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published: May 8, 2012
VANCOUVER, BC – Westport Innovations Inc. (TSX:WPT / NASDAQ:WPRT), the global leader in natural gas engines, today reported financial results for the first quarter ended March 31, 2012 and provided an update on operations. All figures are in U.S. dollars unless otherwise stated.
“The numbers are compelling,” said David Demers, CEO of Westport Innovations. “Compared to the same period last year, Westport Light-Duty revenue was up 258%, Cummins Westport revenue was up 110%, Westport Heavy-Duty revenue was up 65%, and Weichai Westport revenue was up 49%. Customer interest is expanding rapidly, and we see an array of potential investment opportunities with our global partners. Adding to our financial growth, we expect to announce new partnerships in each of our business units this year.”
“Strong growth across all our business units and in all geographic regions continues to demonstrate the rapid emergence of natural gas as a significant fuel for transportation applications,” added Demers. “We are at the start of a long wave of change in both energy and transportation and we believe Westport is well positioned to establish a leading position in this new industry.”
“Over the next three years, we will be launching new products in existing and new markets. The new ISX12 G engine from CWI is a significant step into a major new market opportunity, targeting regional haul, vocational and refuse truck applications. The new Weichai Westport™ WP12 High Pressure Direct Injection (HPDI) Landking 12-litre engine marks a historic shift in technology and engine development in China. The new Westport WiNG™ Power System is a fully-integrated, CNG bi-fuel system for the Ford F-250 and F-350 pick-up trucks, with an industry-leading starting price point. We are advancing steadily to Volvo’s launch of an HPDI heavy-duty natural gas engine for the European market and recently started working with a global engine OEM to develop an HPDI heavy-duty natural gas engine for the North American market. Including our share of the CWI engine program, Westport expects to invest more than $80 million this year in new product and technology development.”
For the calendar year ended December 31, 2012, Westport reiterated its revenue guidance for growth of approximately 50% year over year with consolidated revenue expected to be between $400 and $425 million.
Westport’s consolidated revenue for the three months ended March 31, 2012 was $88.6 million, an increase of $50.5 million, or 132.5%, from $38.1 million for the three months ended March 31, 2011. This increase was driven by an increase in Westport LD revenue of $19.2 million to $26.7 million as the Company began consolidating previous acquisitions; an increase in CWI revenue of $27.6 million to $52.7 million; and an increase in Westport HD revenue of $3.7 million to $9.3 million. $2.7 million associated with the Volvo development agreements were recorded as research and development expenses in the period incurred in the consolidated statement of operations, which will be reimbursable on completion of the next milestone scheduled for the quarter ended June 30, 2012. Due to timing of milestones, no Volvo service revenue was recorded this quarter, compared to $4.1 million in the same period last year and $9.8 million in the quarter ended December 31, 2011.
CWI product revenue for the quarter ended March 31, 2012 increased $25.2 million to $43.6 million as unit sales increased from 773 units to 1,943 units primarily as the result of increased sales volume of ISL G engine sales in North America and sales of C Gas Plus engines for a major bus project in Venezuela. Westport HD product revenue for the quarter ended March 31, 2012 increased by $8.1 million to $8.7 million as unit shipments increased to 151 HD systems compared to $0.6 million and 2 HD systems for the three months ended March 31, 2011. CWI parts revenue increased by $2.4 million quarter over quarter to $9.1 million. Westport HD parts revenue for the three months ended March 31, 2012 was $0.6 million compared with $0.9 million for the three months end March 31, 2011. The number of engines in the field, their age and their reliability all impacted parts revenue each period.
For the three months ended March 31, 2012, gross margin was $28.5 million compared to $17.6 million in the prior year period representing a 61.9% increase. Westport continues to diversify its revenues among the business units, which has an impact on the consolidated gross margin percentage. The consolidated gross margin percentage for the quarter ended March 31, 2012 was 32.2% of total revenue compared to 46.3% of total revenue in the prior year period. The decrease in consolidated gross margin percentage is primarily due to product mix, warranty adjustment, and the year-over-year increase in sales from Westport LD and HD. For the quarter ended March 31, 2012, Westport LD recorded gross margin and gross margin percentage of $7.4 million and 27.8%, respectively, compared to $1.7 million and 23.2%, respectively, in the prior year period. CWI gross margin and gross margin percentage for the quarter ended March 31, 2012 was $19.6 million and 37.3%, respectively, compared to $11.5 million and 45.9%, respectively, in the prior year period. The decrease in CWI gross margin percentage is due primarily to warranty adjustments of $3.6 million and mix of sales. Westport HD gross margin (not including service revenue) and gross margin percentage for the three months ended March 31, 2012 was $1.4 million and 15.4%, respectively, compared with $0.3 million and 22.3%, respectively, in the comparable quarter last year.
For the three months ended March 31, 2012, operating expenses (research and development, general and administrative and sales and marketing) were $36.7 million compared to $22.8 million in the prior year period.
Income from investment accounted for by the equity method for the three months ended March 31, 2012 was $0.8 million, which related to Westport’s 35% interest in Weichai Westport (WWI) of $0.6 million and 50% interest in Minda-Emer Technologies Ltd. of $0.2 million. This is compared to Westport’s 35% interest in WWI of $0.4 million in the prior year period. CWI’s net income attributable to Westport was $4.8 million, an increase of more than 118% compared to $2.2 million in the prior year period.
For the three months ended March 31, 2012, Westport reported consolidated adjusted EBITDA of a loss $9.5 million compared to a loss of $6.0 million in the prior year period. For comparability purposes, the Company did not record any service revenue under Volvo development agreement during the quarter, compared to $4.1 million in the prior year period. Taking this into consideration, the adjusted EBITDA loss for the quarter was consistent with the prior years’ period. The reconciliation of adjusted EBITDA is described below.
Westport’s consolidated net loss attributed to the Company for the three months ended March 31, 2012 was $22.6 million, or a loss of $0.44 per share, compared to net loss of $14.4 million, or a loss of $0.31 per share, in the three months ended March 31, 2011.
As at March 31, 2012, Westport’s cash, cash equivalents and short-term investment position was $333.3 million compared to $85.7 million as at December 31, 2011.
For the three months ended March 31, 2012, Westport LD revenue was $26.7 million compared to $7.5 million for the three months ended March 31, 2011.
During the quarter Westport purchased certain assets of AEC of Perth, Western Australia, for A$1.1 million (approximately US$1.1 million) paid in cash and assumed liabilities. Westport acquired AEC's Australian business assets including its intellectual property, key contracts, inventory and fixed assets, as well as AEC's Australian leased facility in Perth and 10 of its employees, mostly with electronic control expertise. The acquisition further enhances Westport engine controls and injector capabilities.
The Westport WiNG Power System, a fully-integrated, compressed natural gas (CNG) bi-fuel system for the Ford F-250 and F-350 trucks, was priced in February. Based on Ford's new 6.2L hardened gasoline engine platform, the Westport WiNG-equipped trucks run on either inexpensive natural gas or ordinary gasoline and offer unparalleled drivability. The Westport WiNG Power System carries an industry-leading price of $9,750 as an option at Westport authorized Ford dealers and distributors. On average, the Westport WiNG-powered Ford pickups are expected to save fleets upwards of $2 per gallon in fuel costs, and depending on miles driven, can demonstrate a payback in less than two years. Preparation of the Westport WiNG assembly facility in Louisville, Kentucky is completed and shipment of finished trucks is scheduled for the second quarter of 2012.
Westport LD industrial engine division delivered Juniper 2.4L liquefied petroleum gas engines to Clark Material Handling for forklift application and also commenced shipments to Maximal forklifts in the quarter. Westport LD also delivered 2.4L engine packages for industrial stationary applications such as oilfield installations and power generation.
For the three months ended March 31, 2012, CWI revenue increased to $52.7 million on 1,943 units compared to $25.1 million on 773 units for the three months ended March 31, 2011. CWI’s net income attributable to Westport for the three months ended March 31, 2012 was $4.8 million compared to $2.2 million for the same period in 2011. The first quarter sales included a 794 unit order for C Gas Plus engines for buses that will go into service in Venezuela.
During the quarter, Westport and Cummins Inc. entered into an amended and restated joint venture agreement (JVA) for CWI. The new JVA has a term of ten years and was amended to provide for, among other things, clarification concerning the scope of products within CWI, the revision of certain economic terms of the agreement and the release of CWI-owned intellectual property, including its stoichiometric cooled SEGR spark-ignition engine technology, to its parents, Cummins and Westport. Jim Arthurs, formerly Westport Vice President, Off Engine Systems has been appointed President of CWI.
CWI announced the ISX12 G, a 12 litre heavy-duty natural gas engine for regional haul, vocational and refuse truck applications. This new engine will utilize CWI’s proprietary spark-ignited SEGR technology first introduced with the 8.9 litre ISL G. The ISX12 G was formally unveiled at the Mid-America Truck Show in March with all four heavy-duty OEM launch partners displaying ISX12 G-equipped trucks.
The ISX12 G is currently in field trials with full production expected to commence in early 2013. The engine will be manufactured in Cummins' heavy-duty engine plant in Jamestown, New York. CWI is working with OEM launch partners including Freightliner, Peterbilt, Kenworth, Volvo and Autocar, all of whom are participating in the field trials, to ensure broad availability of the ISX12 G when volume production commences.
CWI also announced that Navistar will offer the Cummins Westport ISL G in the International® TranStar and WorkStar trucks. With the addition of Navistar, CWI now provides the ISL G to all major North American truck OEMs.
For the quarter ended March 31, 2012, Westport HD shipped 151 HD Systems to Kenworth and Peterbilt for liquefied natural gas (LNG) truck production for customers, compared to 2 HD Systems in the quarter ended March 31, 2011. LNG trucks were delivered during the quarter to UPS, Heckmann Corporation, Green Energy Oilfield Services and Robert Transport.
Several industry events during the quarter highlighted the widespread interest in natural gas for heavy-duty trucks, including several initiatives launched by the natural gas industry. Significant opportunity is emerging within the gas industry’s own supply chain for natural gas trucks, which will significantly reduce cost of exploration and production and allow these companies to use their own energy production to fuel operations. Other high fuel consumption fleets report significant operating cost savings with Westport HPDI trucks, often with paybacks under one year.
Westport HD has launched Jumpstart fuel services to facilitate the early adoption of LNG trucks while construction of new LNG refuelling infrastructure is being completed. Jumpstart offers co-ordinated fuel delivery and refuelling via portable Orca™ LNG trailers for Westport HD customers. Four fleets now have trucks operating under Jumpstart programs, and we expect to expand this business offering while global refuelling networks are being built out.
Westport HD announced in February that it was investing in a collaborative program with a global truck OEM to develop a heavy-duty truck featuring Westport proprietary HPDI LNG technology for the North American market. The program is expected to start delivery in 2014.
For the three months ended March 31, 2012, WWI revenue increased to $37.2 million on 2,728 engines compared to $24.9 million on 1,771 engines for the calendar quarter ended March 31, 2011. In March, Westport announced the introduction of China's first natural gas engine featuring Westport HPDI technology at a press conference at the government building in Beijing, the Beijing Diaoyutai State Guesthouse. The Weichai Westport HPDI engine is currently undergoing road testing with a select OEM customer, Shaanxi Automobile Group. Commercial launch of this new product is expected in 2013.
Adjusted EBITDA is used by management to review operational progress of its business units and investment programs over successive periods and as a long-term indicator of operational success since it ties closely to the unit’s ability to generate sustained cash flows. Westport defines Adjusted EBITDA as net loss attributed to the Company before (a) income taxes, (b) depreciation and amortization, (c) interest expense, net, (d) amortization of stock-based compensation, (e) unrealized foreign exchange loss (gain), (f) income (loss) from unconsolidated joint ventures and (g) gains and other. The term Adjusted EBITDA is not defined under U.S. generally accepted accounting principles, or U.S. GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. Adjusted EBITDA has limitations as an analytical tool, and when assessing Westport's operating performance, investors should not consider Adjusted EBITDA in isolation, or as a substitute for net loss or other consolidated statement of operations data prepared in accordance with U.S. GAAP. Among other things, Adjusted EBITDA does not reflect Westport's actual cash expenditures. Other companies may calculate similar measures differently than Westport, limiting their usefulness as comparative tools. Westport compensates for these limitations by relying primarily on its GAAP results and using Adjusted EBITDA only supplementally.
|3 months ended|
|Net loss attributed to the Company||$||(22,627)||$||(14,377)|
|Provision for income taxes||6,199||2,307|
|Depreciation and amortization||2,519||1,007|
|Interest expense, net||1,271||761|
|Amortization of stock-based compensation||3,562||1,426|
|Unrealized foreign exchange loss (gain)||385||3,275|
|Less: Income from unconsolidated joint ventures||762||373|
This press release includes financial outlook information for Westport and such information is being provided for the purpose of updating prior revenue disclosure and may not be appropriate for, and should not be relied upon for, other purposes.
To view Westport’s full financials for the quarter ended March 31, 2012, please point your browser to the following link: http://www.westport.com/investors/financial
Westport has scheduled a conference call for today, Tuesday, May 8, 2012 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 website at www.westport.com/investors.
To access the conference call replay, please dial 1-800-319-6413 (Canada & USA toll-free) or 604-638-9010 using the pass code 1847. The replay will be available until May 15, 2012. Shortly after the conference call, the webcast will be archived on the Company’s website and replay will be available in streaming audio.
Westport Innovations Inc. is a leading global supplier of proprietary solutions that allow engines to operate on clean-burning fuels such as compressed natural gas (CNG), liquefied natural gas (LNG), hydrogen, and renewable natural gas (RNG) fuels such as landfill gas and help reduce greenhouse gas emissions (GHG). Westport technology offers advanced LNG fueling systems with direct injection natural gas engine technology for heavy-duty vehicles such as highway trucks and off-road applications such as mining and rail. Cummins Westport, our joint venture with Cummins Inc., designs, engineers and markets spark-ignited natural gas engines for medium- and heavy-duty transportation applications such as trucks and buses. Westport is also one of the global leaders for natural gas and liquefied petroleum gas (LPG) fuel system technology, design, and components in passenger cars, light-duty trucks and industrial applications such as forklifts. To learn more about our business, visit westport.com, subscribe to our RSS feed, or follow us on Twitter @WestportDotCom.