Westport Fuel Systems(US:WPRT)2024-05-09 16:58Financial Data and Key Metrics Changes - Q1 2024 revenues decreased by 6% year-over-year to $77.6 million, primarily due to decreased volumes in the delayed OEM business [7][29] - Gross margin decreased to $11.7 million or 15% of revenue, down from $13.3 million or 16% of revenue in Q1 of the previous year [30] - Adjusted EBITDA loss increased by $2.1 million to $6.6 million [38] Business Line Data and Key Metrics Changes - OEM revenue for Q1 2024 was $49.3 million, down $7 million compared to the prior year, with sales volumes decreasing in delayed OEM, fuel storage, and light-duty OEM businesses [39] - Independent aftermarket revenue increased to $28.3 million, up $2.4 million year-over-year, driven by sales growth in North America, Western Europe, and South America [33] - Electronics business sales volumes increased, driven by higher sales to a key customer [32] Market Data and Key Metrics Changes - The Chinese natural gas vehicle market expanded to over 100,000 commercial vehicles in 2023, with ongoing collaboration with OEM partners [21] - Sales in Africa and Eastern Europe declined, while sales increased in North America, Western Europe, and South America [33] Company Strategy and Development Direction - The company has established three main priorities for 2024: driving success via the HPDI joint venture with Volvo, improving operational excellence, and reimagining a hydrogen-powered future [8][9] - The HPDI joint venture with Volvo is expected to accelerate the commercialization of Westport's fuel system for long-haul and off-road applications [10] - The company is focusing on cost-cutting measures across all levels to ensure sustainable growth and profitability [11][12] Management's Comments on Operating Environment and Future Outlook - Management noted that while Q1 revenues were disappointing, they are optimistic about a recovery in Q2, aligning with seasonal trends [80] - The company is well-positioned to benefit from increasing government support for hydrogen as a fuel source, particularly in North America and Europe [14][15] - Management emphasized the importance of managing inventory and working capital effectively to enhance liquidity [48][49] Other Important Information - The company incurred $1.5 million in one-time expenses related to severance and costs associated with setting up the joint venture [31] - The company is restructuring its presence in India to improve cash flow generation [12] Q&A Session Summary Question: Can you talk about customer inventories and sell-through? - Management indicated that they are seeing an increase in sell-through as a key customer works through excess inventory, with orders expected to ramp up in the latter half of the quarter [47] Question: How big an opportunity is there to generate cash from working capital? - Management acknowledged significant progress in improving working capital and reducing receivables, with inventory reduction being a key focus area [49] Question: What are the commitments from the Chinese OEM partner? - Currently, there are no production orders, but development orders are ongoing, and management is optimistic about future production orders [57][109] Question: What underpins the $70 million revenue expectation from hydrogen components? - The expectation is based on ongoing development projects with Tier 1 suppliers, with increasing production purchase orders anticipated as the hydrogen ecosystem evolves [58][60] Question: How is the company managing cost reductions? - Management is implementing aggressive cost-cutting measures across the organization, with a focus on aligning costs with current business size while also aiming for top-line growth [68][69] Question: What is the timeline for organizational restructuring? - Corporate cost-cutting is expected to show benefits by year-end, while operational cost reductions will take longer to implement effectively [99]