Westport Fuel Systems Inc. (“Westport Fuel Systems”) (TSX:WPRT)
(Nasdaq:WPRT) reported financial results for the third quarter
ended September 30, 2017, and provided an update on operations. All
figures are in U.S. dollars unless otherwise stated.
"We continue to execute on our plan to strengthen our balance
sheet, drive operational efficiencies, and advance the
commercialization of Westport HPDI 2.0," said Nancy Gougarty, Chief
Executive Officer of Westport Fuel Systems. "This is the first
comparable quarter on a year-over-year basis since the merger and
we see improved results across the board. The actions taken and
implemented a year ago to achieve merger synergies are being
realized. Q3 was a strong quarter with a 54% improvement in
adjusted EBITDA compared to Q3 2016. Our Automotive business is
delivering improved adjusted EBITDA; Cummins Westport is seeing
strong customer demand and delivering higher income contributions;
and our technology portfolio is market ready with products that
deliver solutions to customers today. We have made significant
progress and will remain focused on delivering our commitment
towards becoming a profitable and sustainable company."
Q3 2017 CONSOLIDATED FINANCIAL HIGHLIGHTS
CONTINUING OPERATIONS |
|
Three months endedSeptember
30, |
Better / |
Nine months endedSeptember
30,* |
($ in millions, except per share amounts) |
2017 |
2016 |
(Worse) |
2017 |
2016 |
Consolidated Revenues |
$ |
60.8 |
|
$ |
56.1 |
|
8 |
% |
$ |
182.9 |
|
$ |
117.3 |
|
Consolidated Gross Margin |
14.8 |
|
8.7 |
|
70 |
% |
48.1 |
|
23.2 |
|
Consolidated Gross Margin % |
24 |
% |
15 |
% |
- |
|
26 |
% |
20 |
% |
Consolidated Operating Expenses |
34.9 |
|
41.0 |
|
15 |
% |
96.5 |
|
116.6 |
|
Income from Unconsolidated Joint Ventures |
5.8 |
|
2.4 |
|
138 |
% |
12.8 |
|
4.6 |
|
Net income (loss) from Continuing Operations |
$ |
(15.7 |
) |
$ |
(33.6 |
) |
53 |
% |
$ |
(41.9 |
) |
$ |
(54.7 |
) |
Net income (loss) per Share from Continuing Operations |
$ |
(0.12 |
) |
$ |
(0.31 |
) |
61 |
% |
$ |
(0.36 |
) |
$ |
(0.65 |
) |
Cash and Short-term Investments Balance |
$ |
51.1 |
|
$ |
71.2 |
|
(28 |
)% |
$ |
51.1 |
|
$ |
71.2 |
|
*Note: The merger closed on June 1, 2016; therefore the nine
months ended September 30, 2016 included only four months of Fuel
Systems Solutions, Inc. and its year-over-year comparison is not
meaningful.
- Consolidated revenues for the quarter ended September 30, 2017,
were $60.8 million compared with $56.1 million for the same period
last year. The higher revenues were driven by the increase in
the Euro compared to the US dollar, as well as strong sales in the
aftermarket business.
- Consolidated gross margin for the quarter ended September 30,
2017, was $14.8 million or 24% of revenue, compared with $8.7
million or 15% of revenue for the same period last year. The
improvement in gross margin is primarily due to higher revenues and
operating efficiencies generated through post-merger synergies,
particularly related to direct material savings and manufacturing
footprint optimization.
- Consolidated operating expenses were $34.9 million for the
quarter ended September 30, 2017, a decrease of 15% from $41.0
million in the same period last year. The reduction in
operating expenses is primarily related to the reduction in
research and development programs as a result of portfolio
optimization, in addition to restructuring activities.
Furthermore, non-recurring costs associated with the merger in 2016
did not repeat in the current year.
- Net loss from continuing operations for the quarter ended
September 30, 2017, was $15.7 million or a loss of $0.12 per share,
compared with net loss of $33.6 million or $0.31 per share in the
same period last year. This improvement is driven by higher
gross margin, lower operating expenses, and higher CWI income
compared to the same period last year.
"The company continues to effectively manage its working capital
and ongoing liquidity," said Ashoka Achuthan, Chief Financial
Officer of Westport Fuel Systems. “In the third quarter, our
balance sheet was strengthened by the proceeds received from the
equity issuance in July and the repayment of the $55M CDN
debentures on September 15, 2017. Revenue growth
year-over-year was driven by our core business and bolstered
by the strong Euro. We remain focused on aligning our costs to our
revenues and with this quarter's performance, we are moving closer
to achieve positive adjusted EBITDA."
CUMMINS WESTPORT INC. HIGHLIGHTS
CUMMINS WESTPORT
HIGHLIGHTS |
|
Three months ended
September 30, |
Better / |
Nine months ended
September 30, |
Better / |
($ in millions, except unit amounts) |
2017 |
2016 Adjusted |
(Worse) |
2017 |
2016 Adjusted |
(Worse) |
Units |
1,780 |
|
1,643 |
|
8 |
% |
5,557 |
|
5,351 |
|
4 |
% |
Revenue |
$ |
75.5 |
|
$ |
67.5 |
|
12 |
% |
$ |
225.7 |
|
$ |
206.0 |
|
10 |
% |
Gross Margin * |
27.9 |
|
22.0 |
|
27 |
% |
78.2 |
|
59.5 |
|
31 |
% |
Gross Margin % * |
37 |
% |
33 |
% |
- |
|
35 |
% |
29 |
% |
- |
|
Operating Expenses |
13.0 |
|
14.7 |
|
12 |
% |
42.0 |
|
47.9 |
|
12 |
% |
Segment Operating Income * |
14.9 |
|
7.3 |
|
104 |
% |
36.1 |
|
11.6 |
|
211 |
% |
Westport Fuel Systems 50% Interest *
|
$ |
5.8 |
|
$ |
2.4 |
|
142 |
% |
$ |
12.8 |
|
$ |
4.4 |
|
191 |
% |
*Note: 2016 adjusted for change in accounting policy related to
warranty.
- Revenue was $75.5 million on 1,780 units for the quarter ended
September 30, 2017, an increase of 12% over the same period last
year. This is driven by strong customer demand as volume grew
by 8% year-over-year; enhanced by higher parts revenue attributed
to the increase of in-service natural gas engines.
- Gross margin for the quarter ended September 30, 2017 increased
by $5.9 million to 27.9 million, or 37% of revenue from $22.0
million or 33% of revenue in the prior year quarter. The increase
in gross margin and gross margin percentage is driven by higher
revenues, a more favorable parts revenue mix, and a positive
warranty adjustment.
- CWI operating income for the quarter ended September 30, 2017
was $14.9 million, a significant increase from the prior year
primarily due to improvement in gross margin and lower operating
expenses, driven by reduction in marketing expense and 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 units’ 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 U.S. GAAP results and using
Adjusted EBITDA as supplemental information.
|
GAAP & NON-GAAP FINANCIAL MEASURES
FROM CONTINUING OPERATIONS |
($ in millions) |
30-Sept-2016 |
31-Dec-2016 |
31-Mar-2017 |
30-Jun-2017 |
30-Sept-2017 |
Loss before Income Taxes |
$ |
(34.4 |
) |
$ |
(41.7 |
) |
$ |
(13.6 |
) |
$ |
(17.3 |
) |
$ |
(15.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense, Net |
3.1 |
|
4.3 |
|
3.4 |
|
6.3 |
|
0.9 |
|
Depreciation and Amortization |
5.2 |
|
3.9 |
|
3.7 |
|
3.5 |
|
3.9 |
|
EBITDA |
(26.1 |
) |
(33.5 |
) |
(6.5 |
) |
(7.5 |
) |
(10.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
2.9 |
|
1.2 |
|
1.1 |
|
3.1 |
|
2.1 |
|
Unrealized foreign exchange (gain) loss |
(7.1 |
) |
8.1 |
|
(1.6 |
) |
1.0 |
|
2.5 |
|
Asset impairment |
— |
|
2.7 |
|
— |
|
— |
|
— |
|
Inventory impairment from product line closure |
4.3 |
|
1.3 |
|
— |
|
— |
|
— |
|
Bargain purchase gain |
— |
|
7.1 |
|
— |
|
— |
|
— |
|
Merger and financing costs |
0.4 |
|
— |
|
— |
|
— |
|
0.1 |
|
Amortization of fair value inventory adjustment recorded on
acquisition |
1.0 |
|
— |
|
— |
|
— |
|
— |
|
(Gain) loss on sale of investments |
(3.9 |
) |
(0.3 |
) |
— |
|
— |
|
— |
|
Restructuring, termination and other exit costs |
17.5 |
|
1.5 |
|
1.6 |
|
(1.6 |
) |
(0.1 |
) |
Other |
0.2 |
|
0.9 |
|
1.3 |
|
(0.3 |
) |
0.9 |
|
Total Adjusted EBITDA |
$ |
(10.8 |
) |
$ |
(11.0 |
) |
$ |
(4.1 |
) |
$ |
(5.3 |
) |
$ |
(5.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS & MANAGEMENT'S DISCUSSION AND
ANALYSIS
To view Westport Fuel Systems full financials for the quarter
ended September 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
September 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,
November 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
1762. The replay will be available until November 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 Systems
At 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, rationalization
of operations, and reduction of overhead expenses. 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 SawamotoManager, Investor Relations
& CommunicationsWestport Fuel SystemsT: +1
604-718-2046invest@wfsinc.com
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