Westport Fuel Systems Inc. Q1 FY2026 earnings call

Market & Commercial Momentum

• Suspiria's HPDI low-carbon fuel system continues strong growth momentum, with 33% year-over-year revenue growth in Q1 2026 driven by higher sales volumes, broader market adoption, and progress with a second OEM partner
• The broader natural gas heavy-duty truck market shows strong growth signals: Volvo has delivered over 10,000 gas-powered trucks globally, and cognitive market research projects the European LNG heavy truck market will grow at a 12.5% CAGR through 2031
• Early market beachheads have opened in emerging markets including India, Brazil, Peru, and Chile, with strong interest for alternative fuel solutions in large markets India and Brazil

Operational Milestones

• Production has commenced at two new facilities: the expanded product development and manufacturing campus in Cambridge, Ontario, and GFI's new China Hydrogen Innovation Center and manufacturing facility in Zhengzhou, China
• Westport successfully delivered a fully integrated, working high-pressure CNG heavy-duty truck platform to the ACT Expo in Las Vegas, which generated strong interest from fleets, OEMs, and industry stakeholders (the platform is production-ready, not a concept vehicle)
• Capital contributions to the Suspiria joint venture declined from $4.7 million in Q1 2025 to $2.9 million in Q1 2026, reflecting improving operating performance at the joint venture
• Westport maintained a strong cash position: $24.5 million in cash and cash equivalents as of March 31, 2026, with total outstanding debt reduced to $1.9 million, down from $2.9 million at the end of 2025
• Net cash used in operating activities from continuing operations improved to $3.4 million in Q1 2026 from $8.6 million in Q1 2025, a $5.2 million improvement driven by working capital changes

Strategic Positioning

• Westport is positioned to capitalize on tightening emissions regulations and growing demand for practical low-carbon heavy-duty transportation solutions, with a focus on execution, commercial scaling, and expansion into new regions and applications

1. Suspiria Joint Venture: Total Q1 2026 revenue was $22.2 million, a 33% increase from $16.7 million in Q1 2025. Product revenue specifically hit $19.5 million, a 48% year-over-year increase from $13.2 million in the prior year period. Gross profit improved to $1.6 million from $0.4 million year-over-year, with gross margin rising to 7% from 3%. The joint venture reported a net loss of $2.5 million in Q1 2026, a 65% reduction from the $7.1 million net loss in Q1 2025. Suspiria contributed approximately 90.6% of Westport's total segment revenue in the quarter.
2. High Pressure Controls (GFI Control Systems / AFS): Q1 2026 revenue increased 21% year-over-year to $2.3 million from $1.9 million in Q1 2025. Gross profit was $0.5 million, consistent with the prior year period. This segment contributed approximately 9.4% of Westport's total segment revenue in the quarter.

• Management expects Suspiria's strong growth momentum to continue through 2026, supported by favorable fuel economics, tightening emissions rules, and growing OEM and fleet interest
• Westport's cash contribution requirements to the Suspiria joint venture will continue to decline steadily as sales volumes grow, with a much larger reduction expected by mid-2027
• Gross margins for both the Suspiria joint venture and the high-pressure controls business are expected to improve as sales volumes increase, as fixed infrastructure and build-out costs have already been incurred
• The full $1.9 million in outstanding debt will be retired in Q3 2026
• Ongoing engineering service work for Volvo will continue beyond 2026: the HPDI 3.0 development project will wrap up at the end of 2026, but multi-year development work for Volvo's hydrogen project will continue, and additional unannounced development projects are being pursued

• Growth of the hydrogen market in China has been delayed by policy adjustments, which has temporarily slowed volume growth for the high-pressure controls segment's new Chinese manufacturing facility, though management expects volume to pick up as market activity resumes
• There is no guarantee that ongoing negotiations with the second OEM for high-volume commercial production will result in a final agreement, even if a determination is made by the end of 2026
• Margin expansion for the high-pressure controls business is dependent on future volume growth, which is tied to broader alternative fuel market development that is outside of Westport's direct control

Q: The management tone around the second OEM truck trial for Suspiria feels more optimistic than before. Is this accurate, what is the timeline for a decision, and are there any new market contributors to Q1 growth besides existing markets? What is the update on required cash contributions to the joint venture going forward?

A: Management confirms the more optimistic tone, as the ongoing truck trial for the second OEM is progressing very well. Discussions for high-volume commercialization are ongoing, and a final determination on the project is still expected by the end of 2026. New early market interest has emerged in large emerging markets India and Brazil, with deployments already live in Peru and Chile. Required cash contributions to the joint venture are declining steadily alongside volume growth, and will see much deeper reductions by mid-2027.

Q: Suspiria delivered solid gross margin improvement in Q1. How do you expect gross margin to trend for the rest of the year, and what volume impact will the test OEM have this year? Also, will new projects offset the service segment work that is scheduled to wrap up at the end of 2026?

A: Gross margin will continue to improve as sales volume increases, because all the fixed costs to build out and certify the tier-one OEM business have already been incurred. The HPDI 3.0 development project for Volvo will wrap up at the end of 2026, but ongoing multi-year development for Volvo's hydrogen project will continue, and additional unannounced engineering development projects are being pursued to replace the completed work.

Q: What are the next steps for North American market development after the strong interest from ACT Expo, and how will gross margin trend for the high-pressure controls business following the launch of the new Chinese facility?

A: Following ACT Expo, additional fleet-driven demos are being planned, and work has accelerated on EPA certification to launch the high-pressure CNG platform in North America, driven by strong interest from large fleets. For high-pressure controls, margins will grow as volume increases: the new Chinese facility was built for localized low-cost production to serve the China market, but Chinese hydrogen market development has been delayed by policy. Volume is already starting to pick up, and margins will expand as growth continues.