Today's News |
Westport Fuel Systems Reports Third Quarter 2023 Financial Results, Quarterly revenue up 9% to $77.4 million
Tuesday, November 21, 2023Company Profile | Careers | Follow Company
Vancouver, BC, November 21, 2023--(T-Net)--Westport Fuel Systems Inc. (TSX: WPRT) (Nasdaq: WPRT), a leading supplier of advanced alternative fuel systems and components for the global transportation industry, reported financial results for the third quarter ended September 30, 2023, and provided an update on operations.
All figures are in U.S. dollars unless otherwise stated.
Tony Guglielmin, Interim Chief Executive Officer & Director, Westport Fuel Systems
"Our third quarter was an important one in our evolution at Westport, including the announcement of our HPDI joint venture with Volvo. We have made great progress working with the Volvo team to finalize the details of the joint venture. We are now at a stage where I can confidently say that we plan to have the definitive agreements signed no later than the end of January 2024 and the joint venture closed and operational in the second quarter of 2024." said Tony Guglielmin, Interim Chief Executive Officer & Director.
"While we remain focused on closing the joint venture, we also remain committed to our other key priorities, including finding operational efficiencies, crystallizing cost reductions, and strengthening our balance sheet. During the quarter, consistent with these objectives, we prioritized the reorganization of our presence in India to streamline our business, including the monetization of non-core assets and reduction of our cash burn. We are looking for opportunities to further improve our liquidity through working capital efficiencies across the organization."
"Recently, we announced that Westport has entered new markets with our H2 HPDI fuel system solution with a proof-of-concept project with a leading global provider of locomotives and related equipment for the freight and transit rail industries. This represents our first application of the H2 HPDI system for the locomotive sector. In our view, the hard to abate medium and heavy duty as well as high horsepower sectors are where HPDI creates significant value. We believe this is an affordable path to decarbonizing the rail sector without compromising performance or efficiency".
"We remain steadfast in our commitment to sustainable growth in our existing markets and unlocking new and emerging opportunities. Looking to the fourth quarter of 2023 and heading into the 2024 fiscal year, we expect continued strong performance in our results as we recognize a full quarter of HPDI fuel system sales following the launch of Volvo's more powerful, extended range option and we prepare to begin delivery of Euro 6 LPG fuel systems to a global original equipment manufacturer, now anticipated to begin in January. We also see continued strong long-term demand in our hydrogen business".
Finally, we expect to transition to a permanent CEO for Westport in the coming months. In the interim, I remain committed to working with management to deliver on our key priorities." Mr. Guglielmin concluded.
THIRD QUARTER 2023 HIGHLIGHTS
____________________________
1 Adjusted earnings before interest, taxes and depreciation is a non-GAAP measure. Please refer to GAAP and NON-GAAP FINANCIAL MEASURES in Westport's Management Discussion and Analysis for the reconciliation.
OPERATIONAL HIGHLIGHTS
Westport says it remains committed to its priorities - driving sustainable growth in our existing markets, unlocking new and emerging markets, driving operational excellence, and extracting efficiencies through prudent capital management. In the near-term, the Company's immediate priorities are finalizing the HPDI joint venture with Volvo, elevating the performance and efficiency of the core business and improving margins, while continuing to improve the Company's management of working capital. Based on these priorities, Westport can report several achievements that occurred during and subsequent to the third quarter of 2023.
Westport, together with Volvo, continues to work towards the formalization and launch of the HPDI joint venture. The Company currently expects definitive agreements between Westport and Volvo to be signed no later than the end of January 2024 and the joint venture to close and be operational in the second quarter of 2024.
Also, Westport is entering new markets with a two-year H2 HPDI proof of concept project with a leading global provider of locomotives and related equipment for the freight and transit rail industries. The project will adapt Westport's H2 HPDI fuel system for use with the locomotive OEM engine design.
Consistent with Westport's objective of improving profitability and strengthening the Company's balance sheet, in September, the Company reorganized its partnership with Minda in India decreasing its stake in the joint venture, Minda Westport Technologies Ltd., from 50% to 24% in exchange for approximately $1.8 million on closing.
The transaction with Minda is anticipated to close by the end of Q1 2024 and is expected to reduce Westport's near-term cash burn. In addition, Westport is amending its joint venture agreement to include future hydrogen components in addition to CNG/LNG/LPG components and kits (all focused on the Indian market), but to exclude any interest in HPDI. The amended agreement and resulting rationalization of local costs allows Westport to maintain participation in the alternative fuels market in India with a focus on improved profitability.
Moreover, the joint venture provides Westport with an opportunity to lower operations costs, while expanding volumes in the fast-growing market in India and, at the same time, having access to a lower-cost manufacturing footprint through the joint venture for some of the Westport business outside of India. Following closing of the transaction any litigation or claims between the two parties will no longer be pursued.
3Q23 Operations
CONSOLIDATED RESULTS |
||||||
($ in millions, except per share amounts) |
Over / |
Over / |
||||
3Q23 |
3Q22 |
9M23 |
9M22 |
|||
Revenues |
$ 77.4 |
$ 71.2 |
9 % |
$ 244.7 |
$ 227.7 |
7 % |
Gross Margin(2) |
13.2 |
11.3 |
17 % |
40.9 |
31.7 |
29 % |
Gross Margin % |
17 % |
16 % |
— |
17 % |
14 % |
|
Operating Expenses |
25.3 |
22.2 |
14 % |
72.7 |
64.8 |
12 % |
Income from Investments Accounted for by the Equity Method(1) |
0.4 |
0.2 |
124 % |
0.6 |
1.0 |
(34) % |
Net Loss |
$ (11.9) |
$ (11.9) |
— % |
$ (35.8) |
$ (15.8) |
126 % |
Net Loss per Share |
$ (0.68) |
$ (0.70) |
3 % |
$ (2.03) |
$ (0.92) |
(118) % |
EBITDA(2) |
$ (8.6) |
$ (8.0) |
(8) % |
$ (25.0) |
$ (4.0) |
525 % |
Adjusted EBITDA(2) |
$ (3.0) |
$ (4.5) |
33 % |
$ (11.5) |
$ (14.9) |
(23) % |
(1) This includes income from our Minda Westport Technologies Limited joint ventures. |
(2) EBITDA and Adjusted EBITDA are non-GAAP measures. Please refer to GAAP and NON-GAAP FINANCIAL MEASURES for the reconciliation to equivalent GAAP measures and limitations on the use of such measures. |
Revenues for the three months ended September 30, 2023 increased 9% to $77.4 million compared to $71.2 million in the same quarter last year, primarily driven by increased sales volumes in delayed OEM, electronics, fuel storage and additional revenues from the heavy-duty OEM business. These were offset by lower customer sales in the light duty OEM business.
The company reported a net loss of $11.9 million for the three months ended September 30, 2023, compared to net loss of $11.9 million for the same quarter last year.
This was primarily the result of:
Westport generated negative $3.0 million in Adjusted EBITDA during the second quarter of 2023, compared to negative $4.5 million Adjusted EBITDA for the same period in 2022.
Segment Information
SEGMENT RESULTS |
Three months ended September 30, 2023 |
||||||
Revenue |
Operating loss |
Depreciation & |
Equity income |
||||
OEM |
$ 52.9 |
$ (6.2) |
$ 2.5 |
$ 0.4 |
|||
IAM |
24.5 |
(0.9) |
0.6 |
— |
|||
Corporate |
— |
(5.0) |
0.1 |
— |
|||
Total Consolidated |
$ 77.4 |
$ (12.1) |
$ 3.2 |
$ 0.4 |
SEGMENT RESULTS |
Three months ended September 30, 2022 |
||||||
Revenue |
Operating loss |
Depreciation & |
Equity income |
||||
OEM |
$ 44.1 |
$ (7.3) |
$ 2.1 |
$ 0.2 |
|||
IAM |
27.1 |
2.2 |
0.7 |
— |
|||
Corporate |
— |
(5.8) |
0.1 |
— |
|||
Total Consolidated |
$ 71.2 |
$ (10.9) |
$ 2.9 |
$ 0.2 |
Original Equipment Manufacturer Segment
Revenue for the three and nine months ended September 30, 2023 was $52.9 million and $161.6 million, respectively, compared with $44.1 million and $150.2 million for the three and nine months ended September 30, 2022. Revenue for the OEM business segment increased by $8.8 million as compared to the second quarter of 2022 and by $11.4 million as compared to the nine months ended September 30, 2022.
The increase in revenue for the third quarter was primarily driven by higher sales volumes in the delayed OEM, electronics and fuel storage businesses and additional engineering service revenue from the heavy-duty OEM business. This increase was partially offset by lower sales to customers in India in the light-duty OEM business.
For the third quarter, gross margin2 increased by $3.1 million to $7.8 million, or 15% of revenue, compared to $4.7 million, or 11% of revenue for the three months ended September 30, 2022. The increase in gross margin is primarily driven by increased sales volumes in the delayed OEM, electronics and fuel storage businesses, as well as increased gross margin in the heavy-duty OEM due to higher engineering service revenue. This was partially offset by higher production input costs stemming from global supply chain challenges and inflation in logistics, labor and other costs, which we have only partially been able to pass on to our OEM customers.
Year to date, gross margin increased by $9.9 million to $24.3 million, or 15% of revenue, compared to $14.4 million, or 10% of revenue for the nine months ended September 30, 2022.
LPG fuel system production and sales to our global OEM customer for Euro 6 vehicle applications were originally set to begin delivery in November 2023. The OEM customer has delayed the launch by two months, pushing initial deliveries to January 2024.
_____________________________
2 Gross margin is a non-GAAP measure. Please refer to GAAP and NON-GAAP FINANCIAL MEASURES in Westport's Management Discussion and Analysis for the reconciliation.
Independent Aftermarket Segment
Revenue for the three and nine months ended September 30, 2023 was $24.5 million and $83.1 million, respectively, compared with $27.1 million and $77.5 million for the three and nine months ended September 30, 2022. Revenue for the IAM business segment decreased by $2.6 million and increased $5.6 million, as compared to the three and nine months ended September 30, 2022. The decrease in revenue for the third quarter was primarily driven by decreased sales volumes to African and European markets partially offset with higher sales volumes in South America.
For the third quarter, gross margin decreased by $1.2 million to $5.4 million, or 22% of revenue, compared to $6.6 million, or 24% of revenue, for the three months ended September 30, 2022. The decrease in gross margin is related to lower sales in Africa and Europe as well as lower margin sales mix and inflation in South America. For the nine months ended September 30, 2023, gross margin decreased by $0.7 million to $16.6 million, or 20% of revenue, compared to $17.3 million, or 22% of revenue, for the nine months ended September 30, 2022.
Financial Statements & Management's Discussion and Analysis
To view Westport financials for the quarter ended September 30th, 2023, please visit https://investors.wfsinc.com/financials/
About Westport Fuel Systems
At Westport Fuel Systems, we are driving innovation to power a cleaner tomorrow. We are a leading supplier of advanced fuel delivery components and systems for clean, low-carbon fuels such as natural gas, renewable natural gas, propane, and hydrogen to the global transportation industry.
Our technology delivers the performance and fuel efficiency required by transportation applications and the environmental benefits that address climate change and urban air quality challenges. Headquartered in Vancouver, Canada, with operations in Europe, Asia, North America, and South America, we serve our customers in more than 70 countries with leading global transportation brands. At Westport Fuel Systems, we think ahead.
GAAP and NON-GAAP FINANCIAL MEASURES
Management reviews the operational progress of its business units and investment programs over successive periods through the analysis of net income, EBITDA and Adjusted EBITDA. The Company defines EBITDA as net income or loss from continuing operations before income taxes adjusted for interest expense (net), depreciation and amortization. Westport Fuel Systems defines Adjusted EBITDA as EBITDA from continuing operations excluding expenses for stock-based compensation, unrealized foreign exchange gain or loss, and non-cash and other adjustments. Management uses Adjusted EBITDA as a long-term indicator of operational performance since it ties closely to the business units' ability to generate sustained cash flow and such information may not be appropriate for other purposes. Adjusted EBITDA includes the company's share of income from joint ventures.
The terms EBITDA and Adjusted EBITDA are not defined under U.S. generally accepted accounting principles ("U.S. GAAP") and are not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. EBITDA and Adjusted EBITDA have limitations as an analytical tool, and when assessing the company's operating performance, investors should not consider EBITDA and Adjusted EBITDA in isolation, or as a substitute for net loss or other consolidated statement of operations data prepared in accordance with U.S. GAAP. Among other things, EBITDA and Adjusted EBITDA do not reflect the company's actual cash expenditures. Other companies may calculate similar measures differently than Westport Fuel Systems, limiting their usefulness as comparative tools. The company compensates for these limitations by relying primarily on its U.S. GAAP results and using EBITDA and Adjusted EBITDA as supplemental information.
GAAP & NON-GAAP FINANCIAL MEASURES |
|||||
($ in millions) |
3Q22 |
4Q22 |
1Q23 |
2Q23 |
3Q23 |
Three months ended |
|||||
Net loss before income taxes |
$ (11.0) |
$ (16.4) |
$ (9.7) |
$ (13.0) |
$ (12.0) |
Interest expense (income), net |
0.2 |
0.1 |
0.4 |
(0.1) |
0.2 |
Depreciation and amortization |
2.8 |
2.8 |
3.0 |
3.0 |
3.2 |
EBITDA |
(8.0) |
(13.5) |
(6.3) |
(10.1) |
(8.6) |
Stock-based compensation |
0.8 |
0.2 |
0.7 |
0.8 |
(0.3) |
Unrealized foreign exchange loss |
2.7 |
0.4 |
1.1 |
2.4 |
1.4 |
Loss on extinguishment of royalty payable |
— |
— |
— |
2.9 |
— |
Severance costs |
— |
— |
— |
— |
4.5 |
Adjusted EBITDA |
$ (4.5) |
$ (12.9) |
$ (4.5) |
$ (4.0) |
$ (3.0) |
WESTPORT FUEL SYSTEMS INC.
Condensed Consolidated Interim Balance Sheets (unaudited)
(Expressed in thousands of United States dollars, except share amounts)
September 30, 2023 and December 31, 2022
September 30, 2023 |
December 31, 2022 |
|||
Assets |
||||
Current assets: |
||||
Cash and cash equivalents (including restricted cash) |
$ 43,967 |
$ 86,184 |
||
Accounts receivable |
100,926 |
101,640 |
||
Inventories |
76,876 |
81,635 |
||
Prepaid expenses |
6,089 |
7,760 |
||
Total current assets |
227,858 |
277,219 |
||
Long-term investments |
5,206 |
4,629 |
||
Property, plant and equipment |
65,781 |
62,641 |
||
Operating lease right-of-use assets |
22,513 |
23,727 |
||
Intangible assets |
6,858 |
7,817 |
||
Deferred income tax assets |
10,594 |
10,430 |
||
Goodwill |
2,931 |
2,958 |
||
Other long-term assets |
13,776 |
18,030 |
||
Total assets |
$ 355,517 |
$ 407,451 |
||
Liabilities and shareholders' equity |
||||
Current liabilities: |
||||
Accounts payable and accrued liabilities |
$ 101,505 |
$ 98,863 |
||
Current portion of operating lease liabilities |
3,186 |
3,379 |
||
Short-term debt |
6,348 |
9,102 |
||
Current portion of long-term debt |
12,698 |
11,698 |
||
Current portion of long-term royalty payable |
— |
1,162 |
||
Current portion of warranty liability |
8,672 |
11,315 |
||
Total current liabilities |
132,409 |
135,519 |
||
Long-term operating lease liabilities |
19,005 |
20,080 |
||
Long-term debt |
23,207 |
32,164 |
||
Long-term royalty payable |
— |
4,376 |
||
Warranty liability |
1,249 |
2,984 |
||
Deferred income tax liabilities |
3,418 |
3,282 |
||
Other long-term liabilities |
5,045 |
5,080 |
||
Total liabilities |
184,333 |
203,485 |
||
Shareholders' equity: |
||||
Share capital: |
||||
Unlimited common and preferred shares, no par value |
||||
17,174,972 (2022 - 17,130,316) common shares issued and outstanding |
1,244,547 |
1,243,272 |
||
Other equity instruments |
9,002 |
9,212 |
||
Additional paid in capital |
11,516 |
11,516 |
||
Accumulated deficit |
(1,060,488) |
(1,024,716) |
||
Accumulated other comprehensive loss |
(33,393) |
(35,318) |
||
Total shareholders' equity |
171,184 |
203,966 |
||
Total liabilities and shareholders' equity |
$ 355,517 |
$ 407,451 |
WESTPORT FUEL SYSTEMS INC.
Condensed Consolidated Interim Statements of Operations and Comprehensive Income (Loss) (unaudited)
(Expressed in thousands of United States dollars, except share and per share amounts)
Three and nine months ended September 30, 2023 and 2022
Three months ended |
Nine months ended |
|||||||
2023 |
2022 |
2023 |
2022 |
|||||
Revenue |
$ 77,391 |
$ 71,182 |
$ 244,653 |
$ 227,690 |
||||
Cost of revenue and expenses: |
||||||||
Cost of revenue |
64,163 |
59,910 |
203,695 |
195,986 |
||||
Research and development |
5,748 |
6,473 |
18,796 |
17,661 |
||||
General and administrative |
12,993 |
8,649 |
33,307 |
26,853 |
||||
Sales and marketing |
4,088 |
3,351 |
12,557 |
10,914 |
||||
Foreign exchange loss |
1,430 |
2,648 |
4,926 |
5,985 |
||||
Depreciation and amortization |
1,100 |
1,074 |
3,158 |
3,342 |
||||
89,522 |
82,105 |
276,439 |
260,741 |
|||||
Loss from operations |
(12,131) |
(10,923) |
(31,786) |
(33,051) |
||||
Income from investments accounted for by the equity method |
448 |
202 |
633 |
953 |
||||
Gain on sale of investments and assets |
(144) |
— |
(123) |
19,119 |
||||
Interest on long-term debt and accretion on royalty payable |
(568) |
(796) |
(2,058) |
(2,695) |
||||
Loss on extinguishment |
— |
— |
(2,909) |
— |
||||
Interest and other income, net of bank charges |
382 |
555 |
1,560 |
793 |
||||
Loss before income taxes |
(12,013) |
(10,962) |
(34,683) |
(14,881) |
||||
Income tax expense (recovery) |
(76) |
965 |
1,089 |
915 |
||||
Net loss for the period |
(11,937) |
(11,927) |
(35,772) |
(15,796) |
||||
Other comprehensive loss: |
||||||||
Cumulative translation adjustment |
3,427 |
(5,514) |
(1,925) |
(10,159) |
||||
Comprehensive loss |
$ (8,510) |
$ (17,441) |
$ (37,697) |
$ (25,955) |
||||
Loss per share: |
||||||||
Net loss per share - basic and diluted |
$ (0.68) |
$ (0.70) |
$ (2.03) |
$ (0.92) |
||||
Weighted average common shares outstanding: |
||||||||
Basic and diluted |
17,666,649 |
17,124,606 |
17,664,106 |
17,120,040 |
WESTPORT FUEL SYSTEMS INC.
Condensed Consolidated Interim Statements of Cash Flows (unaudited)
(Expressed in thousands of United States dollars)
Three and nine months ended September 30, 2023 and 2022
Three months ended |
Nine months ended |
|||||||
2023 |
2022 |
2023 |
2022 |
|||||
Operating activities: |
||||||||
Net loss for the period |
$ (11,937) |
$ (11,927) |
$ (35,772) |
$ (15,796) |
||||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
Depreciation and amortization |
3,250 |
2,900 |
9,270 |
9,040 |
||||
Stock-based compensation expense |
(310) |
731 |
1,065 |
1,972 |
||||
Unrealized foreign exchange loss |
1,430 |
2,648 |
4,926 |
5,985 |
||||
Deferred income tax |
(324) |
531 |
(347) |
— |
||||
Income from investments accounted for by the equity method |
(448) |
(202) |
(633) |
(953) |
||||
Interest on long-term debt and accretion on royalty payable |
568 |
796 |
2,058 |
2,695 |
||||
Change in inventory write-downs to net realizable value |
500 |
476 |
2,078 |
1,025 |
||||
Loss on extinguishment of royalty payable |
— |
— |
2,909 |
— |
||||
Change in bad debt expense |
304 |
219 |
676 |
278 |
||||
(Gain) loss on sale of investment and assets |
144 |
— |
123 |
(19,119) |
||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
2,877 |
3,342 |
2,305 |
5,813 |
||||
Inventories |
3,359 |
(387) |
2,231 |
(12,270) |
||||
Prepaid expenses |
1,889 |
(2,555) |
3,296 |
(3,743) |
||||
Accounts payable and accrued liabilities |
844 |
(2,971) |
1,894 |
(10,251) |
||||
Warranty liability |
(1,061) |
(2,192) |
(3,622) |
(6,671) |
||||
Net cash from (used in) operating activities |
1,085 |
(8,591) |
(7,543) |
(41,995) |
||||
Investing activities: |
||||||||
Purchase of property, plant and equipment and other assets |
(4,081) |
(2,467) |
(11,993) |
(8,450) |
||||
Purchase of intangible assets |
— |
(78) |
— |
(374) |
||||
Proceeds on sale of investments and assets |
— |
— |
133 |
31,949 |
||||
Net cash from (used in) investing activities of continuing operations |
(4,081) |
(2,545) |
(11,860) |
23,125 |
||||
Financing activities: |
||||||||
Repayments of short and long-term facilities |
(11,943) |
(13,353) |
(34,819) |
(49,952) |
||||
Drawings on operating lines of credit and long-term facilities |
7,497 |
9,707 |
20,593 |
35,099 |
||||
Payment of royalty payable |
— |
— |
(8,687) |
(5,200) |
||||
Net cash used in financing activities |
(4,446) |
(3,646) |
(22,913) |
(20,053) |
||||
Effect of foreign exchange on cash and cash equivalents |
(856) |
3,109 |
99 |
532 |
||||
Net decrease in cash and cash equivalents |
(8,298) |
(11,673) |
(42,217) |
(38,391) |
||||
Cash and cash equivalents, beginning of period (including restricted cash) |
52,265 |
98,174 |
86,184 |
124,892 |
||||
Cash and cash equivalents, end of period (including restricted cash) |
$ 43,967 |
$ 86,501 |
$ 43,967 |
$ 86,501 |
Forward Looking Information This press release contains "forward-looking information" within the meaning of applicable securities laws ("forward looking statements"). Forward looking statements are frequently characterized by words such as "expect", "intend", "may", "will", "potential", "proposed" and other similar words, or statements that certain events or conditions "may" or "will" occur. [ MORE ] |
Company Careers |
||||||||||||||||||||||||||||||
|
Other Recent Company News |
||||||||||||||||||||
|