Westport Fuel Systems Inc (WPRT) 2025 Q4 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to Westport Fuel Systems’ fourth-quarter 2025 conference call. (Operator Instructions) As a reminder, this conference call is being recorded.

At this time, I would like to turn the conference over to Ms. Ashley Nuell. Ma’am, please begin.

Thank you. Good morning, everyone. Welcome to Westport Fuel Systems’ conference call regarding its fourth quarter and full-year 2025 financial and operating results. This call is being held to coincide with the press release containing Westport’s financial results that were issued yesterday after market close. On today’s call, speaking on behalf of Westport will be Chief Executive Officer and Director, Daniel Sceli; and Chief Financial Officer, Elizabeth Owens.

You are reminded that certain statements made on this conference call and our responses to certain questions may constitute forward-looking statements within the meaning of the US and applicable Canadian securities laws. As such, forward-looking statements are made based on our current expectations and involve certain risks and uncertainties.

With that, I’ll turn the call over to you, Dan.

Thank you, Ashley, and good morning, everyone. I want to begin by addressing recent events. We appreciate the patience and support of our shareholders as we worked through our recent cybersecurity incident. Our priority was to ensure the integrity of our IT systems, business continuity, and financial reporting, and we are pleased to confirm that this review has been successfully completed. With this behind us, we’re looking forward to executing on our strategy and delivering on the next phase of our business objectives.

Turning to our financial results. The past year has been a defining one for Westport, marked by the successful divestiture of our Light-Duty business, the recent receipt of a $6.5 million payment, and further strengthened by Cespira’s agreement with a leading OEM to manufacture and deliver HPDI components for a truck trial assessing future commercialization. These accomplishments, combined with ending the year with over $27 million in cash and very low debt, reflect the meaningful progress we have made in sharpening our strategic focus and building a stronger company.

The global heavy-duty transportation market is increasingly recognizing natural gas as a practical, lower-emission solution available today. This is evidenced by Volvo Group’s recent milestone of delivering more than 10,000 natural gas trucks on the road, underscoring the accelerating adoption of Cespira’s HPDI fuel system technology and validating the strategic direction we have taken. From a market perspective, the UK leads the adoption of HPDI-powered LNG trucks, followed by Germany, Sweden, the Netherlands, Norway, and France.

Emerging gas markets such as India and Latin America are also gaining momentum, with volumes seeing steady growth. When we introduced our proprietary CNG fuel storage and delivery system several months ago, we emphasized its potential to significantly expand our addressable market, particularly in North America. Development has progressed well, and our confidence in the commercial opportunity continues to build. We look forward to showcasing this solution at the upcoming Advanced Clean Transportation Expo, ACT, where we will have the opportunity to show off our technology to industry partners and customers.

By integrating advanced high-pressure CNG storage with Cespira’s field-proven HPDI fuel system, we match or exceed the performance and efficiency expected from diesel engines with compelling economics in markets where CNG is the natural choice, like North America. We believe this innovation meaningfully enables Westport and Cespira to capture new opportunities as we move into field testing.

Our GFI brand, through our High-Pressure Controls business, has also delivered important operational milestones. The opening of our facility in one of the fastest-growing hydrogen markets in Canada represents a success in localizing manufacturing, reducing costs, and improving competitiveness.

As the transportation industry continues to balance economic realities with sustainability objectives, we are confident that alternative fuel systems, including Cespira’s HPDI technology and our high-pressure components, provide real-world solutions that deliver both performance and affordability. With the completion of our strategic transition and only a few milestones remaining, growing market validation of Cespira’s expansion, a path to address the North American market, and a clear strategic focus, Westport is excited to drive into this next phase.

Now, I’ll have Elizabeth run through some financial details and then come back afterwards. Over to you, Elizabeth.

Thank you, Dan. Before I dive into the details, I’ll just touch on a few key milestones that were achieved, the first of which is our strong cash position, reflective of the successful divestiture of the Light-Duty segment.

As of December 31, 2025, our cash and cash equivalents position increased by $12.4 million to $27.2 million, compared to $14.8 million at December 31, 2024. The increase in cash was primarily driven by the sale of our Light-Duty segment, as Dan mentioned, partially offset by cash used in our operating activities and debt repayments. Exiting 2025, with the proceeds from the disposition of Westport’s Light-Duty segment, our long-term debt, including the current portion, reflected a 57% reduction to $2.9 million as at December 31, 2025. This compares to $6.8 million in the prior-year period.

Including the long-term debt from discontinued operations, the reduction was more than 90%. This improved financial position provides Westport with greater flexibility to concentrate on markets that are best suited to our current strategy.

Cespira continues to drive meaningful improvement in our results. In the fourth quarter of 2025, total revenue was $29.3 million, compared to $22.9 million in the same period last year, representing an increase of 28%. This progress is supported by strong market adoption, including Volvo Group reaching the milestone of more than 10,000 natural gas trucks on the road equipped with Cespira’s HPDI fuel systems. We are also encouraged by the continued progress of a second OEM that is currently conducting truck trials. We are excited about the opportunities ahead as we target an improvement in Cespira’s capital requirements.

Turning to the details of our 2025 results, Westport reported revenue of $23.3 million for the year ended 2025, compared to $40.7 million in 2024. The 43% decrease in revenue was primarily due to the end of the transitional services agreement for inventory and contract manufacturing between Westport and Cespira. Our adjusted EBITDA for 2025 was negative $17.3 million as compared to negative $11.4 million reported for 2024. We reported a net loss from continuing operations in 2025 of $29.6 million compared to a net loss from continuing operations of $31.3 million for the prior year. The decrease in net loss was attributed to lower operating expenditures across R&D and SG&A and favorable change in foreign exchange rates, partially offset by a full-year pickup of Cespira’s operating results in 2025 compared to the seven months in 2024.

Looking at our specific business units, High-Pressure Controls revenue for the fourth quarter of 2025 increased 20% to $1.9 million compared with $1.6 million in the prior-year quarter and decreased to $8.3 million for the year ended December 31, 2025, from $9.4 million for the prior year. The decrease in year-over-year revenue for the period ending December 31 was primarily driven by the general slowdown in hydrogen infrastructure development, leading to slower adoption of automotive and industrial applications powered by hydrogen. In Q3 2025, we kicked off the move of our manufacturing capacity from Italy to our new facilities in Canada and China, which required shutting down our operations. In late Q4 2025, we resumed selling products to our customers to meet the backlogged demand from the aforementioned shutdown. Gross profit for the year ended December 31, 2025, decreased by $1.3 million to $0.9 million, or 11% of revenue, compared to $2.2 million, or 23% of revenue, for the prior year.

Moving on to Cespira, total revenue generated in Q4 2025 was $29.3 million compared to $22.9 million in the same period last year, an increase of 28%. Cespira product revenue of $23.4 million increased 30% compared to Q4 2024, driven by higher volumes. Gross profit was negative $1.1 million for Q4 2025, compared to $0.5 million in Q4 2024, with the negative variance driven primarily by an obsolete inventory provision of $1.7 million and a recognized loss on one of our contracts valued at $2.8 million.

As I previously mentioned, we had a cash and cash equivalents balance of $27.2 million as at December 31, 2025. Net cash used in operating activities from continuing operations was $14.2 million for the year ended December 31, 2025, compared to $5.8 million in the prior year, an increase of $8.4 million. The decrease in net cash provided by investing activities was mainly driven by $21.7 million in capital contributions to Cespira and purchases of property, plant, and equipment of $2.7 million, partially offset by proceeds from the sale of the Light-Duty segment.

As noted, we also strengthened our balance sheet with total outstanding debt of $2.9 million, down from $6.8 million, while reducing the complexity of our corporate structure in 2025. Our business is focused on the right markets for us, and we are continually looking at ways to streamline our operations.

With that, I will pass it back to you, Dan.

Thank you, Elizabeth. As we look to 2026, we see a transportation market increasingly grounded in economic reality. Operators are seeking solutions that deliver measurable emission reductions without sacrificing durability or operating economics. Natural gas is playing a larger role in that equation, not as a transitional concept, but as a fuel that can compete on performance and cost today. The HPDI platform delivered through Cespira is central to that opportunity.

By pairing compression ignition performance with the advantages of natural gas, including the potential to incorporate hydrogen blends over time, we are providing OEMs and fleets with a pathway that aligns emission reductions with commercial expectations. As I mentioned earlier, Volvo Group’s milestone of more than 10,000 natural gas trucks on the road in over 30 countries, featuring Cespira’s HPDI fuel systems, highlights our combined success and helping drive this path of success. We are encouraged by the progress of a second OEM conducting a full truck trial throughout 2026, which we further believe validates additional commercial potential.

2026 will be a pivotal year as we advance demonstrations and fleet trials, present this exciting new platform at the ACT conference this spring, and follow with targeted show-and-tell sessions with Canadian fleets through the spring and summer. Together, these initiatives position us to build momentum across our portfolio and translate technology progress into tangible commercial interest. I can appreciate the investment community’s interest in our 2026 outlook. We are focused on delivering disciplined execution, continued advancement of OEM programs, and converting technical validation into new commercial opportunities.

In our High-Pressure Controls segment, we are optimistic that volumes can increase as customers’ facilities ramp up production, while we actively pursue cost reduction opportunities in China through greater total sourcing and supply chain optimization. With a focused organization and technologies aligned with market demand, we believe 2026 represents an important step forward, and we intend to deliver. Thank you.

(Operator Instructions)

Amit Dayal, H.C. Wainwright.

So, Dan, just on the margin side of things, it looks like inventory issues and relocation issues were sort of pressuring margins in the fourth quarter. Do you think we see some bounce back in 1Q and the rest of 2026 on the margin side?

Yeah, for sure. I think this transition -- I’ll start with the High-Pressure Controls transition from Italy to Canada and China, launching the two new production facilities, moving the equipment over, managing the inventory transfers, starting up, getting the plants certified, which is quite an extensive process. That put a lot of pressure on margins, and we do expect margins to improve and volumes as well. We’re already seeing some pickup in volumes as we move through the year.

Understood. For the High-Pressure Controls segment, can you talk a little bit about how maybe the China market or the India market, et cetera, the international opportunities you highlighted could start ramping for you, like what should we expect in terms of go-to-market strategy in these geographies?

Sure. So I’ll start with China. I think everybody knows that China is the fastest-growing hydrogen market. The government goals that they set out are driving volume increases. We’re in a bit of a lull right now where volumes globally have slowed down on hydrogen, but we expect them to begin to pick up again at some point here in China. Having our plant there allowed us to compete locally. It allowed us to have local costs, source local suppliers. For us, it’s the right strategy to compete in China for the Chinese market. Shipping from Italy or from Canada just didn’t make sense.

The comment on India is really a huge opportunity for Cespira in the long-haul trucking market. India has now put in a multi-state highway system. They’re investing in clean fuel stations. And we see that a number of trucking OEMs look at India as a beachhead for growth, and that market is going to pick up, we believe, pretty significantly.

Understood. Just last one from me. Any opportunities or possibilities in the PowerGen or backup power space for you guys?

Well, interesting you asked. So we’ve been looking into PowerGen. We currently supply into PowerGen today. We have a customer that used to be Kohler, Realco, that we supply out of our High-Pressure Controls business. We see that opportunity growing with the investments going into PowerGen across North America and, of course, globally. We think that there’s an opportunity to build out that business and are expected to grow there.

Understood. That’s all I have, guys. I’ll take my other questions offline.

Robert Brown, Lake Street Capital Markets.

First question is on the OEM trial. I had to spare the second OEM. I know you can’t give a lot of detail, but I think you said this year is sort of when the trial is happening. What’s sort of the decision point on that? Is it sort of work this year and then just make decisions and then start potentially ramping into a production model, or just sort of the outlines of the process would be helpful?

Sure. I mean, I wish I could say who it was, but in this commercial truck world they’re very, very careful about their commercial information. But the trial is ongoing right now, right? There are trucks on the road running. There are discussions about expanding it. But we believe decisions will be made in the second half of the year at some point. We don’t know the exact timing. It depends when they get the miles on the trucks.

Our expectation is that in the second half of the year, we’re going to start getting feedback. And, of course, if it all goes well, we’re hoping this is going to lead to a commercial launch.

And then turning back to the High-Pressure Controls business run rate, just to get a sense of what’s the revenue run rate now that you’ve gotten the production transition. Is it sort of growing off the Q4 run rate, or how much of the Q4 run rate was depressed from that? Just a sense of the run rate in that business.

Sure. The Q4 run rate was depressed. Number one, the market has slowed down somewhat. But also, with shutting down the equipment in Italy, moving it all to the two new plants, obviously we weren’t producing for some time while that transition happened. But yes, we do see that market starting to grow.

We see volumes increasing over what we expected for 2026 already. So it’s on a good path, and we believe that specifically the Chinese market is the one that will take off first as the Chinese government puts those goals in place for hydrogen transition in both automotive and industrial markets.

(Operator Instructions)

Eric Stine, Craig-Hallum Capital Group.

Dan, you touched on HPDI in India and, in your prepared remarks, Latin America and some other markets. But in terms of North America, I mean, I know that’s a very high priority. You did mention some trials that you are planning or that the joint venture is planning. In Canada, could you maybe go into that a little bit, anything you can share, and should we assume then that Canada is kind of the initial spot in North America that you would target?

I think this is a Westport product, not a Cespira product. Obviously, Cespira has the on-engine HPDI technology that will be part of the solution, but the back-of-cab high-pressure storage, smart storage system is a Westport product. We have already got the first truck. Volvo Group got us a truck, and we’ve already put the back-of-cab system on it. It’s been running mileage, developing data.

And the reason that is that we’re not having to redevelop any of these systems. It’s a matter of putting these systems together. So it’s not a huge development project. It’s more of a market development that’s required. The truck, as I said, is on the road. The truck will be on its way shortly to Las Vegas for the ACT show.

I hope you’re going to be there, Eric, and see it. We have a booth right next to Volvo Group there. And as you know, this CNG storage system is primarily focused on the North American market. We will be doing the initial trials in Canada, but we will at some point here be moving to the US for trials as well.

Got it. Okay, I misunderstood that. Thank you for the clarification. So then, I guess the follow-up then would be just about bringing HPDI, the joint venture, since you just talked about back-of-cab, but HPDI to North America. I would assume that that would be Volvo, right?

Yes. Well, as a starting point, for sure. But this whole CNG HPDI is growing fast globally. The difference is that all the growth, the 10,000 trucks, are on LNG because that’s how those countries receive their natural gas. Natural gas in North America is primarily delivered through compressed, right? It’s a CNG market. So our on-engine system really doesn’t care whether it’s compressed or liquid. The system adapts to that.

The storage system is the big difference going from a liquid storage to a compressed storage, and that’s what we’re bringing in. And the first truck on the road is a Volvo truck. It’s their new truck, and we’re very excited to have it showing up at ACT. This is pretty exciting for us. We’re finally getting to execute on this strategy, and any growth we have on this back-of-cab system obviously pulls through HPDI for Cespira.

Yeah, absolutely. Okay, thanks for that. And just housekeeping for my last question. I might have missed it, but did you quantify or estimate what you think the move did in terms of limiting Q4 for the High-Pressure segment?

Oh, sure. I mean, I think we lost probably a couple of months of production. And we had built up some inventory, but when you lose a couple of months of production, you’ve got to play catch-up. And that coincides with a bit of the market pause that had happened.

But we’ve launched both plants. Both plants are up and running and shipping product. So we’ve gotten through that transition hump, through the launch hump, and we’re pretty excited about where that’s going to go. We have the control in our hands.

Perfect. All right. Thanks, Eric. Well, that’s all the questions we have for today. I want to thank you for your time, everyone, and have a great, wonderful weekend.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.