Westport Q2 Income Drops, Canada

Westport Innovations Inc., the global leader in natural gas engines, reported its financial results for the second quarter ended June 30, 2013 and provided an update on operations.

Highlights include:

• Westport revenue, excluding joint ventures’ revenues, for the quarter ended June 30, 2013 was $34.9 million compared with $49.1 million for the same period last year. The prior quarter period included $14.1 million of service and other revenue recognized under OEM development agreements, including a one-time license revenue of $8.0 million.
• Segment revenue for the quarter ended June 30, 2013 was: $25.2 million for Applied Technologies; $8.4 million for On-Road Systems; $1.3 million for Corporate and Technology Investments; $78.0 million for Cummins Westport Inc. (CWI) and $152.5 million for Weichai Westport Inc. (WWI).
• Westport revenue plus CWI revenue for the quarter ended and six months ended June 30, 2013 was $112.9 million and $187.6 million, respectively, compared with $106.1 million and $194.7 million, respectively, for the same period last year.
• In the second quarter of 2013, CWI shipped 2,716 units and WWI shipped 12,410 units.
• For the quarter ended June 30, 2013 Westport reported a net loss of $33.9 million, or $0.61 loss per share, compared with $6.1 million, or $0.11 loss per share, for the same period last year. The increase in net loss is primarily due to a reduction in service and other revenue described above of $12.8 million, or $0.23 per share; increased net investments in product development activities of $5.8 million, or $0.10 per share; and higher selling, general and administrative (SG&A) costs of $5.0 million, or $0.09 per share, to support facilities expansion and resources globally, as well as OEM development efforts. Westport expects $6.0 million of research and development costs incurred during the quarter to be reimbursed upon completion of milestones.
• Acquired BAF Technologies, Inc. (BAF) and its subsidiary, ServoTech Engineering, Inc. (ServoTech), from Clean Energy Fuels Corp. (Clean Energy) to expand Ford product portfolio and dealership coverage; and entered a new co-marketing agreement with Clean Energy to increase the penetration of natural gas vehicles.
• Volvo Car Group unveiled its new Volvo V60 Bi-Fuel that will be launched in October in Sweden, and Westport will be supplying the natural gas fuel systems to Volvo Car Group.
• Launched a liquefied natural gas (LNG) tender product solution with an order for four tenders from Canadian National Railway (CN).
• Announced an agreement with GAZ Group to design and develop spark ignited natural gas systems for a new range of GAZ Group compressed natural gas (CNG) commercial vehicles utilizing Westport’s new WP580 Engine Management System (EMS).

“Cummins Westport had a record quarter with $78.0 million in revenue, or a 38% year-over-year growth, and shipped over 2,700 engines,” said David Demers, CEO of Westport. “CWI volume in North America grew by 25% with strength in all segments but significant growth in trucking, including the launch of the Cummins Westport ISX12 G in April. Interest in this new engine continues to be strong as large fleets begin to test natural gas in their operations. This opens up opportunities for the new Westport iCE PACK™ LNG Tank System that is optimized for spark-ignited engines. With the 400HP version of the Cummins Westport ISX12 G in production this month, we expect CWI to see continued strong growth in the trucking segment.”

“International markets including China and Russia are also seeing strong growth. Weichai Westport delivered another phenomenal quarter with nearly 12,500 engines shipped in the second quarter, and close to 21,000 engines year-to-date. Revenue is up 144% so far in 2013 compared to the first two quarters last year.”

“Westport has progressed from a proof-of-concept company to a company with a growing range of products and customers. We are optimizing a vertically integrated approach with OEMs to achieve economies of scale in production with Westport technology. We are negotiating supply agreements for Westport HPDI products in the China market. To ensure Westport and its shareholders achieve the best possible outcome, we expect to push the anticipated revenue for HPDI in China beyond 2013. With the deferral of HPDI-based revenue in China combined with the launch of the Cummins Westport ISX 12G in trucking, for which we recognize the income stream only, we are changing Westport’s revenue outlook for 2013, excluding joint ventures’ revenues, to $160 million to $180 million from the previous range of $180 to $200 million. That said, we have not changed our outlook for breakeven on an EBITDA basis for our business units by the end of 2014, and for Westport overall by 2015. As noted above, Westport recognizes the income from the joint ventures, just not the revenue, and expects the income stream to increase in coming quarters. As new products expand our Westport portfolio and as critical mass begins to develop across our markets we expect revenue to become less volatile.”

“We welcome Nancy Gougarty as our newly appointed President and Chief Operating Officer. Nancy brings great operating experience from her global career in the automotive industry and we expect her leadership will help move us quickly forward as we transition from our market creation phase to profitable commercial operations.”