Westport Fuel Systems Inc. has reported financial results for the second quarter ended June 30, 2019 and provided an update on its business. All figures are in U.S. dollars unless otherwise stated.
“Our Q2 2019 results demonstrate continued progress for our company: revenue growth and cost reduction resulting in improved profitability and cash flow,” says David Johnson, Chief Executive Officer of Westport Fuel Systems. “Q2 revenues of $82.4 million were robust as market demand for our products is strong in the many market segments and geographies we serve. We achieved our fifth consecutive quarter of positive Adjusted EBITDA and second consecutive quarter of positive EBITDA due to rising demand for our products. Our increasingly disciplined approach to cost management resulted in a 25% reduction in operating expenses.
“We are witnessing a real-time market response to new regulations and associated calls to action on urban air quality and climate change. In the marketplace today, vehicles powered by LNG, CNG, RNG and LPG are delivering results. We are delighted that our cost-competitive and commercially available clean transportation products are being increasingly deployed to deliver emission reduction benefits to customers around the world. Our global team is highly focused on becoming a sustainable, profitable company in the clean transportation space and these results demonstrate our commitment to achieving this objective.”
- Driven by strong growth in Westport HPDI 2.0TM sales and continued strength in the independent aftermarket business, Transportation revenue was up 12.6% over Q1 and up 2% (6% on a constant currency basis) over Q2 2018.
- Q2 2019 Adjusted EBITDA of $8.1 million compared with Q1 2019, Adjusted EBITDA of $7.3 million and Q2 2018, $8.5 million.
- Q2 2019 EBITDA of $4.0 million compared with Q1 2019, $4.2 million.
- Positive cash flow from operations of $2.5 million compared to a use of cash of $2.0 million in the prior year quarter.
- Company share of CWI net income of $5.9 million in Q2 2019 compared to $8.6 million in Q1 2019 and $7.8 million in Q2 2018 performance, reflects lower Q2 2019 sales.
Based on positive first half results, Westport Fuel Systems full year revenue guidance is being revised to between $285 and $305 million.
Q2 2019 FINANCIAL HIGHLIGHTS
- Consolidated revenues for the quarter ended June 30, 2019 increased by $1.9 million to $82.4 million, or 2% over the same period last year (6% on a constant currency basis). The Aftermarket business was higher in Euro terms, but down 2% in US dollar terms. Q2 2019 OEM revenues increased by $3.1 million, or 13%, over the prior year quarter. HPDI product sales were the primary driver for the OEM increase, offsetting a decrease on the light duty OEM side.
- Consolidated gross margin for the quarter ended June 30, 2019 decreased by $2.4 million to $19.3 million over the same period last year. The quarter ended June 30, 2018 benefited from $1.3 million in favourable warranty adjustments. The decrease in gross margin for the current quarter was also impacted by product mix.
- Consolidated operating expenses for the quarter ended June 30, 2019 decreased by $8.2 million to $25.2 million, or 25%. During the quarter ended June 30, 2019, a foreign exchange gain of $0.7 million was recognized as compared to a foreign exchange loss of $ 5.2 million in the same period last year. The remaining decrease relates to general and administrative expenses which decreased $1.7 million as compared to prior year quarter. Decreases in consulting fees, share-based compensation and other personnel costs, were partially offset by an increase in SEC related costs incurred in the period. The quarter ended June 30, 2019 includes a provision of $4.5 million, net of insurance recovery, which reflects the Company’s estimate of costs to complete and resolve the SEC investigation.
- Income from the unconsolidated joint ventures for the quarter ended June 30, 2019 decreased by $1.9 million over the same period last year. This decrease is largely due to lower sales in the current quarter and favorable warranty adjustments in the prior year quarter.
CUMMINS WESTPORT INC. HIGHLIGHTS
- CWI revenue for the quarter ended June 30, 2019 decreased by $2.9 million to $84.0 million, or 3% over the same period last year.
- CWI gross margin decreased by $4.3 million to $25.2 million, or 30% of revenue from $29.5 million or 34% of revenue in the prior year quarter. The decrease in gross margin and gross margin percentage is driven by lower revenues, and a lower positive warranty adjustment of $0.6 million for the three months ended June 30, 2019 compared to a $3.7 million positive warranty adjustment for the three months ended June 30, 2018.
- CWI operating income for the quarter ended June 30, 2019 decreased by $4.8 million to $15.5 million, or 24% over the same period last year. Westport Fuel Systems' share of CWI's equity interest for the quarter ended June 30, 2019 decreased by $1.9 million to $5.9 million from $7.8 million in same period last year. This reduction is primarily due to decreased revenue and gross margins in the current quarter and from favorable warranty adjustments in the prior year quarter.
Key strategic priorities for 2019 are:
- Sustain growth of light- 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.