Q4 2019 Earnings Call
Thank you for standing by this is the conference operator, welcome mix the Westport fuel systems fourth quarter fiscal year 2019 financial results Conference call.
As a reminder, all participants are in listen only mode.
French is being recorded.
After the presentation, there will be an opportunity to ask questions.
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I'd now like to turn the conference over to Shawn Severson withheld for direct advisors Westports Investor Relations Representative. Please go ahead Mr. teverson.
Thank you good afternoon, everyone welcome to Westport fuel systems fourth quarter conference call, which is being held coincided with the press release contains Westport fuel systems natural results. There were distributed this afternoon.
Today's call speaking on behalf of Westport fuel systems, as Chief Executive Officer, David Johnson, Chief Financial Officer.
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So at this call is open to the public intermediates questions will be restricted to the investment community you reminded that certain statements made in this conference call. It in our response to various questions may constitute forward looking statements within the meaning of the U.S. and clickable Canadian Securities laws.
Such forward looking statements are based on our current expectations in a ball certain risks and uncertainties.
Actual results may differ materially from those projected and forward looking statement. So you are cautioned not to place undue reliance on those statements information contained in this conference call is subject to certain qualified in its entirety by information contained in the Companys public filings.
On the call over to David David.
Good afternoon. Thanks for joining a conference call to review Westport fuel systems, Q4, and year end 2019 results.
Only 19 was a great year pivotal year for Westport fuel systems each of our businesses delivered improved operating results on the top line and on the bottom line.
I'm proud that and training team, we've made another big step in our transformation into a profitable and sustainable company.
Building on our prior year improvement with another year of double digit percentage gains.
Westport fuel systems portfolio clean technology solutions distributor markets around the world and supporting our light duty heavy duty OEM customers and partners is reducing the environmental impact of transportation and our products are doing so in a cost effective way.
This is critical as it enables our technologies to reach the scared required in our industry and for our environment.
There have been a number of important market developments since our Q3 call and I'll walk through these in a moment, but first I want to show the headline financial results show the next slide.
I'm pleased and proud of our latest achievements.
Continued sales growth of HPD combined with the strength in our independent aftermarket like video and businesses resulted in annual revenue of three and $5 million up 13% over 2018 and up 33% 2070.
Net income from continuing operations increased by $41 billion year over year that is in 2018 be lost $40.8 million. While in 2019, we moved to the plus side, earning zero point $2 million, it's a big accomplishment in a very good step.
We recorded our seventh consecutive quarter positive adjusted EBITDA.
And we delivered our first full year positive.
These results are evidence that our claim cost effective market ready technologies are the answer to the increase in global demand for sustainable transportation.
For passenger cars light commercial vehicles for transit buses and heavy freight holders Westport fuel systems has the products that reduce emissions clean air save money and can achieve meaningful scale.
Now, let's review some market developments.
Oh, Good 19 has introduced historic uncertainty for all of us.
Our priority is the health of our team our partner suppliers and customers and all of our communities that working around the world.
We are closely tracking and monitoring the data.
Elements, an expert recommendations from around the world and doing our best to respond.
Well, it's not possible to predict the future we're working hard in real time to mitigate the impact of this pandemic.
I'd like to recognize the commitment dedication and responsiveness of our global team.
As announced yesterday, we had suspended production at our plants brush, Italy, which isn't your the epicenter the outbreak in Italy.
Last few weeks our team of pressure worked tirelessly to accelerate production deliveries to all our customers while simultaneously.
All possible action can mitigate run a virus risk in our workplace.
Similarly, our operations and Gresko and helping to Italy are also taking action. So far have been able to maintain production to continue delivering to our customers.
The combination of the actions we've taken to secure alternative suppliers accelerate purchase orders increased raw material inventories and to protect our team members and minimize disruption that production and supply.
Despite all our preparations all our planning and all the actions we've taken so far this thing our best continuing efforts to manage our operations a meter customers demand.
Implications of the pandemic and they actually being taken to respond to the pandemic.
Certain.
We don't know how much market demand will be affected if there's an adverse effect, we didn't know what government actions they'd be taken nor how effective those actions will be.
And of course uncertainty itself isn't significant market headwind.
Nonetheless, we are convinced that the longer term prospects for our products and our company restaurants.
In China, while the rate of cobot linking cases is now slowing the combination the initial outbreak and the mitigating measures taken by the Chinese government. During the first was this year have delays it kinda give a certification for H.B. I cooked engines.
We try Westport joint venture as it working to complete the emissions testing certification with a Chinese ministry of the college in an environment and also with the Chinese Ministry of industry. There are many steps that certification process, including engine dyno testing for emissions Oh, the de certification testing and vehicle testing with a portable emissions measurement system.
Following while these tests there to diminish the administrative proceedings certifying agencies in China were almost done there are no technical barriers to completion and we look forward to sharing the accomplishments with you when we reach the finish line.
Well the delay compared to our plan affects the timing of the commercial launch and the production sales right that policy, we do not expect that it will change the shape that adoption curve and the long term potential just published in the Chinese market the largest natural gas commercial vehicle market. The world is quite compelling we have a great Parker, a great product and a large market to serve.
In our Q3 conference call I spoke about scale and how critical scale is the transportation sector scale means production volume sales volume and market shares that make a material difference both economically and environmentally.
In transportation scale is enabled by products that deliver what customers require products that reagents customers total cost of ownership and products that enable Oems to meet regulation at the lowest total cost.
'cause scale solutions must be affordable cost competitive easily accessible and must meet stringent customary regulatory requirements in terms of engine vehicle performance criteria air pollutants and see you to a mission.
The next slide shows how natural gas is getting them into heavy duty truck.
Until recently the growth in Europe natural gas field heavy duty trucking, that's been limited by the volatility products and I refueling infrastructure, but now with recently added products like H. VDI and new CEO to regulations, we're seeing a dramatic increase email don't leave LNG large markets, like Germany, Italy, Spain, and France and as well.
It doesn't smoke markets like another one in Sweden, Belgium.
The energy <unk> refueling infrastructure has grown nearly 90% just last two years.
There are now 264, LNG stations spending 18 European countries.
The dramatic growth and the number refueling stations, it's happening in parallel to the growth and our heavy duty trucks. The natural gas vehicles Association in Europe, just released trend 18 sales figures and reports there were more than 4500, new vehicle registrations for LNG fuel heavy duty trucks.
That's up 175% come 2018.
Regulations, combined with product availability refueling availability and winning economics are driving a real time market response.
I want to remind you that Westport H.B. I to pay no beats, the 2025 requirements to reduce cotwo emissions by 15%.
And with renewable gas and or other vehicle, if you're seeing Privy enables Oems to meet the 2030 mandate about 30% reduction.
I'd like to flag. Another notable market development on January 16th and this year shell announced that they were built nearly 50 LNG refueling stations in Germany.
These stations will supply a blend of fossil and renewable natural gas that will make their LNG supply carbon neutral.
And recent analysis demonstrates there is sufficient renewable gas feedstock to fuel the entire truck segment in the European Union.
The potential to get to net zero carbon for truck when Europe and globally using H.P.D. <unk> renewable natural gas is available now and it can be done at a competitive total cost of ownership compared to other technologies and with no compromise the performance reliability or durability.
In addition to H.P.I. for the heavy duty market Westport fuel systems has strong like did he OEM an independent aftermarket businesses. The natural gas vehicles Association in your estimate that the current gas vehicle fleet of 1.4 million vehicles in Europe, well grow just 13 billion vehicles by 20 Threerd.
That's a significant nearly a 10 fold increase so let's take a closer look at what happened in 2019.
There were nearly 70000 CNG passenger car registrations last year compared to 50000 2017, that's a 40% growth rate over two years.
We had 55% of these registrations felt like Germany at 11.
Statements meeting that nearly 8% each.
There are now 3700 CNG stations in Europe.
That's up 10% and just one year, Italy, and Germany haven't largest number and eight more European countries have more than hundred CNG stations Beach.
Well develop network.
Looking to Asia, we see a strong growing market opportunity in China. The LNG truck market is already largest in the world what about 80% of the LNG trucks. So globally are sold there.
Recent projections show that heavy duty LNG trucks can approach a 20% share.
Our joint venture, which I Westport is the leading natural gas engines, a player in China and place to grow with the launch of H.B., yet you've laid out.
In India the growth of CNG vehicle sales being driven by a fuel price advantage stringent emissions regulations propose diesel band and the build up CNG fueling infrastructure.
In January of this year, the Indian government announced a plan to more than doubled to share of natural gas other countries energy mix to 15% 2030 up from 6% currently.
The energy Ministry Awesome Repos reductions in the goods and services tax on CNG vehicles.
This reduction would drop the price of the CNG vehicles and more than 20%.
And already compelling payback would become even more attractive, thereby driving the increase adoption CNG vehicles.
In fact, one of our customers expects natural gas vehicle sales to be greater than 30% of their future sales mix up from 7% currently.
The Indian government has plans to build 10000 CNG station spent 2030 up from the current having 200 and LNG is also expected to gain greater market share as totality. The Dynagas recently announced their plans to build 1500 LNG stations video over the next 10 years.
Westport fuel systems sells products into more than 70 countries through an extensive distribution network.
Independent aftermarket business enables covers of the existing vehicle park CNG or LPG. So our customers can realize fuel cost saving and also reduce emissions.
The global market for LPG CNG covers the Kid is approximately 1 billion kits per year, and our aftermarket business has approximately 30% share.
Argentina, Italy, Poland, Russia, Turkey are well established and critical markets for our products markets, where LPG and CNG or cheating scale.
Westport fuel systems, as well position to capitalize on this compelling market opportunity. The continued strength of our OEM aftermarket businesses the growth of H.B., Yeah in Europe in the upcoming production lunch Beach began in China are keys to our success in 2020.
I'm confident that we can whether the current headwinds continue deliver against 2020 strategic priorities.
Let's look at those priorities number one sustained growth and profitability route to market business.
For two successful launched HPD I in China.
Third new light duty in heavy duty OEM customers and fourth continued focus on material and structural cost reductions.
We're pleased and proud Heartware 19 results the fundamentals that drive market demand for our products, what persistent grow increasingly urgent as we work through the new market headwinds that developed doesn't Q1 of this year.
Now, let me turn it over to Richard to review our financials.
Thank you David.
As David Old line from the start Westport fuel systems had strong financial performance during fiscal year 2019.
For the year revenue increased by 35 million to 305 million, 13% increase driven mainly by significant growth in our OEM business of 29.2 million, primarily from higher each beady eye product sales in Europe and development revenues.
And our independent aftermarket business generated a year over year increase of 5.8 million due to strong demand for its aftermarket and the lead OEM products.
Although growth gross margins increased by approximately 6% to 68 million, our gross margin percentage softened due to the increasing mix of lower margin H. VDI sales.
Besides increase gross margin much of our earnings improvement in 2019 was also due to the 9.4 million decrease in SGN expenses in 2019 compared to the prior year, mainly from the impact of lower Euro and Canadian dollar average exchange rates lower costs related to the FCC investigation year over year and lower.
Professional fees.
Further we had a 4 million dollar increase in equity income from CW why from strong performance in the joint venture.
Do I had a 13% year over year increase in revenues, the 362 million and lower warranty adjustments that led to a 17% increase in net income of 53 million of which 26.6 million was to our account.
At the end of the day, we generated the first net income from continuing operations, a point 2 million compared to a loss of 40.8 million in the prior year.
Looking at our cash flows we generated adjusted operating cash flow of 9.3 million compared to negative 4.2 million in the prior year driven by the better operating results.
But partially offset by negative working capital changes.
Financial discipline as a priority for us and we continue to ensure a cash flow generated as allocated to investing in H.B. <unk> and our other businesses to augment capacity product development and automation amongst other things.
A significant portion of our cash is also set aside for the repayment of our debt, which resulted in a net cash outflow of 14.8 million.
Turning to the fourth quarter revenue increased by 13.8 million to 74 point Threemillion, a 23% increase driven mainly by the growth in our OEM business.
A 5.5 million year over year, primarily from higher each BTI sales and service revenues are independent aftermarket business increased year over year by 8.3 million due to a strong demand for its aftermarket and delayed OEM products compared to a softer quarter in 2018.
[noise] gross margins increased by approximately 12% to 13.8 million due to higher sales, our gross margin percentage softened as expected.
Due to the contracted price reductions in additional warranty expense related to the H.B., Iran.
Year over year, SGN <unk> decreased by 2.3 million, mainly due to the termination of the FCC investigation and lower professional fees.
We had a 1 million dollar increase in equity income from CW I during the quarter CW I generated a 9% year over year increase in revenues to 102.5 million and lower warranty adjustments that led to an 18% increase in net income of 13.5 million of which is 6.7 million was to our account.
During the quarter, we generated our second consecutive quarter of net income from continuing operations of point 7 million compared to a loss of 10.4 million in the prior year.
Looking at our quarterly EBITDA and adjusted EBITDA numbers.
Taking a look at our profitability and ability to generate cash flow from another lens, we generated our fourth consecutive quarter of positive EBITDA, which amounted to 24.9 million for the fiscal year 2019, compared to negative 13.5 million in 2018.
Adjusting for some nonrecurring and noncash items to provide a more comparable measure year over year, our adjusted EBITDA improved to 28.4 million in 2019 compared to 9.6 million in the prior year.
Our 2020 outlook, we are closely tracking and monitoring the impact of covert 19.
On our business.
Okay.
We are closely tracking and monitoring the impact of the Corbett 19 virus on our business, including our operations in China in Italy.
Given the high degree of uncertainty in the markets around the world, we sell into especially the European market and the recent drop in oil prices. We expect the current headwinds that are developing now and very much fluid may persist for much of the rest of year.
While our businesses are growing.
Impact of the Corbett 19 virus on the business environment and our own operations. It is not possible to project with confidence the full year impact on our customers suppliers and operations.
Despite these headwinds we are working to continue the growth of our business for the long term profitability and ensuring we have to liquidity to invest in operate our businesses and meet our obligations.
With that I'd like to turn it back to the operator for your questions.
Thank you we will now begin the question and answer session.
Analysts who wish to ask a question. They press Star then one on your telephone keypad, you'll hear a tone acknowledging your request.
If you are using a speakerphone please pick up your handset before passing any Keith.
Try your question. Please press Star then Q.
The first question comes from Eric Stine.
Please go ahead.
Hi, David I Richard.
Hi, Eric.
So I can.
But I certainly can appreciate the uncertainty and I get the outlook, but just in the context of that I would love to hear about some of the priorities.
And just maybe where are your confidence lies in the four that you've provided you know whether you're writing come or just talk about them a little bit.
On one hand, you've got uncertainty near term on the other hand since you've got some confidence certainly over the long term and even in 2020, you know as you you pointed out sustained growth and profitability in light duty business.
Yeah glad to talk about it Eric and good to have you end the call. So as a general premise you don't <unk> I feel very good about our business all the fundamentals that we talked about it in this call in prior calls and conferences before I believed there, they're there and actually strengthening so we know we talked about more fuel stations in Europe, we talked.
About this regulation coming closer and closer.
Another factor that just give an example in the aftermarket business all those shift of sales from diesel powered vehicles passenger vehicles to gasoline powered vehicles as people get move away from diesel that creates more vehicles that we can convert to add to natural gas and LPG and so you know the fundamentals of our bid.
This are in my view very strongly and my outlook is great. The challenge for US of course is no. We've got a plant closed in early right now and I expect open that plant back up after a two week shutdown, but I don't know that I don't even know that two weeks from now I have to see how the conditions develop in the marketplace that people are able to.
Back to.
Our factory and do their work that needs to be done and what we expect to do that we don't know it so and I think you know frankly in the Grand scheme of things the macroeconomic.
Situation in the world today, if so uncertain in terms of what kind of responses were going to get from the government and how they're going to spur the economy to return to the robust level of commerce, a that drove our order book that we still have today, we just don't know what our order book looks like in the future ask yourself to that and if I go far afield to a place like China, you know I think.
They've gone through their own a phase of cobot 19, all the disruption that caused.
But there need to transport goods in that country will not abate or they have invested heavily in LNG infrastructure.
And the H.B. I product that we will launch there a in short order.
It should be really great in the marketplace and we expect big things from it again, probably not a hockey stick or clarify bat right away.
Even in China.
People are going to buy the truck evaluate the truck and then before they buy two or five or 10 or 20. So there's still that commercial vehicle adoption curve, which isn't a step function change and so those are kind of all the things I think about when I think about what the future look like and where do I see us going.
Yeah, no understood understood. There's a lot of lot of uncertainty it kind of an understatement, but you know maybe just on China, and obviously, you know things complicated by what's going on.
But maybe having can you just talk about maybe some of the things and maybe its prior to the last couple of months, but some of the things, even though certification not yet in hand, what youre doing in the market what wage guys doing in the market and just some of the feedback or thoughts you're getting from fleets.
Truck Oems in anticipation of this engine.
Yes, I think there is heavy anticipation and we're working through our joint venture with a number of Oems to have them sees a product feel the product and be ready for the products. So that is ongoing work and they have the same anticipation that lets say we do on this call regarding getting that certifications done starting the production sales.
And seeing the product in the marketplace to see what the end users the fleets in the and the individual owner operators do with respect to buying the product and the ones that adoption cycle look like in China is it different than what we've experienced southern markets and that we have seen a with the market for natural gas commercial trucks in China leaves.
In some significant non linear charities, historically, where basically the market has jumped by 30 40, 50% based on you know the kind of economy. They have their the signals that against the economy in terms of what people should do and what trucks. They should buy it feels available. So that also could happen with HPD I'm not predicting that are saying that's going to happen.
Here, but I'm, just saying if you look at the history of natural gas trucking in China or the growth rates have been very substantial and I think you you you are quite well aware of what's happened in the marketplace there.
Yeah, absolutely maybe last one for me just yeah on the on the cost side I know.
You've cut opex quite a bit just are there.
Maybe some additional levers that you can pull there just you know in response to that kind of environment.
Yeah, So I think as as a general premise, we have been working hard and making sure. We find every bit of cost to wring out of the company as possible I think we've done really good work on that as have my predecessors. So this is not a new activity for us and we will continue to do it.
I do think we're not done and I will go into specifics of the things that I expect to achieve here there the other but it's a it's an ongoing effort for us Oh, we expect that Oh, we'll continue that 2020.
Okay.
Thank you Eric.
Yeah. The next question comes from Colin Rusch. Please go ahead.
Well. Thanks, so much because you know I know, it's early days, but can you talk a little bit about what you're seeing kinda supply chain and and banks. What's your working capital how are you being able to collapse or on your and then and what are your suppliers looking for from you in terms of.
Getting their parables pay and then are you seeing and support mechanisms emerging Katz from.
Italian are you backs on that.
Well I can talk a little bit about the supply base column, and then I'll hand over to Richard talked about the capital markets a bit what we're seeing their banks and so forth. So in the supply side. We we took early action a cross our operations to.
Advance our orders and build up inventory and so that was happening already in early January when we heard about the the activities are they the outbreak if you will in China. So we have a fair number of companies that do come from China. That's an important part of our supply base as you know when you're making product if you're missing one piece you can't make the product. So we took action.
And to let to build that those inventories and that's worked well for us.
We did a we have not had to stop production or slow down production or short any customer because of a lack of materials. So so far so good I do believe it's still early days you can see in the school that 19, a epidemic it's not a situation but is one weekend done we've been talking about this now since early days.
January and I think we've got sometimes don't to go and so it's a everyday we have to work on this with our suppliers, but I would say no adverse conditions. So far in total, but you know really we had to step up production in our Clinton restaurants, not because of the lack of material because it wasn't it wasn't healthy thing prior place to be the factory.
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Yeah.
Just a I agree.
[laughter].
All.
I I guess I'm more concerned cashless, then then availability of components. So it could address that that's here as you work through the pick out the back support.
Yeah as of right now call in like in terms of our relationships with.
You know vendors and everybody within kind of all our stakeholders.
We we haven't seen the pressure yet so everybody sort of.
In terms of one we're receiving.
And I caught a trade payables, a trade receivable versus paid a trade payable were sort of maintaining those relationships as we were before so there's nothing really significant yet not not to say that that pressure on started happening, especially within our you know with our businesses within it'll either you know very well call. It.
A structure of how things are flowing over there where they are there the community you definitely supporting each other so we haven't seen you know we haven't been.
But the beneficiary or or somebody who are the recipient of any paying out of the process as of right now.
Okay.
Just for the rest of the group and in terms of.
Managing our working capital and our liquidity of the organization I mean, that's one of the things that obviously.
We were preparing for this you know as the situation in Italy was unfolding.
That we were responsible with regard to making sure that we're going to meet all our financial obligations whether those were.
Ours in our supply chain, but also in our in our in our debt that we are preparing ourselves to make sure that we can weather the storm.
Right and then I'm just a we'd love a quick update and I know, it's it's probably not top of mind, but the CW I relationship and any discussions or update that you have you can share.
From a.
Just a question or comment on how to look forward, which had a better grade and that up to the as you come to the end of that kind of its plus.
Yeah, calling it it's a the a question that keeps going back and I understand why unfortunately at this juncture I'm in the same situation that went before we continue to have those discussions and we have a very good working relationship.
And those discussions, but I don't have anything but I can share at this point in time with respect to where we'll end up and how will it come out in the end I've talked about the different options that are in front of us, but I don't have any news to share in sight, sorry for that but that's just perfect and play it read this time.
No I'm, so I'm not sure. Thanks, so much less.
Thank you calling.
Thank you for the next question comes from Sameer Joshi. Please go ahead.
Oh, Thanks for taking my call.
My question of who sits on the Italy situation, one facility moves and the other two oh breathing.
In terms off the parts that are being produced at assembly. There are then a balking make that has been positive.
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No I would say not so maybe just to characterize it just to give you the kind of the the geography that situation our plant in breast, Italy is oh within the you know a few number of kilometers of the epicenter of or the outbreak was less than ours drive and and really that's northern Italy area. It's a severe.
Are they affected I think you can read the news about that yourself, but the other plants that we have our further away and not so severely affected this quarter I'm not trying to minimize it is actually going on there, but actually the regional differences are substantial in terms of bottlenecks, neither supply by us or to us a that hasn't been.
Problems. So we basically actually we are in the early days or less it late days a January early days of February you're actually accelerating our deliveries in response to a the though the news that was coming out as our customers for doing like we did trying to build up inventories to be more robust going forward.
Through the crisis gets you bill and so we met all those requests or wherever we could and I think the team did just absolutely fabulous job and that but unfortunately at the end of the day meat, we just couldn't keep running the plant. It wasn't helpful. There wasn't a healthy environment for our employees and the it was really a crisis situation is aggressive situation in that part of the.
So that was the decision that was taken and we've been in touch with all of our suppliers and customers everybody as well informed and adds as Richard alluded to a moment ago, There's a real strong community in that part of the world and everybody is helping each other as much as again.
Right.
In terms of cost through that soon so I I know you talked about them in context, all oh from operations, but given the uncertainty all fall.
Each of all the news.
The.
Oh cost reduction that floats that both land.
And usage.
Yeah, I would say on the genotype and cost reduction the one that comes top of mind Sunday and then maybe Richard on jump and is is our cost reduction effort on our under each beady eye products. This really is tied directly to the volume growth and so we're really excited about what will be able to do.
Over the coming quarters with respect to improving the margins in that business. Its a lot of work it doesn't happen overnight and but it's on our table to do and that's a priority for us.
So hopefully that are there any question themselves gross margins. So what do you have seen as that as Ah you have increasing its pretty it seems like.
Volume pricing discounts.
And affecting gross margin so holding back working in conjunction with the cost reduction efforts.
Yes, just to start with.
The the growth it's been a good with their lead customer in Europe, we have not yet been able to add the volume we want to see out of our Chinese business and so that we're really I think make a big difference.
And so that's an important part of our business and that's something we're looking forward to.
Okay as did Mona.
So often.
Thanks Amir.
Thank you. The next question comes from Rob Brown. Please go ahead.
Good afternoon, and Rob <unk>.
Hi, just wanted to clarify the brush facilities does that just supplier OEM business or do they support some of the H.P.I. product out of there.
Yeah, we that plan of supplying OEM business for both light duty heavy d.. So we didn't make our think systems that we supply to our European customers at that facility.
Okay. Thanks for clarifying and then on the Chinese yeah ramp realizing it's uncertain when you get that certification, but what what steps sort of happened after you get certification or when does that hit the market.
What does the subsidy to follow them once you get the certification.
Well what are the things that's very different with this launch in China, Besides being completely different market then the European market. Yeah in terms of think more well developed and receptive and available more refueling infrastructure, but I would say what are the most important things at different at that we therefore don't have a total feel on is that actually you know.
Our joint venture there makes engines and then we sell engines to truck manufacturers and so there is a this potential and the we're doing the work now with multiple Oems that we could have multiple Oems launching this project at product that competing with each other in real time and the launch curve could be a different ones curve that we experienced with Volvo because it would be at some of a number of.
Ones curves from from different customers. So we have to see how that plays out over time.
But that would be kind of a key difference that we see as an opportunity going forward.
Okay, good, but that's excellent and then if I think the in the prepared remarks, you mentioned LNG truck registrations in Europe, you gave a number could you kind of clarify what that was and.
And sort of maybe the trend line there again.
Yeah. So there's a chart in a in the materials that we posted a that shows kinda the fleet of vehicles in Europe, and so we're up to like 11000, I think that number 11000 units on a on the road basically.
But what the other number that I gave US 4500 units just in this past year that were registered a new registrations.
So I think that's a giving you a good idea and the need that curve is very clear around 2017 2018, you really started to see an expansion of the market in Europe as people started adopt these trucks and that comes from a couple of factors. One is more refueling infrastructure. It's been growing quite rapidly over last couple of years since we talked about and also more product.
Okay helpful. So back in the early days of LNG. It back in the 2012 2013. It was just tobacco their spark ignited product, but a in the 2016 20 times in 2018 time, we had the launch of our product H.P.D. I with our customer as well as that's gone you. There's marketed products now you have more and more products getting in the market more refueling.
The structure and a really nice trend line that we expect to Ah Ah follow and accelerate.
Okay, great. Thank you appreciate the color I'll turn it over.
Thanks, Rob.
Thank you once again, if you wish to ask a question. Please press star one.
The next question comes from Jeff Osborne. Please go ahead.
Hey, good afternoon, a couple of questions on my end I'm going back to the Italy can you just talk about other than Russia. The other two facilities. What what are those make and then are they reliance on product or any components coming out of Russia.
Yeah. There is some interdependency and ER, we again tried to build up stock up relative to that interdependency as we saw that the closure was gonna be required.
But for the most part me at the plant encourage ASCO is a is our aftermarket business.
A large part supplying components for LPG and doing a our de OEM services for our customers, our OEM customers as well as our plant in Alberta is a component supplier of injectors would probably by market shut the largest supplier of injectors for aftermarket gets around the world. So he supplier don't get.
Let's see supply other other companies kits, so quite a good components can again absent.
Got it that's helpful. And then you mentioned I think in the prepared remarks, you know referencing the European data from in GB Europe that I think 55% or the market for CNG was was Italy can you give us an update you know just your broader light duty vehicle mix across all different fuel types.
You know how much is a Italian centric demand.
Yeah, Italy is a very important market for us and a there's no question about it Oh, we are a dominant player in that market and it is the largest market for our CNG and LPG vehicles, and therefore kits in the European Union, but there are other very important markets are like Russia.
Turkey, Poland, our business very far away in Argentina is also very important piece of the puzzle. So yeah. There is the other business and of course, we have a strong visits in places like Germany, and it hasn't been it's kind of in the northern European region, especially with our print product there.
Which is is built in a different plant in the Netherlands.
But safe to say about half as it is that fair I'm just trying to put in perspective.
If the total market, 55% near the leading player.
Give or take half.
I don't have a number four yeah I'd like to come back down that when Jeff.
Okay No problem and then the 44510 trucks that were registered a LNG based <unk>, yeah, I think of echo that their analyst day highlighted over 50% share obviously skandia, it's been around for a few years any sense and on the market share you know in year, one or and.
He thought process on how that evolves just given the competitive market over the next year or two.
Yeah. So a general general comments on that I don't have any specific market shares that can share with you I do believe a lot of that day to develop I just haven't Hindi myself to share with you, but what I would say is that no spark ignited products in Europe for natural gas in commercial trucking and in China also but specifically we're talking year up here is.
Well no.
No that's been out there kind of leading leading the way and with that product in marketplace for coming up in 10 years now and when when it's kind of came in and joined it was kind of from my perspective in the markets perspective, Okay. Here's another product like that that we know right at the same kind of products I think we know, but when H.B. I comes out based like.
Oh, what's that it's a little different so the adoption character that then I would say not the same as you remember that spark ignited product because it's not so well known and it's something new and novel when people have to get used to it. So I think there is that element of the adoption curve that that means that we still have some acceleration left to do I would say quite a bit with each video product.
Our customer in Europe.
Is that more and your corn or you are large customers are both just so I'm clear on though.
No I think that's a almost entirely on on our customer and no what I expect in the marketplace it'll be interesting to see how it plays out but right now in Europe.
The industry is creating the baseline for the C. The two standards right. The baseline for CEO to standards mean that 15% number and a 30% reduction that's doing 2030 needs are going be measured against the baseline that's being created now so it really kind of across the industry there.
From a mass perspective into compliance perspective, there isn't a strong person says, let's go sell a lot of low carbon products because that just makes the future challenge even greater so after June 30 of this year it'll be interesting to see how the market develops and how all the players Act.
Got it that's helpful. My last question I, just wanted to try to drill down a little bit more on China. So you gave some incredibly helpful detail around the various test I know a mission.
Various vehicle testing and then a an administrative proceeding.
And then you sort of characterize the the processes I believe you said almost done.
I'm just curious can have you done all the three tests that you referenced in our you in the middle of the administrative process or if you're not done the tests. It was unclear where where we are in that journey.
Yeah, no. Thanks for asking the M that process include these three tests as you referenced and we have one left to do a it is the last when you do which is the on vehicle and this is when you have to coordinate with your vehicle partner right because our JV does not make vehicles. So we have to work with the vehicle partner and we have time to compliance agency there it.
So it hasn't been a difficult logistical challenge, which is why it's not done yet and we expect that to be done certainly and I don't know how long the paperwork process takes but hopefully that you can be expedited. So we can start delivering product.
Got it and then maybe the last quick one I think as of the prior ones last and I apologize, but here you are with just under 50 million in cash uncertain outlook I assume not a big capex burden for this year, but how do we think about you know decremental margins.
For every say, 10% drop in volume is there a meaningful impact.
The that yeah, we should consider just given the uncertainty over the next quarter. So.
In terms of cash burn in and other facets I think a few of the prior analysts were asking about as well.
Yeah without going into too much detail I mean, obviously, the second quarter will be will be some pressure there.
<unk> like I said I'm not going to give any guidance in terms of you know how much margin pressure, we could actually see but I mean, you can calculate those from from the statements there but.
You know it like I said before we're now we're trying to see kind of how we can actually weather the storm with regards to making sure that.
The liquidity is in the organization and Oh, we're able to continue growing and investing in H.P.D. <unk>.
In terms of a Capex program. This year like you mentioned, it's not it's not a big spend we're looking to augment little bit of injector capacity there specifically for.
For wage high and and in our European launch partner. So you know as of right now we're we're in good shape.
Got it thank you very helpful.
Thank you Jeff.
Thank you. This concludes the question and answer session.
Thank you to everyone for joining us today, if you have any follow up questions. Please feel free to reach out to the Westport fuel systems Investor Relations team.
This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.
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