Westport Fuel Systems Inc. (“
Westport Fuel
Systems”) (TSX:WPRT / Nasdaq:WPRT) reported financial
results for the third quarter ended September 30, 2019 and provided
an update on our business. All figures are in U.S. dollars unless
otherwise stated.
“Our Q3 results demonstrate our continued progress to transform
the company into a profitable and sustainable organization,” said
David M. Johnson, Chief Executive Officer of Westport Fuel Systems.
“Q3 marks the third consecutive quarter of positive EBITDA, and the
sixth consecutive quarter of positive adjusted EBITDA. These
results are evidence of the continued growth in global demand for
our clean fuel systems. Our customers are deploying our
products and technologies to deliver clean, cost-effective
transportation solutions in markets around the world and they’re
helping to save money and to save the environment, all while
keeping us moving.”
Highlights
- Driven by growth in Westport HPDI 2.0TM sales and continued
strength in the independent aftermarket and light duty OEM
businesses, Transportation revenue increased by 15% to $75.4
million from $65.5 million in the third quarter of 2018;
- Q3 2019 net income from continuing operations improved by $17
million to $4.9 million compared to a net loss from continuing
operations of $12.1 million for the same quarter a year prior;
- Q3 2019 EBITDA of $11.7 million was our third consecutive
quarter of positive EBITDA and compared to negative $3.0 million in
Q3 2018;
- Q3 2019 Adjusted EBITDA of $9.4 million was our sixth
consecutive quarter of positive adjusted EBITDA and compared to
$4.3 million in Q3 2018;
- Company share of CWI net income of $5.4 million in Q3 2019
compared to $5.8 million in Q2 2019 and $7.7 million in Q3 2018,
reflects lower Q3 2019 sales and unfavourable warranty
adjustments.
- Positive cash flow from operations before working capital
changes of $3.5 million compared to a use of cash of $11.6 million
in the prior year quarter;
Q3 2019 FINANCIAL HIGHLIGHTS
CONTINUING OPERATIONS |
|
|
|
($ in millions, except per share amounts) |
Three Months Ended September 30, |
Change Better / (Worse) |
Nine Months Ended September 30, |
Change Better / (Worse) |
2019 |
2018 |
2019 |
2018 |
Consolidated Revenues |
$ |
75.4 |
|
$ |
65.5 |
|
15 |
% |
$ |
231.0 |
|
$ |
209.8 |
|
10 |
% |
Consolidated Gross Margin |
17.9 |
|
15.6 |
|
15 |
% |
54.4 |
|
52.0 |
|
5 |
% |
Consolidated Gross Margin % |
24 |
% |
24 |
% |
— |
|
24 |
% |
25 |
% |
— |
|
Consolidated Operating Expenses |
19.2 |
|
30.6 |
|
37 |
% |
70.3 |
|
89.7 |
|
22 |
% |
Income from Unconsolidated Joint Ventures |
5.4 |
|
7.7 |
|
(30 |
)% |
19.9 |
|
17.0 |
|
17 |
% |
Net income (loss) from Continuing Operations |
$ |
4.9 |
|
$ |
(12.1 |
) |
140 |
% |
$ |
(0.5 |
) |
$ |
(30.4 |
) |
98 |
% |
Net income (loss) per Share from Continuing Operations |
$ |
0.04 |
|
$ |
(0.09 |
) |
144 |
% |
$ |
— |
|
$ |
(0.23 |
) |
100 |
% |
EBITDA (1) |
$ |
11.7 |
|
$ |
(3.0 |
) |
490 |
% |
$ |
19.9 |
|
$ |
(8.2 |
) |
343 |
% |
Adjusted EBITDA (1) |
$ |
9.4 |
|
$ |
4.3 |
|
119 |
% |
$ |
24.8 |
|
$ |
9.4 |
|
164 |
% |
(1) EBITDA and Adjusted EBITDA are non-GAAP measures. Please
refer to GAAP and NON-GAAP FINANCIAL MEASURES for the
reconciliation.
- Consolidated revenues for the quarter ended September 30, 2019
increased by $9.9 million to $75.4 million, or 15% over the same
period last year. Revenues from our independent aftermarket
business were lower by 4% compared to the prior year quarter, but
comparable in Euro terms. Q3 2019 OEM revenues increased by $11.8
million, or 64%, over the prior year quarter. HPDI product sales
and development revenues were the primary driver for the OEM
increase.
- Consolidated gross margin for the quarter ended September 30,
2019 increased by $2.3 million to $17.9 million over the same
period last year, primarily driven by higher revenue during the
current quarter. Downward pressure on margins is expected in Q4 and
through much of 2020 as launch costs and volume related price
discounts are only partially offset by material cost
reductions.
- Consolidated operating expenses for the quarter ended September
30, 2019 decreased by $11.4 million, or 37%, over the same period
last year, to $19.2 million. Decreases were realized in
general and administration expenses, research and development
expenses, depreciation expense and foreign exchange. The $7.6
million decrease in general and administration expense was mainly
due to a reduction in legal and advisory costs for the SEC
investigation of $3.5 million, lower professional and consulting
fees, and reduced headcount. The $2.2 million decrease in research
and development expenses was due to funded customer development
programs and a reduction of headcount. During the quarter ended
September 30, 2019, a foreign exchange loss of $0.8 million was
recognized as compared to a foreign exchange loss of $2.2 million
in the same period last year.
- Income from unconsolidated joint ventures for the quarter ended
September 30, 2019 decreased by $2.3 million over the same period
last year. This decrease is largely due to lower sales and
unfavourable warranty adjustments in the current quarter versus a
positive adjustment in the prior year quarter in the CWI joint
venture.
- During the quarter ended September 30, 2019, the Company
settled a $3.9 million payable related to the residual balance of
government contributions received between 2003 and 2006 in
connection with HPDI technology development. A final payment
of $0.6 million was made in the current quarter and all further
repayment obligations were terminated; the prior year contributions
no longer repayable, amounting to $3.3 million, were credited to
other income during the current period.
CUMMINS WESTPORT INC. HIGHLIGHTS
CUMMINS WESTPORT HIGHLIGHTS |
|
|
|
|
Three Months Ended September 30, |
Change Better / (Worse) |
Nine Months Ended September 30, |
Change Better / (Worse) |
($ in millions, except unit amounts) |
2019 |
2018 |
2019 |
2018 |
Units |
1,740 |
|
2,090 |
|
(17 |
)% |
5,476 |
|
5,031 |
|
9 |
% |
Revenue |
$ |
83.1 |
|
$ |
86.2 |
|
(4 |
)% |
$ |
259.3 |
|
$ |
225.3 |
|
15 |
% |
Gross
Margin |
22.7 |
|
27.3 |
|
(17 |
)% |
75.8 |
|
70.0 |
|
8 |
% |
Gross
Margin % |
27 |
% |
32 |
% |
— |
|
29 |
% |
31 |
% |
— |
|
Operating
Expenses |
9.6 |
|
6.8 |
|
(41 |
)% |
27.4 |
|
26.3 |
|
(4 |
)% |
Segment Operating Income |
$ |
13.1 |
|
$ |
20.5 |
|
(37 |
)% |
$ |
48.3 |
|
$ |
43.7 |
|
11 |
% |
Westport Fuel Systems 50% Interest |
5.4 |
|
7.7 |
|
(30 |
)% |
19.8 |
|
17.0 |
|
17 |
% |
- CWI revenue for the quarter ended September 30, 2019 decreased
by $3.1 million to $83.1 million, or 4% over the same period last
year.
- CWI gross margin decreased by $4.6 million to $22.7 million, or
27% of revenue from $27.3 million or 32% of revenue in the prior
year quarter. The decrease in gross margin and gross margin
percentage is driven by lower revenues, and a negative warranty
adjustment of $3.8 million for the three months ended September 30,
2019 compared to a $0.6 million positive warranty adjustment for
the three months ended September 30, 2018.
- CWI operating income for the quarter ended September 30, 2019
decreased by $7.4 million to $13.1 million, or 37% over the same
period last year. Westport Fuel Systems' share of CWI's equity
interest for the quarter ended September 30, 2019 decreased by $2.3
million to $5.4 million from $7.7 million in same period last year.
This reduction is primarily due to decreased revenue and gross
margins in the current quarter and from favourable warranty
adjustments in the prior year quarter.
Guidance
Based on strong year to date results, Westport Fuel Systems full
year revenue guidance is being revised to between $295 and $305
million.
Key Priorities
Our key strategic priorities for 2019 are:
- Sustain growth of our light-duty and medium-duty business
through both the aftermarket and OEM channels.
- Ensure the successful commercial launch of Westport HPDI 2.0™
in China to drive volume growth that enables further cost
reductions and margin improvement.
- Secure additional OEM customers for Westport HPDI 2.0™ in key
market geographies.
- Continued focus on cost reduction to better align with revenues
and to improve cash flow.
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 term EBITDA and 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.
EBITDA and Adjusted EBITDA has 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 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 U.S. GAAP results and using
EBITDA and Adjusted EBITDA as supplemental information.
GAAP & NON-GAAP FINANCIAL MEASURES FROM CONTINUING
OPERATIONS |
|
|
|
($ in millions) |
30-Sep-18 |
31-Dec-18 |
31-Mar-19 |
30-Jun-19 |
30-Sep-19 |
Three months ended |
Net income (loss) from continuing operations |
$ |
(12.1 |
) |
$ |
(10.4 |
) |
$ |
(3.0 |
) |
$ |
(2.3 |
) |
$ |
4.9 |
|
|
|
|
|
|
|
Income tax expense |
2.6 |
|
(1.5 |
) |
1.1 |
|
0.9 |
|
0.8 |
|
Interest Expense, net |
2.3 |
|
2.6 |
|
1.8 |
|
1.4 |
|
1.8 |
|
Depreciation and amortization |
4.2 |
|
4.0 |
|
4.3 |
|
4.0 |
|
4.2 |
|
EBITDA |
(3.0 |
) |
(5.3 |
) |
4.2 |
|
4.0 |
|
11.7 |
|
|
|
|
|
|
|
Stock based compensation |
0.6 |
|
0.7 |
|
0.4 |
|
0.3 |
|
0.3 |
|
Unrealized foreign exchange (gain) loss |
2.2 |
|
1.6 |
|
0.1 |
|
(0.7 |
) |
0.7 |
|
Restructuring, termination and other exit costs |
— |
|
— |
|
0.8 |
|
— |
|
— |
|
Asset impairment |
— |
|
0.6 |
|
— |
|
— |
|
— |
|
Costs associated with SEC investigation |
3.5 |
|
3.1 |
|
1.8 |
|
4.5 |
|
— |
|
Other |
1.0 |
|
(0.5 |
) |
— |
|
— |
|
(3.3 |
) |
Adjusted EBITDA |
$ |
4.3 |
|
$ |
0.2 |
|
$ |
7.3 |
|
$ |
8.1 |
|
$ |
9.4 |
|
FINANCIAL STATEMENTS & MANAGEMENT'S DISCUSSION AND
ANALYSIS
Included in this press release are an unaudited condensed
consolidated interim balance sheet and statement of operations and
comprehensive loss. To view Westport Fuel Systems full financials
for the third quarter ended September 30, 2019, please visit
www.wfsinc.com/investors/financials.
CONFERENCE CALL PRESENTATION
The company is providing a conference call 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 third quarter ended September 30, 2019.
LIVE CONFERENCE CALL & WEBCAST
Westport Fuel Systems has scheduled a conference call for today,
November 7, 2019 at 5:30 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: 1-855-327-6838 (Canada & USA
toll-free) or 1-604-235-2082. The live webcast of the conference
call can be accessed through the Westport Fuel Systems website at
www.wfsinc.com/investors/financials.
REPLAY CONFERENCE CALL & WEBCAST
To access the conference call replay, please dial 1-800-319-6413
(Canada & USA toll-free) or 604-638-9010 using the pass code
3774. The replay will be available until November 14, 2019. 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 Systems
At Westport Fuel Systems, we are driving innovation to power a
cleaner tomorrow. We are inventors, engineers, manufacturers and
suppliers of advanced clean 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 the future growth of, and key
strategic priorities for, Westport Fuel System's business, market
demand for Westport Fuel Systems' products, commercial launch of
Westport HPDI 2.0TM in China, future volume growth and cost
reductions and additions of new OEM customers along with statements
regarding revenue, Adjusted EBITDA and cash flow expectations,
continued research and development investment, the demand for our
products, cash and capital requirements as well as Westport
Fuel Systems management's response to any of the aforementioned
factors. 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, uncertainties and
assumptions include those 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, continued reduction in
research and development expenses, CWI performance, our ability to
secure new customers, the availability and price of natural gas,
global government stimulus packages, the acceptance of and shift to
natural gas vehicles, 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.
Contact Information
Shawn SeversonInvestor RelationsWestport Fuel
SystemsT: +1 604-718-2046invest@wfsinc.com
WESTPORT FUEL SYSTEMS INC.Condensed Consolidated
Interim Balance Sheets (unaudited)(Expressed in thousands of United
States dollars, except share amounts)September 30, 2019 and
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
December 31, 2018 |
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
37,406 |
|
|
$ |
61,119 |
|
Accounts receivable |
|
69,132 |
|
|
57,118 |
|
Inventories |
|
48,936 |
|
|
46,011 |
|
Prepaid expenses |
|
6,372 |
|
|
4,835 |
|
Total current
assets |
|
161,846 |
|
|
169,083 |
|
Long-term investments |
|
11,031 |
|
|
8,818 |
|
Property, plant and equipment |
|
58,247 |
|
|
63,431 |
|
Operating lease right-of-use assets |
|
17,931 |
|
|
— |
|
Intangible assets |
|
14,065 |
|
|
16,829 |
|
Deferred income tax assets |
|
284 |
|
|
1,664 |
|
Goodwill |
|
3,182 |
|
|
3,170 |
|
Other long-term assets |
|
5,642 |
|
|
6,933 |
|
Total
assets |
|
$ |
272,228 |
|
|
$ |
269,928 |
|
Liabilities and
Shareholders’ Equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
87,007 |
|
|
$ |
85,429 |
|
Current portion of operating lease liabilities |
|
4,244 |
|
|
— |
|
Current portion of long-term debt |
|
9,514 |
|
|
10,327 |
|
Current portion of long-term royalty payable |
|
5,936 |
|
|
6,091 |
|
Current portion of warranty liability |
|
3,170 |
|
|
2,800 |
|
Total current
liabilities |
|
109,871 |
|
|
104,647 |
|
Long-term operating lease liabilities |
|
13,687 |
|
|
— |
|
Long-term debt |
|
35,429 |
|
|
44,983 |
|
Long-term royalty payable |
|
11,477 |
|
|
14,844 |
|
Warranty liability |
|
3,039 |
|
|
2,141 |
|
Deferred income tax liabilities |
|
4,858 |
|
|
5,521 |
|
Other long-term liabilities |
|
6,350 |
|
|
7,116 |
|
Total
liabilities |
|
184,711 |
|
|
179,252 |
|
Shareholders’ equity: |
|
|
|
|
Share capital: |
|
|
|
|
Unlimited common and preferred shares, no par value |
|
|
|
|
133,663,774 (2018 - 133,380,899) common shares |
|
1,088,024 |
|
|
1,087,068 |
|
Other equity instruments |
|
12,979 |
|
|
12,948 |
|
Additional paid in capital |
|
10,079 |
|
|
10,079 |
|
Accumulated deficit |
|
(998,971 |
) |
|
(998,361 |
) |
Accumulated other comprehensive loss |
|
(24,594 |
) |
|
(21,058 |
) |
Total shareholders'
equity |
|
87,517 |
|
|
90,676 |
|
Total liabilities and
shareholders' equity |
|
$ |
272,228 |
|
|
$ |
269,928 |
|
Commitments and
contingencies |
|
|
|
|
WESTPORT FUEL SYSTEMS INC.Condensed Consolidated
Interim Statements of Operations and Comprehensive Loss
(unaudited)(Expressed in thousands of United States dollars, except
share and per share amounts) Three and nine months ended September
30, 2019 and 2018 |
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenue |
|
$ |
75,403 |
|
|
$ |
65,524 |
|
|
$ |
231,013 |
|
|
$ |
209,845 |
|
Cost of revenue and
expenses: |
|
|
|
|
|
|
|
|
Cost of revenue |
|
57,494 |
|
|
49,918 |
|
|
176,621 |
|
|
157,859 |
|
Research and development |
|
5,633 |
|
|
7,817 |
|
|
19,341 |
|
|
23,841 |
|
General and administrative |
|
7,191 |
|
|
14,767 |
|
|
31,874 |
|
|
39,304 |
|
Sales and marketing |
|
3,862 |
|
|
3,605 |
|
|
11,963 |
|
|
11,514 |
|
Restructuring costs |
|
— |
|
|
— |
|
|
825 |
|
|
808 |
|
Foreign exchange loss |
|
787 |
|
|
2,223 |
|
|
141 |
|
|
7,422 |
|
Depreciation and amortization |
|
1,707 |
|
|
2,133 |
|
|
6,161 |
|
|
6,707 |
|
Loss on sale of investment and assets |
|
— |
|
|
36 |
|
|
— |
|
|
95 |
|
|
|
76,674 |
|
|
80,499 |
|
|
246,926 |
|
|
247,550 |
|
Loss from operations |
|
(1,271 |
) |
|
(14,975 |
) |
|
(15,913 |
) |
|
(37,705 |
) |
|
|
|
|
|
|
|
|
|
Income from investments
accounted for by the equity method |
|
5,400 |
|
|
7,696 |
|
|
19,940 |
|
|
16,960 |
|
Interest on long-term debt and
accretion on royalty payable |
|
(1,765 |
) |
|
(2,697 |
) |
|
(5,467 |
) |
|
(6,818 |
) |
Interest and other income
(note 11) |
|
3,361 |
|
|
442 |
|
|
3,830 |
|
|
744 |
|
Income (loss) before income
taxes |
|
5,725 |
|
|
(9,534 |
) |
|
2,390 |
|
|
(26,819 |
) |
Income tax expense |
|
820 |
|
|
2,566 |
|
|
2,842 |
|
|
3,569 |
|
Net income (loss) from
continuing operations |
|
4,905 |
|
|
(12,100 |
) |
|
(452 |
) |
|
(30,388 |
) |
Net income (loss) from
discontinued operations |
|
82 |
|
|
8,971 |
|
|
(158 |
) |
|
8,100 |
|
Net income (loss) for the
period |
|
4,987 |
|
|
(3,129 |
) |
|
(610 |
) |
|
(22,288 |
) |
Other comprehensive loss: |
|
|
|
|
|
|
|
|
Cumulative translation
adjustment |
|
(4,289 |
) |
|
1,612 |
|
|
(3,536 |
) |
|
(1,264 |
) |
Comprehensive income
(loss) |
|
$ |
698 |
|
|
$ |
(1,517 |
) |
|
$ |
(4,146 |
) |
|
$ |
(23,552 |
) |
|
|
|
|
|
|
|
|
|
Income (loss) per share: |
|
|
|
|
|
|
|
|
From continuing operations -
basic and diluted |
|
$ |
0.04 |
|
|
$ |
(0.09 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.23 |
) |
From discontinued operations -
basic and diluted |
|
0.00 |
|
|
0.07 |
|
|
(0.00 |
) |
|
0.06 |
|
Net income (loss) per share -
basic and diluted |
|
$ |
0.04 |
|
|
$ |
(0.02 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.17 |
) |
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
133,743,506 |
|
|
132,178,685 |
|
|
133,598,944 |
|
|
132,128,066 |
|
Westport Fuel Systems (NASDAQ:WPRT)
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Westport Fuel Systems (NASDAQ:WPRT)
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From Apr 2023 to Apr 2024