WPRT earnings name for the interval ending December 31, 2024.
Picture supply: The Motley Idiot.
Westport Gasoline Techniques (WPRT -2.59%)
This fall 2024 Earnings Name
Mar 31, 2025, 1:30 p.m. ET
Contents:
- Ready Remarks
- Questions and Solutions
- Name Individuals
Ready Remarks:
Operator
Good day, and thanks for standing by. Welcome to Westport’s This fall convention name. At the moment, all contributors are in a listen-only mode. After the audio system’ presentation, there can be a question-and-answer session.
[Operator instructions] Please be suggested that immediately’s convention is being recorded. I might now like at hand the convention over to your speaker immediately, Ashley Nuell, vp of investor relations. Please go forward.
Ashley Nuell — Senior Director, Investor Relations
Good morning, everybody. Welcome to Westport Gasoline Techniques convention name concerning outcomes for the fourth quarter and 2024 fiscal 12 months. This name is being held to coincide with the press launch containing Westport’s monetary outcomes that have been issued earlier immediately. On immediately’s name, talking on behalf of Westport is Chief Government Officer and Director Dan Sceli; and Chief Monetary Officer Invoice Larkin.
Attendance on this name is open to the general public, however questions can be restricted to the funding group. You’re reminded that sure statements made on this name and our responses to sure questions could represent forward-looking statements inside the that means of the U.S. and relevant Canadian securities legal guidelines. And as such, forward-looking statements are made based mostly on our present expectations and contain sure dangers and uncertainties.
With that, I’ll flip the decision over to you, Dan.
Dan Sceli — Director and Chief Government Officer
Thanks, Ashley. Good morning, everybody. Earlier this morning, not solely did we announce our 2024 fourth-quarter and full-year outcomes, however we additionally introduced an thrilling transaction that will result in the divestment of our light-duty enterprise. This proposed transaction is predicted to allow Westport to change into considerably stronger from a monetary perspective and permit us to taper our concentrate on creating options for hard-to-decarbonize segments of the long-haul heavy-duty transport and industrial area.
Given the thrill round this transaction, we’ve adjusted the movement of this name so we are able to focus our time on outlining the proposed transaction the potential that it affords Westport and its shareholders. So, immediately, following a couple of opening remarks from me, we’ll kick the decision off with Invoice strolling by way of the fourth-quarter and year-end outcomes. After which I am going to dive into the main points of the transaction earlier than we go to our question-and-answer interval. Regardless of revenues for the 12 months being down by 9% as in comparison with the earlier 12 months, primarily because of the HPDI income now sitting in Cespira, our dedication to our three key pillars, positioned us to ship enhancements throughout the board, together with in our gross revenue and gross revenue margins.
Our adjusted EBITDA and for one of many first instances ever, we delivered constructive internet money from operations. I am very pleased with how Westport carried out within the 2024 interval and acknowledge we nonetheless have plenty of work in entrance of us as we proceed to evolve the corporate in 2025. I am going to now hand the decision over to Invoice so he can present some extra info on the monetary outcomes. Invoice?
Invoice Larkin — Chief Monetary Officer
Thanks, Dan. Shifting on to our fourth-quarter and year-end outcomes. As anticipated, the transition of the heavy-duty OEM enterprise and the Cespira impacted revenues for each the fourth quarter and full 12 months 2024. This was partially offset by a rise in gross sales in our light-duty phase.
Within the fourth quarter of 2024, we generated 75.1 million in income. This can be a 14% lower in comparison with the prior-year interval. For the complete 12 months of 2024, income was 302.3 million, a 9% lower in comparison with the earlier 12 months. According to our key precedence of enhancing operational excellence and decreasing value, we delivered improved margins in each the fourth quarter and full 12 months ended December 31, 2024.
Gross margin elevated to 14.3 million or 19% of income in This fall of 2024. That is up from 8 million or 9% of income in This fall of 2023. For the complete 12 months of 2024, gross margin elevated to 57.6 million or 19% of income. That is up from 48.9 million or 15% of income for the complete 12 months of 2023.
A rise in gross sales to determine European prospects relatively than rising markets additionally helped to enhance our margins. We demonstrated continued enhancements in our adjusted EBITDA metrics for each the fourth quarter and 12 months ended December thirty first, 2024. For the quarter, we reported an adjusted EBITDA lack of 1.8 million. That is considerably lower than the adjusted EBITDA lack of 10.9 within the fourth quarter of 2023.
For the complete 12 months, we reported an adjusted EBITDA lack of 11.2 million. This can be a appreciable enchancment in comparison with an adjusted EBITDA lack of 21.5 million for the complete 12 months of 2023. Concerning liquidity, our money and money equivalents on the finish of 2024 have been 37.6 million, as in comparison with 54.9 million on the finish of 2023. The lower was primarily pushed by debt funds, partially offset by money supplied by our working and investing actions.
2024 marked one of many first instances Westport generated constructive money movement from operations, with internet money supplied by working actions of seven.2 million. The discount in working losses, together with a rise in money collected from accounts receivable, together with the sale of Italian value-added tax receivables of 5.9 million, drove the development in money supplied by working actions, which have been partially offset by stock associated to our heavy-duty OEM and light-duty companies. Internet money supplied by investing actions was 4.5 million for the 12 months, pushed by proceeds from the sale of investments of 30 million, primarily associated to the Cespira, partially offset by purchases of property, vegetation, and tools of 16.9 million and our capital contributions to Cespira of 9.9 million. Internet money utilized in financing actions was 25.2 million in 2024.
In January 2024, we obtained new time period mortgage of three.8 million from UniCredit that has private repayments beginning in 2025. Throughout 2024, along with our scheduled principal funds on our time period debt we paid in stuffed with revolving credit score facility with RBC with 15.2 million was excellent on this credit score facility on the finish of 2023. We closed this revolving financing facility with RBC in November of 2024. As you learn in our press launch and monetary outcomes launched this morning, based mostly on our projected capital expenditures, debt servicing obligations and working money necessities underneath our present marketing strategy, we’re projecting that our money and money equivalents is not going to be adequate to fund our operations for the following 12 months.
This morning, we additionally introduced the sale of our light-duty enterprise, which is able to strengthen our steadiness sheet. As well as, we plan to proceed driving our cost-reduction initiative. We’ve made many constructive modifications all through 2024, together with enhancements in margin and adjusted EBITDA as I reviewed earlier. We imagine this transaction leads the enterprise in the suitable route whereas permitting us to focus by way of with our dedication to strengthening the steadiness sheet and growing the HPDI and high-pressure controls and techniques segments.
With that, I’ll go the decision again to Dan, who’s going to stroll by way of our divestiture announcement. Dan?
Dan Sceli — Director and Chief Government Officer
Yeah. Thanks, Invoice. So, this morning, Westport introduced that it has entered into an settlement to divest its light-duty enterprise, which incorporates the light-duty OEM enterprise, delayed OEM, and impartial aftermarket companies. Along with considerably strengthening our steadiness sheet as Invoice talked about, the proposed transaction simplifies our aggressive technique and streamlines our operations, permitting Westport to concentrate on HPDI expertise in our Cespira three way partnership and on our high-pressure controls and techniques enterprise, the place we see the strongest alternatives for development.
The transaction is valued at 75.1 million or 69.5 million euros, with the potential for an incremental 6.5 million or 6 million euros to be paid in earn-outs if sure situations are met. We anticipate closing the transaction by the tip of Q2 2025, topic to the receipt of shareholder approval and different customary closing situations. The transaction considerably improves our monetary place, and shifting ahead, we’re dedicated to sustaining a stronger steadiness sheet. The proposed transaction would deliver ahead extra cash immediately than we anticipated underneath the light-duty enterprise’ five-year money movement projections and permits us to fund near-term natural development alternatives for each Cespira and the high-pressure controls and techniques phase.
It additionally permits us to think about bolt-on acquisitions. Lastly, publish transaction, our group can be a lot smaller and extra targeted. We are going to intend to align the price construction with that of a smaller, extra environment friendly group. The resurgence of pure gasoline and renewable pure gasoline globally supplies a market alternative for Westport, notably in North America, the place pure gasoline infrastructure is considerable and RNG manufacturing is rising.
As well as, we imagine that hydrogen will play a job in hard-to-decarbonize cellular functions long run. Each Cespira and our high-pressure controls and techniques phase have merchandise and applied sciences enabling using lower-carbon fuels immediately to handle decarbonization with internet zero and low-carbon fuels, whereas additionally having an inexpensive answer when zero-carbon hydrogen turns into extra obtainable. With this announcement, our aim is to revert again to our roots and change into a extra targeted group. Westport has 30 years of expertise delivering part options and growing HPDI applied sciences.
At its core, Westport is a clear tech innovation firm that gives OEMs with simplified options to decarbonize difficult segments of the heavy-duty transport and industrial markets, using quite a lot of various fuels. Via Cespira, the HPDI gasoline system does the on-engine work, whereas our high-pressure controls and techniques phase produce merchandise do the off-engine work. As our world inhabitants continues to develop, transportation of products stays critically necessary. The worldwide heavy-duty truck market is predicted to achieve nearly 2 million new vehicles on the street in 2025.
As this phase grows, offering options to allow emission reductions is crucial. Regardless of technological developments, decarbonizing long-haul heavy-duty transport stays a problem with substantial reductions in CO2 emissions nonetheless to be realized. Actually, in Europe, the expertise presently making the biggest affect on heavy-duty long-haul trucking GHG emissions are pure gasoline and biogas gasoline inner combustion engines with HPDI main the way in which. Whereas OEMs have explored a number of options, widespread adoption has been restricted, whereas pure gasoline and biogas fueled inner combustion engines have seen modest adoption.
Such adoption, however, eclipses the adoption of some other carbon mitigating options. As well as, fleet operators are prioritizing cost-effectiveness and complete value of possession with emissions typically taking a secondary position. Subsequently, for options to realize traction, they have to preserve efficiency and be cost-effective. Hydrogen is acknowledged as an answer for the long-haul functions long-term.
In the meantime, demand continues to develop for low and zero-carbon options in hard-to-decarbonize functions equivalent to heavy-duty trucking. To deal with these challenges, Westport by way of Cespira is advancing fuel-agnostic heavy-duty transport associated applied sciences, rising its pure gasoline and biogas options immediately whereas laying the groundwork for hydrogen adoption sooner or later. The HPDI gasoline system is probably the most inexpensive, commercially viable possibility that doesn’t compromise on efficiency and that may ship internet zero carbon emissions and heavy-duty transport. As further hard-to-decarbonize functions emerge within the transport sector, high-pressure techniques and controls can be wanted whatever the powertrain and complement the transition from pure gasoline to renewables to hydrogen.
Our high-pressure controls and techniques enterprise designs, develops and produces, and sells elements for transportation and industrial functions. Improvement during the last 5 years is targeted on the hydrogen market however with latest development in CNG, we intend to leverage our high-pressure experience and develop the CNG product portfolio, offering efficient options for decarbonization by using various fuels immediately whereas advancing zero-emissions hydrogen options for the longer term with desire to these serving heavy-duty, off-road, and industrial functions. We plan to mix our controls functionality direct with our tank valves, regulators, and strain reduction units, shifting us towards a system-based answer. This transition is deliberate to incorporate the development of our product portfolio and extra CNG functions, leveraging the capabilities in our high-pressure controls and techniques enterprise to shorten the timeline to enter the North American market with a product providing that may run on RNG immediately and hydrogen sooner or later.
As we glance to the longer term, Westport appears to be like to develop its addressable market, taking part in a bigger a part of the ecosystem in mobility and industrial area that is not simply electrified. In closing, first, thanks to everybody who joined the earnings name immediately. Your continued help is invaluable to us. We’re enthusiastic about Westport’s future, and we need to transfer by way of 2025 with objective, creating worth for our shareholders and cultivating alternatives to develop as an organization.
We imagine that shifting our focus to our HPDI and our high-pressure controls and techniques segments will present us with the absolute best future. We perceive that loads is proposed to be altering. And with change comes arduous work, however we’re eager to embrace. Thanks once more for becoming a member of us immediately.
Questions & Solutions:
Operator
[Operator instructions] Please stand by whereas we compile the Q&A roster. Our first query comes from Eric Stine from Craig-Hallum Capital Group.
Eric Stine — Analyst
Hello, everybody. Thanks for taking the questions.
Dan Sceli — Director and Chief Government Officer
Hey, good morning, Eric.
Invoice Larkin — Chief Monetary Officer
Good morning.
Eric Stine — Analyst
Hey, howdy. So, possibly simply beginning with HPDI. I do know you do not escape items however clearly a step-up in revenues in This fall. So, possibly if you happen to might simply, from a excessive stage, discuss type of unit traits that you just noticed within the quarter causes for that? After which any element you can provide on expectations, whether or not it is items or development for ’25.
Invoice Larkin — Chief Monetary Officer
Certain, certain. Effectively, actually, we did see This fall volumes go up with our OEM buyer rising manufacturing builds. And we will see these carrying on by way of into 2025. So, what we’re seeing is {the marketplace} adopting this expertise.
It is beginning to get its legs beneath it. After all, we’re coping with a worldwide market and the plan all alongside has been that this enterprise would develop over the primary two, three, 4 years, and it is in actual fact doing that. So, we’re hitting the plan versus manufacturing volumes, and we really feel excellent about the place it is headed.
Eric Stine — Analyst
Obtained it. After which possibly simply an replace, sticking with HPDI. I do know that you’ve got actually expressed confidence in previous calls and investor outreach on further OEMs. I do know that that may be a mandate of the three way partnership and its companions.
The place do issues stand there?
Dan Sceli — Director and Chief Government Officer
Effectively, the efforts to herald different OEMs continues arduous. I am truly sitting abroad proper now, strolling — simply popping out of conferences with further OEMs working at it. And as you understand, we’re not allowed to make use of their names they do not like that very a lot. However that is, in actual fact, the place I’m proper now.
So, these efforts are choosing up steam. I believe the most important factor that we must be watching is that this pendulum shift within the pure gasoline world, proper? I believe that we’re seeing a world that is swinging again from electrify all the pieces or gasoline cells for all the pieces. We’re feeling the load of that coming. And so, the industrial discussions with different OEMs are taking place and persevering with to choose up tempo.
Eric Stine — Analyst
Obtained it. Obtained it. After which possibly simply — I am going to sneak in yet one more after which flip it over simply on the divestiture.
Dan Sceli — Director and Chief Government Officer
Yeah, certain. Certain.
Eric Stine — Analyst
Are you able to simply remind me how a lot debt is tied to that light-duty enterprise? I sense that it is a respectable quantity, however if you happen to might simply type of dial that piece in for us that you’ll now not have, that will be useful.
Dan Sceli — Director and Chief Government Officer
Certain. Invoice, you need to do this?
Invoice Larkin — Chief Monetary Officer
Yeah. Primarily, all of the debt, besides for about 7 million, is said to the light-duty enterprise. So, you are trying —
Eric Stine — Analyst
That is — that is gone, proper? I imply, that can be on?
Invoice Larkin — Chief Monetary Officer
Sure. Yeah. So, it’s going to simply be — the EDC debt, that continues to be with the enterprise with us.
Eric Stine — Analyst
OK, that is nice. Thanks.
Dan Sceli — Director and Chief Government Officer
All proper. Thanks, Eric.
Operator
Thanks. One second for our subsequent query. Our subsequent query comes from the road of Rob Brown from Lake Avenue Capital Markets.
Rob Brown — Lake Avenue Capital Markets — Analyst
Hello, good morning.
Dan Sceli — Director and Chief Government Officer
Good morning, rob.
Invoice Larkin — Chief Monetary Officer
Good morning.
Rob Brown — Lake Avenue Capital Markets — Analyst
Simply to make clear the final level, your sale worth of 73 million is form of internet of all the pieces, after which the debt will — that portion of debt can be gone. So, your form of enterprise worth of the entire was over, I assume, over 100 million. Is that proper?
Invoice Larkin — Chief Monetary Officer
Effectively — so, you are going to offset that towards the money on the opposite aspect.
Rob Brown — Lake Avenue Capital Markets — Analyst
OK. OK. So, you may internet after the debt. Obtained it.
Invoice Larkin — Chief Monetary Officer
Yep.
Rob Brown — Lake Avenue Capital Markets — Analyst
After which possibly on the technique — type of the technique of the enterprise going ahead. What’s form of the income charge of the enterprise that you just retain? And I do know you laid out a lot of the elements that you just look to develop, however possibly a way of the way you method that market, how lengthy it takes to get these merchandise extra into the pure gasoline aspect in addition to the hydrogen and simply possibly form of a way of the technique of the continued enterprise.
Dan Sceli — Director and Chief Government Officer
Yeah. The reply is absolutely two completely different buckets. Clearly, the HPDI or Cespira bucket, we’re on a glide path of accelerating volumes per plan that have been constructed into this enterprise to begin it up. And people are going to proceed to go at that tempo.
Clearly, touchdown one other OEM does not give us speedy income bump as a result of any OEM we land will undergo the event cycle, nevertheless it does get — it offers a dedication to the expertise. The opposite piece of our enterprise remaining is the high-pressure controls and techniques. And the expansion that we’ve been seeing during the last 12 months has all been hydrogen-based elements. We received a big quantity of latest enterprise.
And — however the manufacturing launches for many of that enterprise is 2, three years down the street. What we’re doing now, recognizing what’s occurred within the market, we will be pivoting arduous. We’re pivoting arduous to go and create alternatives for those self same forms of strain management elements and techniques within the pure gasoline market. So, we see an enormous swing towards the compressed pure gases in North America.
And it is principally the identical expertise that we use for the hydrogen controls, proper? So, what our plan is as properly, the place the packages will come down the street for hydrogen, we must be promoting into the CNG techniques now, and that is what we’re pivoting to do. I haven’t got any particular timeline to speak to when that enterprise goes to begin rolling in. It is an initiative that we have pivoted to as a result of we have listened to the market. And, in fact, some traders have introduced it up.
Its — for certain, it is an enormous alternative, we imagine, in North America that we will make the most of.
Rob Brown — Lake Avenue Capital Markets — Analyst
Nice, thanks. I am going to flip it over.
Operator
Thanks. [Operator instructions] Our subsequent query comes from the road of Chris Dendrinos from RBC Capital Markets.
Chris Dendrinos — RBC Capital Markets — Analyst
Yeah, good morning, and congratulations on the transaction.
Invoice Larkin — Chief Monetary Officer
Thanks.
Chris Dendrinos — RBC Capital Markets — Analyst
I assume possibly to begin, simply going again to the technique, and I believe you all had talked about that M&A might be a part of this. And so, might you possibly simply discuss what forms of belongings you could be contemplating? And is there — is it the U.S. or North America that you are looking to construct a much bigger presence in? Or might this be one thing that is world in scale? Simply assist us flush that thought course of out just a little bit. Thanks.
Dan Sceli — Director and Chief Government Officer
Certain, certain. Our technique actually is seeking to take the controls that we’ve, the high-pressure controls, and constructing it out right into a full system functionality. So, we’ll be potential alternatives to, in actual fact, do this. We predict that the bigger speedy alternative is certainly in North America for that, however it’s a world enterprise.
There’s — compressed pure gasoline is used all around the world. So — however we will be seeking to construct out that enterprise to be shifted from being a elements play to a techniques play. We do have our expertise capabilities for the complete engine management system. So, mix that with the strain controls, and there is going to be some alternatives available in the market to construct that out.
Chris Dendrinos — RBC Capital Markets — Analyst
Obtained it. After which I assume possibly from an operational standpoint, do you could have the R&D capabilities in-house to pursue that immediately? Or is that this going to be a bit of the story the place you are shrinking a few of the, I assume, name it, worker footprint with the sale however then trying so as to add new workers in these type of development areas? Thanks.
Dan Sceli — Director and Chief Government Officer
Certain, certain. The high-pressure controls is an R&D and engineering group fully separate from the light-duty enterprise in Europe. It is positioned in Cambridge, Ontario in North America and simply outdoors of Toronto. And they’re absolutely outfitted to function independently and construct out this — from a technical perspective, construct out this enterprise.
Chris Dendrinos — RBC Capital Markets — Analyst
Obtained it. Thanks.
Operator
Thanks. At the moment, I might now like to show the convention again over to Dan Sceli, CEO, for closing remarks.
Dan Sceli — Director and Chief Government Officer
Nice. Thanks very a lot. Effectively, once more, thanks to everybody becoming a member of the decision immediately, and recognize the great questions. I do know we’ll have additional discussions, and we’re very enthusiastic about our future.
We’ll proceed to remain very targeted managing this enterprise with self-discipline and excellence. That is one of many huge — one of many greatest issues that I believe we are able to look again on is shifting the tradition to a really disciplined group in order that as we make strategic choices, as we execute operationally, we’re doing it in a really skilled method. And we will handle our prices very, very, very tightly and never get uncontrolled on spending. So, I am proud to say that we’re a well-run enterprise with a group that is fully motivated to expire this technique and supply an awesome future for the shareholders.
So, thanks very a lot.
Operator
[Operator signoff]
Length: 0 minutes
Name contributors:
Ashley Nuell — Senior Director, Investor Relations
Dan Sceli — Director and Chief Government Officer
Invoice Larkin — Chief Monetary Officer
Eric Stine — Analyst
Rob Brown — Lake Avenue Capital Markets — Analyst
Chris Dendrinos — RBC Capital Markets — Analyst
