Westport Fuel Systems Inc. Q2 FY2025 earnings call

Westport continues to make meaningful progress in strategic transformation. The successful divestiture of the Light-Duty segment strengthens the balance sheet and focuses on commercial transportation and industrial applications. Cespira aims for volume growth in the next 12 months with favorable fuel pricing for heavy-duty transportation. High-Pressure Controls & Systems is developing high-pressure components, with China accounting for over 50% of revenue, and is opening a hydrogen innovation center in China and relocating European manufacturing to Canada. The company recognizes market conditions and is working on maximizing economic benefit from the recent transaction, focusing on growth and positive cash flow.

Reported revenue for the quarter was $12.5 million from continuing operations, down from $14.1 million in the prior year. Consolidated revenue including the discontinued Light-Duty segment totaled $88.8 million compared to $83.4 million in the same period of 2024. Cespira generated $12 million in revenue during the quarter. The Light-Duty business (discontinued) had revenue of $76.4 million with a gross profit of $15.1 million (20% of revenue). The High-Pressure Controls & Systems segment had Q2 2025 revenue of $2.9 million, down from $3.6 million in the prior year, with a gross margin of $100,000 (3% of revenue). The Heavy-Duty OEM segment had Q2 2025 revenue of $9.6 million, down from the prior year, with a gross margin of $700,000 (7% of revenue). Cespira's Q2 2025 revenue was $12 million compared to $4.1 million in the same period of 2024 (with only 1 month of activity in 2024), and its gross profit was negative $1.9 million compared to $200,000 in the prior year.

Cespira aims for demonstrated volume growth over the coming 12 months with renewed industry focus on CNG, LNG, and RNG for heavy-duty transportation. High-Pressure Controls & Systems focuses on market expansion in China, Europe, and North America. The company expects further cost reductions as it rightsizes, with full operating expense reduction expected in 2026.

Macro-economic environment changes may impact market demand. Policy and regulatory changes can affect business development. Tariffs and trade uncertainties may indirectly impact volume.

Q: Can you provide more details on HPDI activity outside of Europe?

A: Volvo is planting growth seeds in markets like India, South America, and Asia, beginning to build market acceptance with HPDI technology.

Q: Is CNG HPDI development by Westport only?

A: HPDI on engine is part of Cespira; Westport is developing off-engine storage and material handling for CNG HPDI.

Q: On High-Pressure Controls business run rate?

A: There's a pause in North America due to policy setup, but continued opportunities in China.

Q: OpEx run rate going forward?

A: The company will rightsize overhead, focus R&D on natural gas markets, with full reduction expected in 2026.

Q: Clarification on continuing operations revenue?

A: Slowdown in hydrogen programs due to customers waiting on market direction.

Q: Escrow and earn-out details?

A: $12.8 million is in escrow with conditionality, and up to $3.8 million is available as earn-out.

Q: CapEx for hydrogen innovation center?

A: $15 million in Q3 includes Q3 contribution to Cespira, transaction costs, and relocation costs.

Q: Heavy-Duty business revenue post transition?

A: Very little revenue in the HD OEM business going forward.

Q: Funding of Cespira going forward?

A: Cespira requires cash from parents for a 3-year build-out, which will continue.