Westport Fuel Systems (US) ((TSE:WPRT)) has held its Q4 earnings call. Read on for the main highlights of the call.
Westport Fuel Systems’ recent earnings call revealed a company in transition, with a strategic focus on strengthening its financial position and honing in on core segments. The sentiment was cautiously optimistic, as the company navigates both positive developments and challenges. While improvements in margins and operational cash flow were highlighted, a decline in overall revenue and liquidity concerns were acknowledged as areas needing attention.
Improved Margins and EBITDA
Westport Fuel Systems reported a notable improvement in gross margins, which rose to $14.3 million or 19% of revenue in Q4 2024, compared to $8 million or 9% in Q4 2023. Additionally, the adjusted EBITDA loss saw a significant improvement, reducing to $1.8 million in Q4 2024 from a $10.9 million loss in the same quarter the previous year.
Positive Cash Flow from Operations
For the first time, Westport achieved positive net cash flow from operations, generating $7.2 million in 2024. This milestone marks a significant step towards financial stability and operational efficiency.
Divestment of Light-Duty Business
In a strategic move, Westport announced the divestment of its light-duty business for $75.1 million. This transaction is expected to bolster the company’s balance sheet and enable a concentrated focus on its heavy-duty transport and industrial segments.
Growth in European Customer Sales
Sales to established European customers have increased, contributing to improved margins and demonstrating the company’s strong market presence in the region.
Revenue Decline
Despite the positive developments, Westport’s Q4 2024 revenue was $75.1 million, marking a 14% decrease compared to Q4 2023. The full-year 2024 revenue also saw a decline of 9% from the previous year, totaling $302.3 million.
Liquidity Concerns
The company faces liquidity challenges, with cash and cash equivalents decreasing to $37.6 million at the end of 2024 from $54.9 million at the end of 2023. Westport projects that its cash reserves will not be sufficient to fund operations for the next 12 months, highlighting the need for strategic financial planning.
Forward-Looking Guidance
In the earnings call, Westport’s leadership outlined a strategic shift towards focusing on hard-to-decarbonize segments, such as long-haul heavy-duty transport. The divestment of the light-duty business is expected to close by the end of Q2 2025, subject to shareholder approval. This move is aimed at enhancing financial robustness and expanding the company’s market in mobile and industrial applications, particularly in HPDI technology and high-pressure controls.
In conclusion, Westport Fuel Systems’ earnings call conveyed a company at a pivotal juncture, with strategic initiatives aimed at improving financial health and focusing on core growth areas. While challenges such as revenue decline and liquidity issues persist, the company’s efforts to streamline operations and concentrate on high-potential segments offer a cautiously optimistic outlook for the future.