Inventories
18.2
12.9
5.3
41
Trade and other payables
13.9
13.2
0.7
5
-
1.1
(1.1)
(100)
Note: All outstanding warrants were
exercised in January 2014
25
%
37
1
$
$
5.1
Warrants1
18.9
Change
13.8
Trade, other and grants receivable
$
Dec. 31,
2013
Reconciliation of Non-IFRS Measures – Adj. EBITDA
($M)
Three months ended
June 30, 2014
Adjusted EBITDA loss
$
0.3
Three months ended
June 30, 2013
$
0.9
(0.9)
2.0
Add: Amortization and depreciation
0.2
0.2
Add: Finance (income) loss, net
0.5
1.1
Add: Stock-based compensation
(cash settled and share settled)
Net loss
26
$
0.1
$
4.2
Reconciliation of Non-IFRS Measures – Adj. EBITDA
($M)
Six months ended
June 30, 2014
Adjusted EBITDA loss
$
2.0
Six months ended
June 30, 2013
$
0.7
0.9
2.5
Add: Amortization and depreciation
0.3
0.4
Add: Finance (income) loss, net
0.7
1.7
Add: Stock-based compensation
(cash settled and share settled)
Net loss
27
$
3.9
$
5.3
28