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VANCOUVER, BC, March 27, 2024 /PRNewswire/ -- Westport Fuel Systems Inc. ("Westport") (TSX: WPRT) (Nasdaq: WPRT) today released financial results for the fourth quarter and year ended March 31 December 2023 and provided an update on operations. All figures are in US dollars unless otherwise indicated.
"I am privileged to report that, despite the challenges of the past year, we achieved new milestones, evolved strategically and prioritized operational efficiency and financial strength and, in doing so, generated record revenues. Consistent with our priority of driving growth sustainably, our team increased sales volumes in our lagging OEM and electronics and fuel storage businesses, while increasing the engineering services we offer in our heavy-duty OEM business.
As we move forward, Westport is dedicated to growth and adaptability, and continues to innovate and evolve with the ever-changing regulatory and macroeconomic landscapes. Anticipating the road ahead, I am determined to guide Westport through strategic and decisive actions. Our success depends on the seamless integration of disciplined operations with a solid strategic framework. To this end, I will guide our efforts towards three essential pillars: harnessing the potential of our HPDI joint venture to drive success, improving operational excellence and continuous innovation to shape the future of the hydrogen-powered world. We have a lot of work ahead of us. With a dedicated team and unwavering pursuit of excellence, I have every confidence in our ability to not only meet, but exceed, our goals.”
Dan Sceli, CEO
Financial Highlights
Operational highlights
Westport closed 2023 focused on driving sustainable growth in our existing markets, unlocking new and emerging markets, driving operational excellence and extracting efficiencies through prudent capital management. Based on these priorities, Westport can report several accomplishments that occurred during and after the fourth quarter of 2023.
Segment information
Original Equipment Manufacturer ("OEM")
OEM revenue for the three months and year ended December 31, 2023 was $61.2 million and $222.8 million, respectively, compared to $47.8 million and $198.0 million dollars for the three months and the year ended December 31, 2022. The increase of $13.4 million compared to the fourth quarter of 2022 was primarily driven by higher sales volumes in the electronics and OEM businesses and higher engineering services revenue from the heavy-duty OEM business. This was partially offset by lower sales volumes in heavy-duty OEM, delayed OEM and fuel storage businesses compared to the prior year.
Revenue for the year ended December 31, 2023 increased by $24.8 million compared to the prior year, primarily driven by higher sales volumes in the delayed OEM, electronics and fuel storage businesses, and higher revenues from engineering services of the heavy duty OEM business as well as increased sales volumes in Eastern Europe for our light vehicle business. This was partially offset by lower sales volumes in our hydrogen business and lower sales in the light vehicle OEM business in India.
Gross margin2 increased by 1.6 million to $0.8 million, or 1% of revenue for the three months ended December 31, 2023, compared to negative $0.8 million, or 2 Negative % of income, for the same period of the previous year. The increase in gross margin for the three months ended December 31, 2023 is primarily due to higher sales volumes in the electronics and light-duty OEM businesses, as well as higher gross margin in the service OEM business heavy due to higher revenues from engineering services. The heavy vehicle OEM business was negatively impacted by a $4.5 million inventory write-down. Additionally, the increase in gross margin is partially offset by lower sales volumes in the fuel storage business, a negative sales mix in the hydrogen business and higher production input costs resulting from supply chain challenges. global supply and inflation in logistics, utilities, labor and other costs, which we have only been able to partially pass on to our OEM customers.
Gross margin for the year ended December 31, 2023 increased by $11.7 million to $25.3 million, or 11% of revenue, compared to $13.6 million, or 7%. of income from the previous year. The increase in gross margin and gross margin percentage for the year ended December 31, 2023 is primarily due to higher contribution margins from engineering services and higher sales volumes in the delayed OEM and fuel storage businesses . This was offset by lower margins in the hydrogen business due to lower sales volumes and a negative impact on the heavy-duty OEM business due to a $4.5 million inventory write-down.
Independent Aftermarket
Revenue for the three months and the year ended December 31, 2023 were $26.0 million and $109.0 million, respectively, compared to $30.2 million and $107.7 million for the three months and the year ended December 31, 2022. The decrease in revenue for the three months ended December 31, 2023 was $4.2 million compared to the prior year period, primarily due to lower volumes of sales in the African and South American markets, offset by higher sales volumes in Europe. The increase in IAM revenue for the year ended December 31, 2023 was $1.3 million compared to the prior year, primarily driven by higher sales volumes to South America offset by lower sales to Europe and Africa.
Gross margin for the three months ended December 31, 2023 increased by 1.8 million to $7.2 million, or 28% of revenue, compared to $5.4 million, or 18% of revenue. revenue, for the same period last year, driven primarily by positive sales mix, lower electronic component costs and higher sales volumes in Europe.
Gross margin for the year ended December 31, 2023 increased by 1.0 million to $23.6 million, or 22% of revenue, compared to $22.6 million, or 21% of revenue , from the prior year, driven primarily by higher margins and a positive sales mix in South America. This was partially offset by a negative sales mix in Africa.
Outlook for 2024
The alternative fuels industry is becoming more dynamic, driven by increased investment, industrial applications and political support. Specifically, the hydrogen project pipeline has approximately 1,400 announced projects globally, with investments totaling $570 billion and 45 million tons of clean hydrogen supply annually announced through 20303. Over the same period, it is expected Hydrogen is not only more available but also more affordable.
As government policies and regulatory changes around the world accelerate the shift toward zero emissions, Westport's alternative fuel-based solutions enable its customers to deliver cleaner performance with practical and affordable applications today. We expect demand for our products and services to continue to increase and the widespread transition to hydrogen-based transportation to be competitive with traditional fuels by the 2030s.
As we move forward, Westport is dedicated to growth and adaptability, and continues to innovate and evolve with the ever-changing regulatory and macroeconomic landscape. Our efforts in 2024 will be guided by three essential pillars: harnessing the potential of our HPDI joint venture to drive success, improving operational excellence and continuous innovation to shape the future of the hydrogen-powered world. Our success is based on these three essential pillars in the short, medium and long term, respectively:
1) Driving success through our HPDI joint venture
Our HPDI joint venture marks a new era for Westport and culminates more than two decades of dedication and innovation. The joint venture is a cornerstone of Westport's business strategy going forward and it is time to innovate and drive growth together.
Looking ahead, the joint venture will leverage the partners' collective experience, capitalize on growth opportunities and solidify our position as a leader in alternative fuels.
2) Improving operational excellence
We are relentless in our pursuit of operational excellence and embark on bold initiatives to optimize processes, improve efficiency and reduce costs. In particular, our restructuring efforts in India exemplify our commitment to optimizing capital efficiency and maximizing performance on all operational fronts.
We are beginning to implement a combination of levers to increase profits and improve profitability, including the implementation of significant cost reduction measures that are expected to span both operating and general and administrative expenses.
3) Reimagining a hydrogen-powered future
Harnessing the potential of alternative fuels, particularly hydrogen, is exciting as we position ourselves at the forefront of this transformative change. Armed with advanced technological capabilities, leveraging our existing hydrogen components business and a deep understanding of market dynamics and customer needs, we are prepared to capitalize on emerging growth opportunities while maintaining our commitment to sustainability and relevance in a constantly evolving landscape.
Phone conference
Westport has scheduled a conference call for Tuesday, March 26, 2024 at 7:00 a.m. Pacific Time (10:00 a.m. Eastern Time) to analyze these results. To access the conference call by telephone, dial: 1-888-390-0546 (toll-free for Canada and the US) or 416-764-8688. A live webcast of the conference call can be accessed via Westport's website at https://investors.wfsinc.com/
To access the conference call replay, dial 1-888-390-0541 (toll-free in Canada and the US) or 1-416-764-8677 using the access code 618393. The telephone replay will be available until on April 9, 2024. Shortly after the conference call, the webcast will be archived on the Westport Fuel Systems website and playback will be available in streaming audio and as a downloadable MP3 file.
Financial Statements and Management Discussion and Analysis
To view Westport's complete financials for the fourth quarter and the year ended December 31, 2023, visit https://investors.wfsinc.com/financials/...
About Westport Fuel Systems
At Westport Fuel Systems, we drive innovation to power a cleaner tomorrow. We are a leading provider of advanced components and delivery systems for clean, low-carbon fuels, such as natural gas, renewable natural gas, propane and hydrogen, to the global transportation industry. Our technology delivers the performance and fuel efficiency required for transportation applications and 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, we serve our customers in more than 70 countries with leading global transportation brands. At Westport Fuel Systems, we think about the future. For more information, visit www.wfsinc.com.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements, including statements regarding future strategic initiatives and future growth, the future of our development programs (including those related to HPDI and Hydrogen), our expectations for 2024 and beyond, including demand for our products, and the future success of our commercial and technological strategies. These statements are neither promises nor guarantees, but involve known and unknown risks and uncertainties and are based on both management's views and assumptions that may cause our actual results, levels of activity, performance or achievements to be materially different. of any future results, levels of activities, performance or achievements expressed 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 and access to the capital and debt markets, solvency, government policies and regulations, technological innovations, fluctuations in the exchange rate. rates, operating expenses, continued expense reduction, 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, acceptance and shift toward natural gas and hydrogen vehicles, the relaxation or waiver of fuel emissions standards, the inability of fleets to access capital or government financing to purchase natural gas vehicles, the development of competitive technologies, our ability to appropriately develop and deploy our technology, the actions and determinations of our joint ventures and development partners, the effects and duration of the Russia-Ukraine conflict, supply chain disruptions, as well as other risk factors and assumptions that may affect to our actual results, performance or achievements or our financial position discussed in our most recent Annual Information Form and other filings with securities regulators. Readers should not place undue reliance on such forward-looking statements, which speak only as of the date on which they are made. We disclaim any obligation to publicly update or revise any such statements to reflect any changes in our expectations or in events, conditions or circumstances on which such statements may be based, or which 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 content of any website, RSS feed or Twitter account referenced in this press release is not incorporated herein by reference.
GAAP and non-GAAP financial measures
Our 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 with our past or future performance difficult. In addition to conventional measures prepared in accordance with US GAAP, Westport 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, meet debt obligations and finance capital expenditures. Management also uses these non-GAAP measures in its review and evaluation of Westport's financial performance. 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 information to investors and securities analysts as complementary information to our U.S. GAAP results and as a basis for comparing our financial performance period over period and comparing our financial performance with that of others. companies. We believe these non-GAAP financial measures facilitate comparisons of our core operating results from period to period and with other companies by, in the case of EBITDA, eliminating the effects of our capital structure (net interest income on cash deposits, interest expense on outstanding debt and lines of credit), asset base (depreciation and amortization) and tax consequences. Adjusted EBITDA provides this same measure of Westports' EBITDA from continuing operations and removes such effects from our capital structure, asset base and tax consequences, but also excludes any unrealized foreign exchange gains or losses, stock-based compensation charges and other one-time impairments and costs that are not expected to recur to provide greater insight into the cash flow produced from our operating business, uninfluenced by 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 performance measures prepared in accordance with U.S. GAAP. 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 are therefore not necessarily indicative of operating income. or cash flow from operations as determined in accordance with US GAAP. Other companies may calculate EBITDA and adjusted EBITDA differently.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Inquiries: Investor Relations, T: 1 604-718-2046, invest@wfsinc.com
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