Westport Fuel Systems Inc. Q4 FY2025 earnings call

Good day, everyone. Welcome to Westport Fuel Systems conference call regarding its fourth quarter and full year 2025 financial and operating results. Spoke about recent cybersecurity incident successfully completed. Mentioned successful divestiture of light-duty business, receipt of $6.5 million payment, and Suspira's agreement with a leading OEM for HPDI components. Global heavy duty transportation market recognizing natural gas as lower emission solution. Volvo's milestone of over 10,000 natural gas trucks with Suspira's HPDI fuel system. Westport introduced proprietary CNG fuel storage and delivery system. GFI brand's high-pressure controls business had operational milestones with manufacturing capacity move. Ended 2025 with over $27 million in cash and very low debt.

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. Total revenue generated in the fourth quarter of 2025 was $29.3 million, compared to $22.9 million in the same period last year, an increase of 28%. Suspira product revenue of $23.4 million increased 30% compared to the fourth quarter of 2024, driven by higher volumes.

2026 will be pivotal as transportation market seeks emission reductions without sacrificing durability or operating economics. HPDI platform via SUSPIRA centric to opportunity. Volvo's milestone highlights success. Second OEM's truck trial ongoing with decision point in second half of 2026. High pressure controls segment optimistic on volume increase as customers ramp up production and cost reduction in China. 2026 seen as important step forward with focused organization and technologies aligned with market demand.

Cybersecurity incident was a risk but review successfully completed. General slowdown in hydrogen infrastructure development impacted high pressure controls revenue. Transition of manufacturing capacity from Italy to Canada and China put pressure on margins.

Q: 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?

A: 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.

Q: For the high pressure control segment, can you talk a little bit about how maybe the China market or the Indian market, et cetera, the international opportunities you highlighted, could uh you know start ramping for you like what should we expect in terms of you know like go-to-market sort of strategy in these in these geographies A: sure so i'll start with china i think everybody knows that china is the fastest growing hydrogen market the the government uh 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, India is really A huge opportunity for Suspira 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's going to pick up, we believe, pretty significantly.

Q: Any opportunities or possibilities in the PowerGen or backup power space for you guys?

A: Well, interesting you ask. So we've been looking into PowerGen. We currently supply into PowerGen today. We have a customer that used to be Kohler 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.

Q: On the OEM trial at the spur of 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? Does it sort of work this year and then just make decisions and then start again? potentially ramping into a production model or just sort of the outlines of the process would be helpful.

A: Sure. Sure. I mean, I wish I could say who it was, but, you know, in this commercial truck world, they're very, very careful about their commercial information. But the trial is ongoing right now, right? There's trucks on the road running There's, you know, discussions about expanding it. But we believe decisions will be made, you know, 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. But, you know, 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.

Q: Dan, you touched on HPDI in India and in your prepared remarks, Latin America and some other markets, but In terms of in 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?

A: You know, I think if is a Westport product, not a Suspira product. Obviously, Suspira 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 got us a truck, and we've already put the back-of-cab system on it. It's been running miles developing data. And the reason that is, is that, you know, we're not having to redevelop any of these systems. It's a matter of putting these systems together. And 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 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 U.S. for trials as well.