Westport Fuel Systems Reports Fourth Quarter and Full Year 2020 Financial Results

VANCOUVER, British Columbia, March 15, 2021 (GLOBE NEWSWIRE) — Westport Fuel Systems Inc. (“WFS”) (TSX:WPRT / Nasdaq:WPRT) today reported financial results for the fourth quarter and year ended December 31, 2020 and provided an update on operations. All figures are in U.S. dollars unless otherwise stated.FOURTH QUARTER 2020 HIGHLIGHTSRecord revenue of $83.9 million, an increase of 13% over same period last year, with OEM revenue up 32% due to continued growth in HPDI™ 2.0 sales volumes combined with strengthening light-duty OEM salesNet income of $4.1 million or $0.03 per share; Adjusted EBITDA was $8.1 million, or a $4.5 million improvement year-over-yearLiquidity bolstered by net $27.6 million raised by shares issued under the at-the-market equity offering, of which $13.2 million was raised following the close of the quarterAnnounced new product development work with current OEM partner to apply HPDI 2.0 to an upgraded base engine platform designed to meet Euro VI Step E emission regulations that take effect in 2024FULL YEAR 2020 HIGHLIGHTSRevenue of $252.5 million, down 17% vs. 2019 due to COVID-19 pandemic’s impact on customer demand, partially offset by significant year-over-year growth in HPDI sales volumes to our initial launch partnerNet loss of $7.4 million, or $0.05 per share; Notwithstanding the pandemic’s impact, recorded positive adjusted EBITDA of $14.7 million, compared to $28.4 million in the prior yearWorking with our lenders, we strengthened the balance sheet, improved overall liquidity and reduced cost of capitalJoint venture with Weichai Power secured certification for WP12 natural gas engine powered by HPDI in ChinaCombined our Indian businesses with UNO MINDA to create a JV to better serve the growing market in India for gaseous fuel systems through cost efficiencies and greater product choicePublished enhanced Environment, Social and Governance (“ESG”) report, highlighting our commitment to ongoing ESG performance improvements and responsible corporate citizenship4Q20 AND FULL YEAR 2020 CONTINUING OPERATIONS
⁽¹⁾This includes income primarily from our Cummins Westport Inc. (“CWI“), Minda Westport and Westport Weichai Inc. joint ventures.
⁽²⁾EBITDA and Adjusted EBITDA are non-GAAP measures. Please refer to GAAP and NON-GAAP FINANCIAL MEASURES for the reconciliation.We generated revenues of $83.9 million and $252.5 million in 4Q20 and FY 2020, compared to $74.3 million and $305.3 million for 4Q19 and FY 2019, respectively. Revenues for the full year 2020 decreased 17% compared to the prior year due to the negative impact on customer demand caused by COVID-19, partially offset by the significant growth in our HPDI sales volumes to our initial launch partner in the second half of FY 2020. Revenue was most significantly impacted by the pandemic during the second quarter of 2020, with a $46.4 million reduction in revenue representing 88% of the full year decline.Consolidated net income for 4Q20 was $4.1 million, resulting in earnings of $0.03 per share, compared to net income of $0.7 million, or $0.00 per share, for the same period in 2019. The improvement in net income was driven primarily by lower operating costs, an increase in investment income from the CWI joint venture and higher unrealized foreign exchange gain during the current year quarter.A net loss of $7.4 million was recorded for FY 2020 compared to net income of $0.2 million for FY 2019. Earnings declined by $7.6 million largely as a result of lower sales caused by the impact on demand from COVID-19, a $2.4 million net warranty charge related to a field service campaign and a $2.7 million decrease in earnings from our CWI joint venture. The earnings decline caused by lower sales was partially offset by lower operating expenses, $6.1 million in government-sponsored wage subsidies and a higher foreign exchange gain in the current year. The prior year results also included a $3.3 million gain recorded on the forgiveness of government funding of HPDI development. Notwithstanding the challenges of COVID-19, we generated $14.7 million adjusted EBITDA during the year ended December 31, 2020, compared to $28.4 million for the year ended December 31, 2019 as our businesses recovered over the 2H20.SEGMENT INFORMATIONOriginal Equipment Manufacturer SegmentOriginal Equipment Manufacturer (“OEM”) revenue for 4Q20 and FY 2020 was $58.8 million and $149.6 million, compared with $44.7 million and $164.7 million for 4Q19 and FY 2019, an increase of $14.1 million and decrease of $15.1 million, respectively. Revenue growth in the current quarter largely reflected an increase in sales volumes in the Heavy-Duty OEM business from our initial launch partner combined with a 7% increase in the Euro to U.S. dollar exchange rate, partially offset by the large contractual price reductions of our HPDI product in 4Q19. The year-over-year decrease in OEM revenue for FY 2020 is mainly due to the impact of plant shutdowns in response to the COVID-19 pandemic and the impact on customer demand in the first half of the year, combined with lower light-duty OEM sales to German and Russian OEMs.Independent Aftermarket SegmentIndependent Aftermarket (“IAM”) revenue for 4Q20 and FY 2020 was $25.1 million and $102.9 million, compared with $29.6 million and $140.6 million for the same prior year periods, respectively. Revenue for the IAM business segment decreased by $4.5 million and $37.7 million, respectively, primarily due to the continuing impact of COVID-19 on customer demand in Western Europe and the related shutdowns in the second quarter of 2020, partially offset by the stronger Euro to U.S. dollar during 2020.
CUMMINS WESTPORT INC.
Revenue for 4Q20 decreased by $6.5 million to $96.0 million, or 6% over the same period last year, due to lower engine sales during the quarter. Unit sales were lower for FY 2020 compared to the prior year reflecting the impact of OEM factory shutdowns in April and May 2020 in response to the COVID-19 pandemic. Gross margin for 4Q20 increased by $0.2 million to $28.5 million, or 30% of revenue from $28.3 million or 28% of revenue in the prior year quarter. The increase in gross margin and gross margin percentage resulted primarily from product mix, which more than offset lower revenues in the current year quarter.Operating income for Q4 2020 increased by $4.2 million to $24.3 million, or 21% over the same period last year, primarily reflecting lower operating expenses combined with the increase in gross margin. WFS share of CWI’s net income for 4Q20 increased to $9.4 million from $6.7 million in 4Q19.The following tables sets forth a summary of the financial results of CWI for the years ended December 31, 2020 and 2019, and three months ended December 31, 2020 and 2019.HYDROGEN ICE
Our research and development of a heavy-duty internal combustion engine (“ICE”) running on hydrogen has the potential of near-zero greenhouse gas emissions and much lower cost than fuel cell vehicles or battery electric vehicles, particularly for heavy-duty trucking and other high-load applications like mining, marine and rail that have come to rely on the efficiency, power, durability and reliability of diesel engines, Over the past several months we achieved several important milestones including:In January, we announced the start of a research project with Scania to apply HPDI fuel systems with hydrogen to the latest Scania commercial vehicle engine.Later in February, we released a joint publication with AVL, the world’s largest independent company for the development, simulation and testing of powertrain systems, entitled “Total Cost of Ownership (TCO) Analysis for Heavy Duty Hydrogen Fueled Powertrains.” The analysis presents the case for hydrogen use in an ICE with Westport Fuel Systems’ patented HPDI 2.0 fuel system, as the most cost-competitive near-term pathway to reduce CO2 emissions to near-zero from on-road long-haul transportation. The paper undertakes a comprehensive TCO analysis, applying inputs from Westport Fuel Systems HPDI hydrogen (H2-HPDI) simulations and HPDI 2.0 operating costs with AVL’s existing TCO models for diesel and fuel cell powertrains.In March, we successfully started up and conducted initial testing of a heavy-duty ICE running on hydrogen fuel, using our patented and proprietary HPDI 2.0 system. The preliminary test results validate our combustion simulations and demonstrate the potential for hydrogen combustion with efficiency comparable to fuel cells in heavy-duty applications. The potential benefits for OEMs and others to avoid significant new investments that would be required to develop and manufacture fuel cells, electric motors and batteries that are associated with heavy-duty long haul fuel cell electric vehicles is financially compelling, while leveraging established supply chains, manufacturing investment and infrastructure and economies of scale. Technical results will be reviewed at the upcoming Vienna Motor Symposium, which takes place April 29-30, 2021.
2021 OUTLOOKThe COVID-19 pandemic brought significant headwinds and uncertainty to the global economy, and significantly impacted our business, our partners and customers. Throughout these tumultuous times, the world’s focus on decarbonizing transportation, global climate change and the need to improve urban air quality have strengthened, not disappeared. The world needs affordable, clean transportation more than ever.We are poised for growth and continued positive momentum, considering the robust recovery in our revenues in 4Q20 somewhat tempered in the near-term by the current risks in the supply chain the automotive industry is facing. Due to the expected growth in our Heavy-Duty OEM business, we plan to expand our manufacturing capacity through our vendor supplier network and our own manufacturing capabilities to be able to meet our customer demand. We are excited about our recent research and development of H2 ICE technologies and the potential for further applications of HPDI technology in other industry verticals, which will require investment. Significant strides have been made to restore financial stability, and we will continue to evaluate our financing options to sustainably fund the exciting growth potential of our portfolio of existing and emerging technologies.FINANCIAL STATEMENTS & MANAGEMENT’S DISCUSSION AND ANALYSISTo view WFS full financials for the fourth quarter and year ended December 31, 2020, please visit https://investors.wfsinc.com/financials/CONFERENCE CALL PRESENTATIONWFS 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 WFS full financials for the year ended December 31, 2020.LIVE CONFERENCE CALL & WEBCASTWFS has scheduled a conference call for Tuesday, March 16, 2021 at 7:30 am Pacific Time (10:30 am Eastern Time) to discuss these results. 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 WFS website at https://investors.wfsinc.com/REPLAY CONFERENCE CALL & WEBCASTTo access the conference call replay, please dial 1-800-319-6413 (Canada & USA toll-free) or 1-604-638-9010 using the pass code 6262. The telephone replay will be available until March 23, 2021. 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.2021 ANNUAL GENERAL MEETING OF SHAREHOLDERSIn response to the ongoing global COVID-19 pandemic, Westport Fuel Systems intends to host its upcoming Annual Meeting of shareholders (the “Meeting”) in a virtual only format on Wednesday, May 5, 2021 at 10:00 am Pacific Time. In order to streamline the virtual meeting process, Westport Fuel Systems encourages shareholders to vote in advance of the Meeting using the Voting Instruction Form or the Form of Proxy which will be emailed or mailed to them with the Meeting materials at the end of March. Further instructions on voting and accessing the meeting will be contained in the Management Information Circular under “Section 1: Voting” – upon receipt, please review these materials carefully.Guest Access:Registered Shareholders or Duly Appointed Proxyholders Access:
Shareholder or Duly Appointed Proxyholders access to the virtual Meeting requires early registration at the following link – https://tinyurl.com/agmpreregistration. Please register at your earliest convenience as registration will close May 3, 2021 at 10:00am PT (48 hours prior to the meeting). Before the Meeting, shareholders of record at the close of business on March 16, 2021 may vote by completing the form of proxy or voting instruction form in accordance with the instructions provided herein.Non-registered shareholders should carefully follow all instructions provided by their intermediaries to ensure that their Westport Fuel Systems voting shares are voted at the Meeting. Please refer to “Section 1: Voting” of Westport Fuel Systems Management Information Circular in respect of the Meeting for additional details on how to vote by proxy before the Meeting and the matters to be voted upon.Votes placed prior to the Meeting must be received by our transfer agent, Computershare Investor Services Inc. by May 3, 2021 at 10:00am PT.TERMINATION OF AT-THE-MARKET OFFERINGWFS has now terminated its previously announced at-the-market offering program (the “ATM Program“). Under the ATM Program WFS issued a total of 5,035,682 common shares at an average price of $5.48 per share for gross proceeds of $27.6 million and net proceeds of $26.7 million.About Westport Fuel SystemsWestport Fuel Systems is driving innovation to power a cleaner tomorrow. Westport Fuel Systems is 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 automotive industry. Its 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, Westport Fuel Systems serves customers in more than 70 countries with leading global transportation brands. For more information, visit www.wfsinc.com.Cautionary Note Regarding Forward Looking StatementsThis press release contains forward-looking statements, including statements regarding revenue and cash usage expectations, future strategic initiatives and future growth, future of our development programs (including those relating to HPDI and Hydrogen), the impact of COVID-19 on our business, the demand for our products, the future success of our business and technology strategies, intentions of partners and potential customers, the performance and competitiveness of Westport Fuel Systems’ products and expansion of product coverage, future market opportunities, speed of adoption of natural gas for transportation and terms and timing of future agreements 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 expenses, ability to successfully commercialize new products, the performance of our joint ventures, the availability and price of natural gas, global government stimulus packages and new environmental regulations, 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, the effects and duration of COVID-19 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 InformationChristine Marks
Investor Relations
Westport Fuel Systems
T: +1 604-718-2046
invest@wfsinc.comGAAP and NON-GAAP FINANCIAL MEASURESOur financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP“). These U.S. GAAP financial statements include non-cash charges and other charges and benefits that may be unusual or infrequent in nature or that we believe may make comparisons to our prior or future performance difficult. In addition to conventional measures prepared in accordance with U.S. GAAP, WFS and certain investors use EBITDA and Adjusted EBITDA as an indicator of our ability to generate liquidity by producing operating cash flow to fund working capital needs, service debt obligations and fund capital expenditures. Management also uses these non-GAAP measures in its review and evaluation of the financial performance of WFS. EBITDA is also frequently used by investors and analysts for valuation purposes whereby EBITDA is multiplied by a factor or “EBITDA multiple” that is based on an observed or inferred relationship between EBITDA and market values to determine the approximate total enterprise value of a company. We believe that these non-GAAP financial measures also provide additional insight to investors and securities analysts as supplemental information to our U.S. GAAP results and as a basis to compare our financial performance period-over-period and to compare our financial performance with that of other companies. We believe that these non-GAAP financial measures facilitate comparisons of our core operating results from period to period and to other companies by, in the case of EBITDA, removing the effects of our capital structure (net interest income on cash deposits, interest expense on outstanding debt and debt facilities), asset base (depreciation and amortization) and tax consequences. Adjusted EBITDA provides this same indicator of WFS’ EBITDA from continuing operations and removing such effects of our capital structure, asset base and tax consequences, but additionally excludes any unrealized foreign exchange gains or losses, stock-based compensation charges and other one-time impairments and costs which are not expected to be repeated in order to provide greater insight into the cash flow being produced from our operating business, without the influence of extraneous events.EBITDA and Adjusted EBITDA are intended to provide additional information to investors and analysts and do not have any standardized definition under U.S. GAAP, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP. EBITDA and Adjusted EBITDA exclude the impact of cash costs of financing activities and taxes, and the effects of changes in operating working capital balances, and therefore are not necessarily indicative of operating profit or cash flow from operations as determined under U.S. GAAP. Other companies may calculate EBITDA and Adjusted EBITDA differently.