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Westport Fuel Systems Reports Second Quarter 2020 Financial Results

VANCOUVER, British Columbia, Aug. 06, 2020 (GLOBE NEWSWIRE) -- Westport Fuel Systems Inc. (“Westport Fuel Systems”) (TSX:WPRT / Nasdaq:WPRT) reported financial results for the second quarter ended June 30, 2020 and provided an update on operations. All figures are in millions of U.S. dollars unless otherwise stated.

Key Results

  • Consolidated revenues for the quarter ended June 30, 2020 decreased by $46.4 million to $36.0 million, or 56% relative to the same period last year, mainly due to lower sales resulting from plant closures and reduced customer demand related to the COVID-19 pandemic. Consolidated revenues for the six months ended June 30, 2020 were $103.2 million compared to $155.6 million for the prior year period.
  • Net income for the second quarter of 2020 was $3.0 million compared to a loss of $2.6 million for the comparative period mainly due to a $7.7 million insurance recovery related to the $10.0 million charge for a field service campaign for the replacement of pressure release devices recorded in the first quarter of 2020.  Net loss for the six months ended June 30, 2020 was 12.3 million compared to $5.6 million for the prior year period.
  • Adjusted EBITDA increased to $6.2 million for the quarter ended June 30, 2020. Excluding the insurance recovery, Adjusted EBITDA would have been negative $1.5 million for the quarter. For the six months ended June 30, 2020, Adjusted EBITDA was $2.6 million compared to $15.4 million in the prior year period.
  • Through August 5, 2020, liquidity improved by over $50 million through new borrowings, principal deferrals, extension of the convertible notes and government wage subsidy programs to weather the economic impact of COVID-19 and continue funding our operations and investment plans.

While the impact of COVID-19 on our Q2 results was significant, we are now in full recovery-mode, with our factories responding to increasing market demand for our products” said David M. Johnson, Chief Executive Officer of Westport Fuel Systems. “With the support of governments and our financial partners we are ready and able to support the green recovery with our clean transportation solutions.  Despite the uncertainty that remains in markets around the world, demand for Westport HPDI 2.0TM and for our Light-Duty OEM and aftermarket products is recovering.”

COVID-19 and Outlook

Although a rebound in customer demand is evident, the outbreak of COVID-19 had an adverse impact on our business during the second quarter 2020 and continues to affect our business. The extent, duration and impact of COVID-19 and governmental and societal responses is uncertain. A significant portion of our production is from three facilities located in Northern Italy, and sales from these facilities are primarily to Western and Eastern Europe. Our Brescia facility was closed from March 16, 2020 through May 4, 2020. This facility produces components in the light-duty OEM business and assembles LNG tank systems for the heavy-duty OEM business. Our Cherasco and Albinea facilities were closed from March 22, 2020 through May 4, 2020. These facilities produce components and kits in the IAM, DOEM, electronics and OEM businesses.

In addition to our production facilities, our European HPDI launch partner temporarily closed its facilities in mid-March in response to safety concerns and government restrictions arising from the spread of COVID-19. Our launch partner reopened its production facilities in late April and we expect strong sales of our HPDI product in the second half of 2020.

At this time, customer demand for our light-duty and aftermarket products for the full year 2020 is difficult to estimate and will be highly dependent on the duration and severity of the COVID-19 pandemic and post-pandemic market weakness. Our consolidated sales in the first half of 2020 declined as a result of COVID-19 and we expect that the pandemic will impact our results of operations during the remainder of 2020, with the most significant impact to revenue realized in the second quarter of 2020.

Our light-duty OEM and DOEM businesses are dependent on new vehicle sales with gaseous fuel systems. Sales revenue in these businesses declined significantly during the second quarter of 2020 due to the impact of COVID-19 pandemic, but we anticipate a progressive recovery in the third and fourth quarters of 2020 from the first half of the year. With low emissions and low fuel costs, LPG and CNG-fueled vehicles are available and sustainable alternative gaseous fuel systems supported by a growing network of refueling infrastructure.

We believe that our heavy-duty business will be less impacted than the IAM and light-duty OEM businesses due to on-going need for freight transportation and the growing demand for cost-competitive and climate-friendly products. Demand for essential goods remains and consumer delivery of these goods has increased, resulting in more stable demand for medium and heavy-duty trucks.

While the certification of the WWI HPDI engine through a multi-step, multi-party activity was delayed in the first half of 2020 due to the impact of COVID-19 in China, we expect the certification and start of production and sales within this year.

In response to COVID-19, we have implemented several austerity measures, including actions to reduce costs, such as salary and other compensation deferrals and reductions, and delaying non-critical projects and capital expenditures. We have been working with our key lenders and have made significant progress to strengthen our liquidity and reduce our cost of capital:

  • On March 25, 2020, $6.0 million in principal deferrals on our term loan from Export Development Canada;
  • On May 28, 2020, a €5.0 million government backed term loan from UniCredit S.p.A. ("UniCredit") to our Emer subsidiary;
  • On July 17, 2020, a €15.0 million government backed term loan from UniCredit to our MTM subsidiary;
  • On July 23, 2020, a $10.0 million bridge loan secured through Export Development Canada at a 6.25% interest rate;
  • On July 24, 2020, we announced the refinancing of our convertible notes with Cartesian Capital Group and its affiliates ("Cartesian"). Under the terms of the agreement, on July 30, 2020, we paid down the principal amount of the existing convertible notes from $17.5 million to $10.0 million. Concurrent with this repayment, the maturity of the remaining amended notes was extended to three years from the date of the amendments and the coupon rate was reduced from 9.0% annually to 6.5% annually.

2Q20 Financial Highlights

($ in millions, except per share amounts) Over /
 Over /
Revenues$36.0 $82.4 (56)%$103.2 $155.6 (34)%
Gross Margin12.2 19.3 (37)%16.5 36.5 (55)%
Gross Margin %

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