Westport Fuel Systems (WPRT) Q3 2024 earnings summary

Executive summary

• Q3 2024 marked the first full quarter with the Cespira JV operational, generating $16.2 million in revenue and shifting heavy-duty OEM revenue to equity accounting, resulting in a reported revenue decrease, though Cespira itself grew year-over-year.

• Significant cost-cutting initiatives led to a 40% reduction in SG&A and R&D expenses compared to Q3 2023, improving gross margins and adjusted EBITDA.

• Gross margin improved to $14.5 million (22% of revenue), up from $13.2 million (17%) in Q3 2023, and adjusted EBITDA loss narrowed to $0.8 million from $3 million in the prior year period.

• The light-duty segment outperformed expectations, with strong demand for Euro 6 LPG programs and new product launches, including the Kia Niro Tri-Fuel in Italy.

• Net loss improved to $3.9 million from $11.9 million year-over-year, driven by higher gross margin, cost reductions, and a net foreign exchange gain.

Financial highlights

• Q3 2024 revenue was $66.2 million, down 14% year-over-year due to the transfer of heavy-duty OEM business to Cespira.

• Cespira generated $16.2 million in revenue, up from $13.5 million in Q3 2023.

• Gross margin increased to $14.5 million (22% of revenue) from $13.2 million (17%) year-over-year.

• Adjusted EBITDA loss narrowed to $0.8 million from $3 million in the prior year period.

• Cash and cash equivalents at quarter-end were $33.3 million, with $7 million in debt repaid during the quarter.

Outlook and guidance

• Inventory levels are expected to normalize by year-end, freeing up cash and reducing working capital needs.

• The transition to Euro 7 kits in the light-duty segment is expected to be seamless, with no production disruption anticipated; Euro 7 production to begin mid-to-late 2025.

• Heavy-duty OEM volumes are increasing, and the business is prepared to onboard additional OEMs, with development work ongoing.

• Restructuring and right-sizing efforts will continue for at least another year to achieve sustainable EBITDA break-even.

• Management remains confident in the long-term adoption of hydrogen as a fuel, despite current infrastructure delays.