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Westport Fuel Systems Reports Third Quarter 2021 Financial Results

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VANCOUVER, British Columbia, Nov. 08, 2021 (GLOBE NEWSWIRE) -- Westport Fuel Systems Inc. ("WFS") (TSX:WPRT / Nasdaq:WPRT) reported financial results for the third quarter ended September 30, 2021, and provided an update on operations. All figures are in U.S. dollars unless otherwise stated.

THIRD QUARTER 2021 HIGHLIGHTS

  • Revenues of $74.3 million, up 14% compared to the same period in 2020, due to the continued recovery of sales volumes in our light-duty OEM businesses since the beginning of the COVID-19 pandemic and $7.1 million revenue from our recently acquired fuel storage business, partially offset by the decrease in the independent aftermarket ("IAM") business

  • Net loss of $5.8 million and net loss per share of $0.03 mainly due to increased operating expenses, lower government wage-subsidy and support programs, and lower foreign exchange gain

  • Global supply chain challenges and the shortage of semiconductors adversely impacted growth of our HPDI sales, independent aftermarket business, and delayed OEM businesses due to lower production compared to customer demand

  • Awarded our single largest IAM tender bid of €9 Million for the supply of 60,000 LPG systems to NAFTAL, a branch of SONATRACH, the national Algerian Oil & Gas company

  • Published our annual ESG report, featuring 34.4% lower overall GHG emissions (tonnes-CO2e) and reduced GHG intensity by 20.6% year over year

  • Cartesian Capital Group debt converted into common shares of the company

"While this was a challenging quarter for our company as we felt the larger effects of both the ongoing semi-conductor shortage and global supply chain issues across key parts of our business; despite these challenges, market conditions for our company and the potential for our clean, affordable products remain positive and we are still showing an improving trend in our business. Sales of our light-duty LPG and CNG components in Europe showed recovery over last year, we expect continued positive growth in Europe, as well as growth in emerging markets. The heavy-duty business remains fundamentally strong and we anticipate a return to expected full-year growth trend when the semi-conductor shortage challenges are resolved, as market and customer feedback is positive. Demand for heavy-duty vehicles will continue to increase and our HPDI technology, fueled by LNG and RNG today and next by green Hydrogen, is in a key competitive position to expand as OEMs need to act to respond to environmental regulations and meet the demand for clean, efficient, and affordable solutions. Our products will continue to play an important role in the immediate future towards overall carbon reduction in transportation and ensuring a clean and prosperous future for all."

David M. Johnson, Chief Executive Officer

Third Quarter Financial Highlights Operations

CONSOLIDATED RESULTS

($ in millions, except per share amounts)

Over / (Under) %

Over / (Under) %

3Q21

3Q20

9M'21

9M'20

Revenues

$

74.3

$

65.4

14

%

$

229.8

$

168.6

36

%

Gross Margin

10.1

10.0

1

%

38.9

26.5

47

%

Gross Margin %

14

%

15

%

17

%

16

%

Operating Expenses

18.8

13.2

43

%

59.4

47.8

24

%

Income from Investments Accounted for by the Equity Method(1)

4.1

4.6

(12

)

%

18.7

14.1

33

%

Net Income (Loss)

$

(5.8

)

$

0.8

(802

)

%

$

8.3

$

(11.5

)

173

%

Net Income (Loss) per Share

$

(0.03

)

$

0.01

(400

)

%

$

0.05

$

(0.08

)

163

%

EBITDA(2)

$

(1.2

)

$

4.9

(124

)

%

$

14.6

$

3.0

387

%

Adjusted EBITDA(2)

$

(1.4

)

$

4.0

(135

)

%

$

7.5

$

6.6

14

%

(1) This includes income primarily from our Cummins Westport Inc. ("CWI") and 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 in 3Q21 increased 14% to $74.3 million in the three months ended September 30, 2021, resulting from higher sales volume and recovery in our light-duty OEM business and the addition of $7.1 million in revenue from our recently acquired fuel storage business, partially offset by the decrease in the IAM business.

WFS reported a net loss of $5.8 million for the quarter ended September 30, 2021, compared to net income of $0.8 million for the same quarter last year. The $6.6 million decrease in earnings was primarily the result of increases in research and development expenditures and general and administrative expenditures, lower foreign exchange gain and increase in income tax expense compared to the prior quarter. Equity income from CWI was $1.0 million lower compared to the same prior year quarter. Government-wage subsidies and support programs received were also $0.9 million lower compared to the same prior year quarter.

WFS recorded negative $1.4 million Adjusted EBITDA for the quarter ended September 30, 2021 compared to $4.0 million. Adjusted EBITDA for the same period in 2020. This was due to increased R&D spending and higher SG&A expenses.

Segment Information

SEGMENT RESULTS

Three months ended September 30, 2021

Revenue

Operating income (loss)

Depreciation & amortization

Equity income (loss)

OEM

$

48.0

$

(7.4

)

$

2.4

$

0.3

IAM

26.3

0.7

0.8

Corporate

(1.9

)

0.1

3.8

CWI - 50%

41.7

5.1

0.1

Total segment

116.0

(3.5

)

3.4

4.1

Less: CWI - 50%

(41.7

)

(5.1

)

(0.1

)

Total Consolidated

$

74.3

$

(8.6

)

$

3.3

$

4.1

SEGMENT RESULTS

Three months ended September 30, 2020

Revenue

Operating income (loss)

Depreciation & amortization

Equity income (loss)

OEM

$

37.4

$

(4.9

)

$

2.1

$

(0.2

)

IAM

28.0

1.7

1.3

Corporate

0.1

0.1

4.9

CWI - 50%

42.2

6.3

Total segment

107.6

3.1

3.5

4.7

Less: CWI - 50%

(42.2

)

(6.3

)

Total Consolidated

$

65.4

$

(3.1

)

$

3.5

$

4.7

Original Equipment Manufacturer Segment

Revenue for the three and nine months ended September 30, 2021 was $48.0 million and $138.2 million, respectively, compared with $37.4 million and $90.8 million for the three and nine months ended September 30, 2020. Revenue for the OEM business segment increased by $10.6 million and $47.4 million, respectively. The increase during the current quarter was mainly due to higher light-duty OEM sales volumes, particularly sales to Indian and Russian OEMs, and $7.1 million additional revenue from the recently acquired fuel storage business. The impact of COVID-19 was significant in the prior year period, which was impacted by plant shutdowns combined with lower light-duty OEM sales to German and Russian OEMs. HD OEM revenue was comparable year-over-year and reflects the impact of manufacturing delays caused by the shortage of semiconductors on our initial OEM launch partner. Despite the headwinds from supply chain issues and increases in LNG prices, we expect to see continued growth in HPDI through the remainder of this year as production recovers.

Independent Aftermarket Segment

Revenue for the three and nine months ended September 30, 2021, was $26.3 million and $91.6 million, respectively, compared with $28.0 million and $77.8 million for the three and nine months ended September 30, 2020. Revenue for the third quarter decreased by $1.7 million year-over-year because of a slowdown in sales due to supply chain issues, including semiconductors shortages. Year-to-date, revenues are higher by $13.8 million compared to the same prior year period, mainly due to due to the recovery from the impact of COVID-19 across all markets and growth in the emerging markets offset by the aforementioned global supply chain issues. We expect to see continued improvement in revenues from the IAM business segment in the fourth quarter of the year, but we temper expectations due to the ongoing global shortage of semiconductors, and recent spike in LPG and CNG prices which could continue to impact the IAM business.

CUMMINS WESTPORT INC.

Revenue for the three months ended September 30, 2021 for the Cummins Westport Inc. ("CWI") joint venture, was $83.3 million compared to $84.4 million year-over-year. Unit sales for the three months ended September 30, 2021, were 1,764 compared to 1,912 year-over-year. The decrease in unit sales is a result of delays in OEM orders due to supply chain issues in the quarter. Parts revenue for the three months ended September 30, 2021 was $29.4 million compared to $25.1 million year-over-year. Currently, we are working with Cummins to wrap up the final terms for the conclusion of the joint-venture. We expect engines with our HPDI technology to have an important role in the North American market, as they have had in Europe.

Revenue for the nine months ended September 30, 2021 was $255.8 million compared to $227.5 million for the same prior year period. Unit sales for the nine months ended September 30, 2021 were 5,642 compared to 4,777 for the same prior year period. Unit sales were higher in the current year reflecting the impact of OEM factory shutdowns in April and May 2020 in response to the COVID-19 pandemic. Parts revenue for nine months ended September 30, 2021 was $83.3 million compared to $79.2 million for same prior year period.

CUMMINS WESTPORT HIGHLIGHTS

Over / (Under) %

Over / (Under) %

($ in millions, except unit amounts)

3Q21

3Q20

9M'21

9M'20

Units

1,764

1,912

(8

)

%

5,642

4,777

18

%

Revenue

$

83.3

$

84.4

(1

)

%

$

255.8

$

227.5

12

Product revenue

53.9

59.3

(9

)

%

172.5

148.3

16

%

Parts revenue

29.4

25.1

17

%

83.3

79.2

5

%

Gross Margin

16.5

19.0

(13

)

%

59.9

58.8

2

%

Gross Margin %

20

%

22

%

23

%

26

%

Operating Expenses

6.3

6.4

(2

)

%

14.7

22.2

(34

)

%

Operating Income

$

10.3

$

12.5

(18

)

%

$

45.2

$

36.6

23

%

WFS 50% Interest

3.8

4.9

(21

)

%

18.2

14.4

26

%

FINANCIAL STATEMENTS & MANAGEMENT'S DISCUSSION AND ANALYSIS

To view WFS financials for the second quarter ended September 30, 2021, please visit https://investors.wfsinc.com/financials/

LIVE CONFERENCE CALL & WEBCAST

WFS has scheduled a conference call for Tuesday, November 9, 2021, at 7:00 am Pacific Time (10:00 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 & WEBCAST

To access the conference call replay, please dial 1-800-319-6413 (Canada & USA toll-free) or +1-604-638-9010 using the passcode 7899. The telephone replay will be available until Tuesday, November 16, 2021. 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

Westport Fuel Systems is driving innovation to power a cleaner tomorrow. The company 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. Westport Fuel Systems’ 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, the company serves customers in more than 70 countries with leading global transportation brands. 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, future strategic initiatives and future growth, future of our development programs (including those relating to HPDI and Hydrogen), the impact of COVID-19 and ongoing semiconductor shortages 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, access to required semiconductors, 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 and the ongoing semiconductor shortage 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
Christian Tweedy
Investor Relations
Westport Fuel Systems
T: +1 604-718-2046

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)

3Q20

4Q20

1Q21

2Q21

3Q21

Three months ended

Net income (loss)

$

0.8

$

4.1

$

(3.1

)

$

17.2

$

(5.8

)

Income tax expense (recovery)

(0.6

)

1.2

0.3

(8.1

)

0.4

Interest expense, net

1.3

4.0

1.2

1.1

0.9

Depreciation and amortization

3.4

3.8

3.5

3.7

3.3

EBITDA

4.9

13.1

1.9

13.9

(1.2

)

Stock based compensation

0.9

0.3

0.1

0.5

0.7

Unrealized foreign exchange (gain) loss

(2.3

)

(5.3

)

0.7

(2.3

)

(0.9

)

Asset impairment

0.5

Bargain purchase gain

(5.9

)

Adjusted EBITDA

$

4.0

$

8.1

$

2.7

$

6.2

$

(1.4

)


WESTPORT FUEL SYSTEMS INC.

Condensed Consolidated Interim Balance Sheets (unaudited)

(Expressed in thousands of United States dollars, except share amounts)

September 30, 2021 and December 31, 2020


September 30, 2021

December 31, 2020

Assets

Current assets:

Cash and cash equivalents (including restricted cash)

$

141,899

$

64,262

Accounts receivable

86,729

90,467

Inventories

78,087

51,402

Prepaid expenses

9,100

11,767

Short-term investment

7,585

Total current assets

323,400

217,898

Long-term investments

3,516

13,954

Property, plant and equipment

63,385

57,507

Operating lease right-of-use assets

30,204

27,962

Intangible assets

9,863

11,784

Deferred income tax assets

11,380

2,140

Goodwill

3,067

3,397

Other long-term assets

12,069

11,621

Total assets

$

456,884

$

346,263

Liabilities and shareholders’ equity

Current liabilities:

Accounts payable and accrued liabilities

$

95,203

$

84,599

Current portion of operating lease liabilities

4,845

4,476

Short-term debt

11,028

23,445

Current portion of long-term debt

19,168

16,302

Current portion of long-term royalty payable

5,657

7,451

Current portion of warranty liability

11,718

10,749

Total current liabilities

147,619

147,022

Long-term operating lease liabilities

25,010

23,486

Long-term debt

33,315

45,651

Long-term royalty payable

4,449

8,591

Warranty liability

5,640

8,187

Deferred income tax liabilities

3,507

3,250

Other long-term liabilities

5,754

6,017

Total liabilities

225,294

242,204

Shareholders’ equity:

Share capital:

Unlimited common and preferred shares, no par value

170,754,085 (2020 - 144,069,972) common shares issued and outstanding

1,241,854

1,115,092

Other equity instruments

7,983

7,671

Additional paid in capital

11,516

11,516

Accumulated deficit

(997,358

)

(1,005,679

)

Accumulated other comprehensive loss

(32,405

)

(24,541

)

Total shareholders' equity

231,590

104,059

Total liabilities and shareholders' equity

$

456,884

$

346,263


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, 2021 and 2020


Three months ended September 30,

Nine months ended September 30,

2021

2020

2021

2020

Revenue

$

74,343

$

65,407

$

229,794

$

168,594

Cost of revenue and expenses:

Cost of revenue

64,214

55,368

190,905

142,091

Research and development

6,207

4,721

20,419

14,611

General and administrative

9,058

5,619

27,581

18,360

Sales and marketing

3,176

3,087

9,828

8,790

Foreign exchange (gain) loss

(893

)

(2,291

)

(2,495

)

978

Depreciation and amortization

1,224

1,540

4,188

4,547

Gain on sale of assets

(146

)

Impairment of long-lived assets

479

479

82,986

68,523

250,280

189,856

Loss from operations

(8,643

)

(3,116

)

(20,486

)

(21,262

)

Income from investments accounted for by the equity method

4,098

4,625

18,738

14,113

Interest on long-term debt and accretion on royalty payable

(1,380

)

(1,679

)

(4,437

)

(4,698

)

Bargain purchase gain from acquisition

5,856

Interest and other income, net of bank charges

482

395

1,212

654

Income (loss) before income taxes

(5,443

)

225

883

(11,193

)

Income tax expense (recovery)

325

(597

)

(7,438

)

284

Net income (loss) for the period

(5,768

)

822

8,321

(11,477

)

Other comprehensive income (loss):

Cumulative translation adjustment

(4,067

)

72

(7,864

)

(392

)

Comprehensive income (loss)

$

(9,835

)

$

894

$

457

$

(11,869

)

Income (loss) per share:

Net income (loss) per share - basic and diluted

$

(0.03

)

$

0.01

$

0.05

$

(0.08

)

Weighted average common shares outstanding:

Basic

169,500,461

136,879,478

156,673,290

136,625,262

Diluted

169,500,461

145,549,940

158,533,077

136,625,262


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, 2021 and 2020


Three months ended September 30,

Nine months ended September 30,

2021

2020

2021

2020

Cash flows from (used in) operating activities:

Net income (loss) for the period

$

(5,768

)

$

822

$

8,321

$

(11,477

)

Items not involving cash:

Depreciation and amortization

3,309

3,460

10,485

10,231

Stock-based compensation expense

629

852

1,252

2,093

Unrealized foreign exchange (gain) loss

(893

)

(2,291

)

(2,495

)

978

Deferred income tax

69

(645

)

(9,606

)

(1,328

)

Income from investments accounted for by the equity method

(4,098

)

(4,625

)

(18,738

)

(14,113

)

Interest on long-term debt and accretion on royalty payable

1,380

1,679

4,437

4,698

Change in inventory write-downs to net realizable value

87

414

409

478

Bargain purchase gain from acquisition

(5,856

)

Change in bad debt expense

178

143

152

395

Impairment of long-lived assets

479

479

Gain on sale of assets

(146

)

Net cash from (used) before working capital changes

(5,107

)

288

(11,785

)

(7,566

)

Changes in non-cash operating working capital:

Accounts receivable

7,574

(12,621

)

2,532

(8,003

)

Inventories

(11,851

)

1,110

(23,794

)

(6,946

)

Prepaid and other assets

(1,717

)

(2,145

)

4,639

(3,704

)

Accounts payable and accrued liabilities

(2,154

)

8,308

4,134

(7,482

)

Deferred revenue

Warranty liability

(1,136

)

736

(1,423

)

10,517

Net cash used in operating activities of continuing operations

(14,391

)

(4,324

)

(25,697

)

(23,184

)

Cash flows from (used in) investing activities:

Purchase of property, plant and equipment

(5,084

)

(1,339

)

(7,946

)

(4,525

)

Sale of investments, net

600

Acquisition, net of acquired cash

(5,948

)

Dividends received from joint ventures

7,229

4,592

21,502

13,835

Net cash from investing activities of continuing operations

2,145

3,253

8,208

9,310

Cash flows from (used in) financing activities:

Repayments of short and long-term facilities

(17,191

)

(14,661

)

(56,606

)

(33,554

)

Drawings on operating lines of credit and long-term facilities

13,987

34,201

39,985

56,267

Payment of royalty payable

(7,451

)

(5,948

)

Proceeds from share issuance, net

120,727

Net cash from (used in) financing activities

(3,204

)

19,540

96,655

16,765

Effect of foreign exchange on cash and cash equivalents

(3,362

)

(1,075

)

(1,529

)

(2,581

)

Increase (decrease) in cash and cash equivalents

(18,812

)

17,394

77,637

310

Cash and cash equivalents, beginning of period (including restricted cash)

160,711

28,928

64,262

46,012

Cash and cash equivalents, end of period (including restricted cash)

$

141,899

$

46,322

$

141,899

$

46,322



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