Westport Fuel Systems Inc. (β
Westport Fuel
Systemsβ) (TSX:WPRT) (Nasdaq:WPRT) reported financial
results for the second quarter ended June 30, 2017, and provided an
update on operations. All figures are in U.S. dollars unless
otherwise stated.
"A year ago, we set a very specific goal to transform the
company into a profitable and sustainable organization," said Nancy
Gougarty, Chief Executive Officer of Westport Fuel Systems. "We
have made substantial progress in meeting this goal and believe we
now have the fundamentals in place to unlock the value of our
technology, assets and people.β
βIn the first year of the new leadership team, we have achieved
$30 million of run-rate merger cost savings a year ahead of
schedule; have sold non-core assets generating in excess of $100
million in cash; have improved Q2 2017 adjusted EBITDA by 54%
compared to the same period last year; and are on track for the
launch of the Westport High Pressure Direct Injection 2.0
("WestportTM HPDI 2.0")," added
Gougarty.
"The second quarter results are in line with our expectations,
but further steps are being taken to align our operating costs with
revenue," stated Gougarty. "We will continue to work with urgency
and take actions that can deliver maximum value to customers,
employees and shareholders."
Q2 2017 CONSOLIDATED FINANCIAL HIGHLIGHTS
CONTINUING OPERATIONS |
|
($ in millions, except per share amounts) |
Three months endedJune
30, |
Six months endedJune
30, |
2017 |
2016[1, 2] |
2017 |
2016[1, 2] |
Consolidated Revenues |
$ |
62.1 |
|
$ |
37.2 |
|
$ |
122.1 |
|
$ |
61.2 |
|
Consolidated Gross Margin |
15.8 |
|
8.2 |
|
33.3 |
|
14.5 |
|
Consolidated Gross Margin % |
25.4 |
% |
21.9 |
% |
27.3 |
% |
23.7 |
% |
Consolidated Operating Expenses |
32.1 |
|
46.2 |
|
61.6 |
|
75.7 |
|
Income from Unconsolidated Joint Ventures |
5.3 |
|
1.4 |
|
7.0 |
|
2.2 |
|
Net income (loss) from Continuing Operations |
$ |
(13.3 |
) |
$ |
3.4 |
|
$ |
(26.2 |
) |
$ |
(21.1 |
) |
Net income (loss) per Share from Continuing Operations |
$ |
(0.12 |
) |
$ |
0.04 |
|
$ |
(0.24 |
) |
$ |
(0.29 |
) |
Cash and Short-term Investments Balance |
$ |
87.7 |
|
$ |
71.2 |
|
$ |
87.7 |
|
$ |
71.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[1] The three months and six months ended June 30, 2016 includes
one month of Fuel Systems Solutions, Inc. ("Fuel Systems").
[2] Net income for the 2016 periods include a one-time non-cash
gain of $42.9 million related to the merger with Fuel Systems.
Excluding the gain, Westport Fuel Systems net loss for the quarter
ended June 30, 2016 would have been $39.5 million and the net loss
for the six months ended June 30, 2016 would have been $64.0
million.
- Consolidated revenues for the quarter ended June 30, 2017, was
$62.1 million compared with $37.2 million for the same period last
year mainly due to the addition of Fuel Systems' revenue as a
result of the merger. The 2017 quarter has a full three months of
Fuel Systems' revenue versus only one month for the comparative
2016 quarter.
- Consolidated gross margin for the quarter ended June 30, 2017
was $15.8 million or 25.4% of revenue, compared with $8.2 million
or 21.9% of revenue for the same period last year. The increase in
gross margin and gross margin percentage is due to the addition of
Fuel Systems' gross margin as a result of the merger and a $1.1
million favourable warranty adjustment related to Westport's
automotive business.
- Consolidated operating expenses were $32.1 million for the
quarter ended June 30, 2017, a decrease of 30.5% from $46.2 million
in the same period last year. The current quarter included a full
quarter of Fuel Systems' operating expenses versus only one month
for the 2016 period. Despite this, research & development
("R&D") and selling, general and
administrative ("SG&A") expenses decreased 9%
in the three months ended June 30, 2017 compared to the three
months ended June 30, 2016. This decrease was primarily the result
of expense rationalization, headcount reductions, facility closures
and one time merger related costs in the 2016 period.
- Net loss from continuing operations for the quarter ended June
30, 2017, was $13.3 million or a loss of $0.12 per share, compared
with net income of $3.4 million or $0.04 per share in the same
period last year. Net income for the quarter ended June 30, 2016
included a one-time non-cash gain of $42.9 million related to the
merger. Excluding the gain, Westport Fuel Systems net loss for the
quarter ended June 30, 2016 would have been $39.5 million. As a
result, net loss from continuing operations for the quarter ended
June 30, 2017 improved by 66% compared to the same period last
year.
Effective first quarter 2017, the previously reported Industrial
business segment has been reclassified to Discontinued
Operations.
"We have made substantial progress in strengthening our balance
sheet in the second quarter of 2017 and ended the quarter with
$87.7 million in cash," said Ashoka Achuthan, Chief Financial
Officer of Westport Fuel Systems. "The successful completion of the
sale of the industrial business assets, which generated $87.5
million, combined with the recent equity issuance with gross
proceeds of $28.7 million, has further improved our liquidity.
Given our improved financial situation and outlook, on August 8 we
sent an offer to the holders of our outstanding debentures to
either sell their debentures or consent to the extension of the
maturity date for an additional three years. We will continue to
take the necessary steps to put the company on a sustainable path
to achieve positive adjusted EBITDA."
CUMMINS WESTPORT INC. HIGHLIGHTS
CUMMINS WESTPORT HIGHLIGHTS |
|
($ in millions, except unit amounts) |
Three monthsended June 30, |
Increase / Decrease |
Six monthsended June 30, |
Increase / Decrease |
2017 |
2016(Adjusted)[1] |
2017 |
2016(Adjusted)[1] |
Units |
2,037 |
|
2,061 |
|
(1.2 |
)% |
3,777 |
|
3,708 |
|
1.9 |
% |
Revenue |
$ |
79.5 |
|
$ |
73.6 |
|
8.0 |
% |
$ |
150.2 |
|
$ |
138.6 |
|
8.4 |
% |
Gross Margin |
28.6 |
|
21.0 |
|
36.2 |
% |
50.3 |
|
40.4 |
|
24.5 |
% |
Gross Margin % |
36.0 |
% |
28.5 |
% |
26.3 |
% |
33.5 |
% |
29.1 |
% |
15.1 |
% |
Operating Expenses |
12.3 |
|
17.4 |
|
(29.3 |
)% |
29.1 |
|
33.3 |
|
(12.6 |
)% |
Segment Operating Income |
16.3 |
|
3.7 |
|
340.5 |
% |
21.3 |
|
7.1 |
|
200.0 |
% |
Westport Fuel Systems 50% Interest |
$ |
5.3 |
|
$ |
1.4 |
|
278.6 |
% |
$ |
7.1 |
|
$ |
2.6 |
|
173.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[1] 2016 adjusted for change in accounting policy at CWI.
- Revenue was $79.5 million on 2,037 units for the quarter ended
June 30, 2017, an increase of 8.0% in revenue over the same period
last year due to an increase in parts revenue attributed to the
increase in the natural gas engine population in service. The
demand from refuse remained strong in the second quarter.
- Gross margin for the quarter ended June 30, 2017 increased by
$7.6 million compared to the same period last year driven by higher
revenues, a favorable parts revenue mix, and a positive warranty
adjustment.
- CWI operating income for the quarter ended June 30, 2017 was
$16.3 million, a significant increase from the prior year primarily
due to improvement in gross margin and lower operating expenses as
a result of reduction in the R&D expenses. This is primarily
due to the timing of the on-board diagnostics compliance spending
that is nearing completion.
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 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 unitsβ ability to generate sustained cash
flow. Adjusted EBITDA includes the company's share of income
from joint ventures.
The term Adjusted EBITDA is not defined under U.S. generally
accepted accounting principles ("U.S. GAAP") and
is not a measure of operating income, operating performance or
liquidity presented in accordance with U.S. GAAP. Adjusted EBITDA
has limitations as an analytical tool, and when assessing the
company's operating performance, investors should not consider
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, Adjusted EBITDA does
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 GAAP results and using Adjusted EBITDA as supplemental
information.
GAAP & NON-GAAP FINANCIAL
MEASURES |
|
($ in millions) |
30-Jun-2016 [1] |
30-Sep-2016 |
31-Dec-2016 |
31-Mar-2017 |
30-Jun-2017 |
|
|
Loss before Income Taxes |
$ |
3.4 |
|
$ |
(34.4 |
) |
$ |
(41.7 |
) |
$ |
(13.6 |
) |
$ |
(17.3 |
) |
|
|
|
|
|
|
|
|
Interest Expense, Net |
2.7 |
|
3.1 |
|
4.3 |
|
3.4 |
|
6.3 |
|
|
Depreciation and Amortization |
3.6 |
|
5.2 |
|
3.9 |
|
3.7 |
|
3.5 |
|
|
EBITDA |
9.7 |
|
(26.1 |
) |
(33.5 |
) |
(6.5 |
) |
(7.5 |
) |
|
|
|
|
|
|
|
|
Stock based compensation |
2.3 |
|
2.9 |
|
1.2 |
|
1.1 |
|
3.1 |
|
|
Unrealized foreign exchange (gain) loss |
4.1 |
|
(7.1 |
) |
8.1 |
|
(1.6 |
) |
1.0 |
|
|
Asset impairment |
β |
|
β |
|
2.7 |
|
β |
|
β |
|
|
Inventory impairment from product line closure |
β |
|
4.3 |
|
1.3 |
|
β |
|
β |
|
|
Bargain purchase gain |
(42.9 |
) |
β |
|
7.1 |
|
β |
|
β |
|
|
Merger and financing costs |
4.5 |
|
0.4 |
|
β |
|
β |
|
β |
|
|
Amortization of fair value inventory adjustment recorded on
acquisition |
0.4 |
|
1.0 |
|
β |
|
β |
|
β |
|
|
(Gain) loss on sale of investments |
6.3 |
|
(3.9 |
) |
(0.3 |
) |
β |
|
β |
|
|
Restructuring, termination and other exit costs |
β |
|
17.5 |
|
1.5 |
|
1.6 |
|
(1.6 |
) |
|
Other |
4.1 |
|
0.2 |
|
0.9 |
|
1.3 |
|
(0.3 |
) |
|
Total Adjusted EBITDA |
$ |
(11.5 |
) |
$ |
(10.8 |
) |
$ |
(11.0 |
) |
$ |
(4.1 |
) |
$ |
(5.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[1] The merger closed on June 1, 2016 and as a result the three
and six months ended June 30, 2016 include only one month of Fuel
Systems' results. The other quarters included in the table above
include the full quarter of Fuel Systems' results.
FINANCIAL STATEMENTS & MANAGEMENT'S DISCUSSION AND
ANALYSIS
To view Westport Fuel Systems full financials for the quarter
ended June 30, 2017, please visit
wfsinc.com/investors/financial-information.
CONFERENCE CALL PRESENTATION
Westport Fuel Systems is providing this presentation of
financial information based on the most recent reporting structure
that was implemented in the first quarter of 2017. The Company is
providing this presentation as a guide to its financial information
in a quick reference format and it should be read in conjunction
with Westport Fuel Systems full financials for the quarter ended
June 30, 2017, and full financials for the year ended December 31,
2016.
LIVE CONFERENCE CALL & WEBCAST
Westport Fuel Systems has scheduled a conference call for today,
August 14, 2017, at 2:00 pm Pacific Time (5:00 pm Eastern Time) to
discuss these results. The public is invited to listen to the
conference call in real time by telephone or webcast. To access the
conference call by telephone, please dial: 1-800-319-4610 (Canada
& USA toll-free) or 604-638-5340. The live webcast of the
conference call can be accessed through the Westport Fuel Systems
website at wfsinc.com/investors
REPLAY CONFERENCE CALL & WEBCAST
To access the conference call replay, please dial 1-855-669-9658
(Canada & USA toll-free) or 604-674-8052 using the pass code
1581. The replay will be available until August 21, 2017. Shortly
after the conference call, the webcast will be archived on the
Westport Fuel Systems website and replay will be available in
streaming audio and a downloadable MP3 file.
About Westport Fuel SystemsAt Westport Fuel
Systems, we are driving innovation to power a cleaner tomorrow. We
are inventors, engineers, manufacturers and suppliers of advanced
clean-burning fuel systems and components that can change the way
the world moves. Our technology delivers performance, fuel
efficiency and environmental benefits to address the challenges of
global climate change and urban air quality. Headquartered in
Vancouver, Canada, we serve our customers in more than 70 countries
with leading global transportation brands. At Westport Fuel
Systems, we think ahead. For more information, visit
www.wfsinc.com.
Cautionary Note Regarding Forward Looking
Statements
This press release contains forward-looking statements,
including statements regarding revenue and cash usage expectations,
time for achievement of positive adjusted EBITDA and
rationalization of operations and reduction of overhead expenses,
future of our development programs (including those relating to the
referenced HPDI program), timing for launch, delivery and
completion of milestones related to the products referenced herein
(including HPDI components).These statements are neither promises
nor guarantees, but involve known and unknown risks and
uncertainties and are based on both the views of management and
assumptions that may cause our actual results, levels of activity,
performance or achievements to be materially different from any
future results, levels of activities, performance or achievements
expressed in or implied by these forward looking statements. These
risks and uncertainties include risks and assumptions related to
our revenue growth, operating results, industry and products, the
general economy, conditions of and access to the capital and debt
markets, solvency, governmental policies and regulation, technology
innovations, fluctuations in foreign exchange rates, operating
expenses, the availability and price of natural gas, global
government stimulus packages, the acceptance of and shift to
natural gas vehicles, the relaxation or waiver of fuel emission
standards, the inability of fleets to access capital or government
funding to purchase natural gas vehicles, the development of
competing technologies, our ability to adequately develop and
deploy our technology, the actions and determinations of our joint
venture and development partners, as well as other risk factors and
assumptions that may affect our actual results, performance or
achievements or financial position discussed in our most recent
Annual Information Form and other filings with securities
regulators. Readers should not place undue reliance on any such
forward-looking statements, which speak only as of the date they
were made. We disclaim any obligation to publicly update or revise
such statements to reflect any change in our expectations or in
events, conditions or circumstances on which any such statements
may be based, or that may affect the likelihood that actual results
will differ from those set forth in these forward looking
statements except as required by National Instrument 51-102. The
contents of any website, RSS feed or twitter account referenced in
this press release are not incorporated by reference herein.
More Information
Caroline Sawamoto
Manager, Investor Relations & Communications
Westport Fuel Systems
T: +1 604-718-2046
invest@wfsinc.com
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