Hydrogenics Corporation : Hydrogenics Reports Fourth Quarter and Full Year 2013

PRESS RELEASE

Ends 2013 with Record Revenue and Strong Backlog for Future Growth

"Hydrogenics ended 2013 stronger than at any point in its history - with record revenue of $42.4 million, backlog of $57.0 million, and $13.8 million in cash," said Daryl Wilson, President and Chief Executive Officer. "We continue to see the same demand trends that have propelled the Company forward, as global interest in hydrogen-based power and energy solutions accelerates.

"We are encouraged with progress in our energy storage applications. Later this year E.ON will open the most advanced Power-to-Gas facility in the world and the largest PEM electrolysis installation producing hydrogen. Given energy storage opportunities such as this, the growing demand for fueling stations, new fuel-cell applications within the mobility and backup power sectors, and the underlying strength of our industrial electrolysis business, Hydrogenics is on sound footing for 2014 - to pass the $50 million revenue barrier and break into profitability."

 Revenue increased by 12% to $11.0 million reflecting higher sales in the Company's Power Systems business unit.

 Gross profit improved 11.1 percentage points to $2.7 million, or 24.6% of revenue for the quarter.

 Cash Operating Costs1 declined 20% to $2.9 million for the quarter, principally due to an increase in

R&D funding in the quarter.

 Adjusted EBITDA loss was $0.2 million a 93% improvement and evidence of substantial progress toward profitability. (See footnote at the end of this release as the Company's definition of Adjusted EBITDA has changed).

 Net loss in the quarter was $3.1 million a decline of $0.3 million from the fourth quarter of 2012.

 Hydrogenics secured $14.3 million of orders for renewable energy storage, industrial gas and power system applications during the quarter, resulting in an order backlog of $57.0 million as of December 31,

2013. Order backlog movement during the fourth quarter (in $ millions) was as follows:

Sept. 30, 2013

Backlog

Orders

Received FX

Orders

Delivered

Dec. 31, 2013

Backlog

OnSite Generation $ 17.1 $ 12.2 $ 0.1 $ 6.9 $ 22.5

Power Systems 35.6 2.1 0.9 4.1 34.5

Total $ 52.7 $ 14.3 $ 1.0 $ 11.0 $ 57.0

 The Company exited the fourth quarter with $13.8 million of cash and restricted cash, a $0.8 million decrease from September 30, 2013, primarily reflecting: (i) a $1.5 million decrease in working capital;

and (ii) $0.2 million related to the purchase of property, plant and equipment; partially offset by (iii) $1.3 million of proceeds from loan advances.

 Revenue improved by 34% to $42.4 million, an increase of $10.7 million, primarily reflecting higher sales in the Company's Power Systems business unit driven by a contract for integrated power propulsion systems as well as the delivery of fuel cell modules to Hydrogenics' major telecom backup power partner, CommScope, Inc.

 Gross profit increased by $6.8 million to $12.1 million, to 28.4% of revenue, driven by improved margins from the OnSite Generation business unit and higher revenue from the Power Systems business unit.

 Cash operating costs were $13.5 million, versus $15.3 million last year, with costs as a percent of revenue falling 16%. The year-over-year change primarily reflects an increase in external R&D funding of $1.3 million as well as a decrease in corporate R&D expenses of $0.5 million; the lower R&D spending was driven by greater resource allocation within the Power Systems business unit. Cash operating costs included a slight increase of $0.1 million in SG&A expenses.

 Adjusted EBITDA loss was $1.2 million versus $10.1 million in 2012, primarily reflecting the above noted changes.

 Net loss was $8.9 million, a 30% reduction from the $12.8 million reported in 2012.

1. Cash operating costs are defined as the sum of SG&A and R&D, less amortization and depreciation, and stock-based compensation expense inclusive of compensation costs indexed to the Company's share price. This is a non-IFRS measure and may not be comparable to similar measures used by other companies. Management uses this measure as a rough estimate of the amount of fixed costs to operate the Corporation and believes this is a useful measure for investors for the same purpose.

2. Adjusted EBITDA is defined as net loss excluding stock based compensation (both cash settled long term compensation indexed to share price and share based compensation), other finance income and expenses, depreciation and amortization. These items are considered by management to be outside of Hydrogenics' ongoing operational results. Adjusted EBITDA is a non-IFRS measure and may not be comparable to similar measures used by other companies.

Hydrogenics will hold a conference call at 10:00 a.m. EST on March 7, 2014 to review the fourth quarter results. The telephone number for the conference call is (877) 307-1373 or, for international callers, (678) 224-7873. A live webcast of the call will also be available on the company's website, www.hydrogenics.com.

An archived copy of the conference call and webcast will be available on the company's website, www.hydrogenics.com, approximately six hours following the call.

Hydrogenics Corporationis a world leader in engineering and building the technologies required to enable the acceleration of a global power shift. Headquartered in Mississauga, Ontario, Hydrogenics provides hydrogen generation, energy storage and hydrogen power modules to its customers and partners around the world. Hydrogenics has manufacturing sites in Germany, Belgium and Canada and service centres in Russia, Europe,

the US and Canada.

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This release contains forward-looking statements within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995, and under applicable Canadian securities law. These statements are based on management's current expectations and actual results may differ from these forward-looking statements due to numerous factors, including: our inability to increase our revenues or raise additional funding to continue operations, 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; 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 altern ative 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; dilution as a result of significant issuances of our common shares and preferred shares; inability of US investors to enforce US 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 Hydrogenics' forward-looking statements. Investors are encouraged to review the section captioned "Risk Factors" in Hydrogenics' regulatory filings with the Canadian securities regulatory authorities and the US Securities and Exchange Commission for a more complete discussion of factors that could affect Hydrogenics' future performance. Furthermore, the forward-looking statements contained herein are made as of the date of this release, and Hydrogenics undertakes no obligations to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release, unless otherwise required by law. The forward-looking statements contained in this release are expressly qualified by this.

Bob Motz, Chief Financial Officer

Hydrogenics Corporation (905) 361-3660 investors@hydrogenics.com

Chris Witty

Hydrogenics Investor Relations (646) 438-9385 cwitty@darrowir.com

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Reconciliation of Adjusted EBITDA to Net Loss

(in thousands of US dollars) (unaudited)

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(unaudited)

December 31

2013 2012 Assets As Revised Current assets

Cash and cash equivalents $ 11,823 $ 13,020
Restricted cash 635 3,039
Trade and other receivables 5,391 5,769
Grants receivable - 16
Inventories 12,821 11,848
Prepaid expenses 979 915

Restricted cash 1,389 743
Property, plant and equipment 1,684 1,399
Intangible assets 100 107
Goodwill 5,248 5,021

8,421 7,270

Trade and other payables 13,193 11,551
Warranty provisions 1,912 1,252
Deferred revenue 6,348 11,706
Warrants 1,075 1,545

Other non-current liabilities 3,095 2,384
Non-current warranty provisions 981 556

Non-current deferred revenue 7,305 8,576

Share capital 333,312 323,513
Contributed surplus 18,449 17,995
Accumulated other comprehensive loss (249) (999) Deficit (345,351) (336,202) Total equity 6,161 4,307

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Consolidated Interim Statements of Operations and Comprehensive Loss

(in thousands of US dollars, except share and per share amounts) (unaudited)

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Consolidated Interim Statements of Cash Flows

(in thousands of US dollars) (unaudited)

2013 2012 2013 2012

As Revised As Revised

Net loss for the period $ (3,100) $ (3,388) $ (8,908) $ (12,797) Decrease (Increase) in restricted cash (30) (424) 1,758 (1,607) Items not affecting cash:
Loss on disposal of assets 3 7 3 7
Amortization and depreciation 145 197 712 870
Other finance (gains) losses, net 689 706 2,065 438
Unrealized foreign exchange gains (4) (148) (120) (257) Stock-based compensation 145 83 631 577
Portion of borrowings recorded as a reduction from
research and development expenses (645) (155) (934) (981)
Accreted non-cash interest 91 84 349 288
Payment of post-retirement benefit liability (22) (23) (97) (100) Liabilities for compensation indexed to share
price 2,021 413 4,223 768
Net change in other non-cash working capital (1,267) 9,551 (8,879) 11,631

Proceeds from disposal of property, plant and equipment 26 - 26

Payment of repayable government contributions (55) (84) (393) (308) Proceeds of borrowings, net of transaction costs 1,257 (249) 1,782 1,621
Proceeds of operating borrowings 1,182 1,412 1,182
Repayment of operating borrowings - (1,182) (1,412) (1,182) Common shares issued, warrants and options exercised,
net of issuance costs 41 327 7,280 5,178

Effect of exchange rate fluctuations on cash and cash
equivalents held 118 228 302 307
Increase (decrease) in cash and cash equivalents during
the period (827) 7,099 (1,197) 5,235

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