Q1 2025 Westport Fuel Systems Inc Earnings Call
Daniel Sceli: Speaking on behalf of Westport is Chief Executive Officer and Director Dan Sceli and Chief Financial Officer Bill Larkin.
Westport, as Chief Executive Officer, and director Dance, Eli and Chief Financial Officer, they'll Lucky.
Unknown Executive: Attendance on this call is open to the public, but questions will be restricted to the investment community.
On this call is open to the public the questions will be restricted to the investment community. You are reminded that statements made on this call and our responses to certain questions may contain.
Unknown Executive: You are reminded that the statements made on this call and our responses to certain questions may constitute forward-looking statements within the meaning of the U.S. and applicable Canadian securities laws, and as such, forward-looking statements are made based on our current expectations and involve certain risks and uncertainties.
Dan: They may constitute forward looking statements within the meaning of the U S and applicable Canadian Securities laws and all such forward looking statements are made based on our current expectations and involve certain risks and uncertainties with that I'll call I'll turn the call over to you Dan. Thank.
Daniel Sceli: With that, I'll turn the call over to you, Dan. Thank you, Ashley, and good morning, everyone. We continue to make meaningful progress in transforming Westport and sharpening our strategic focus. Our priorities do remain clear, driving success through Suspira, our HPDI joint venture with Volvo, pursuing operational excellence by streamlining operations and reducing costs, and positioning Westport as a leader in the shift to alternative fuel. These three pillars are guiding us toward a stronger future. In Q1 2025, our efforts translated into measurable results. reported revenue was $71 million for the quarter. In addition, Spira generated $16.7 million in revenue, which isn't reflected in our top line due to the equity method of accounting.
Dan: Thank you Ashley and good morning, everyone.
Dan: We continued to make meaningful progress in transforming Westport to sharpening our strategic focus our priorities do remain clear driving success through the spirit, our H PDI joint venture with Volvo.
Dan: Operational excellence by streamlining operations, and reducing costs and positioning Westport as a leader in the shift to alternative fuels.
Dan: These three pillars are guiding us toward a stronger future in Q1 2025, our efforts translated into measurable results.
Dan: Reported revenue was 71 million for the quarter. In addition to the spirit generated $16 7 million in revenue, which isn't reflected in our top line due to the equity method of accounting.
Daniel Sceli: When adjusting for our 55% ownership share, total revenue would have exceeded $80 million, higher than the $77.6 million reported in Q1 2024. Net loss improved significantly to $2.5 million from a net loss of $13.6 million in Q1 2024. Gross profit rose by $3.5 million while operating expenditures dropped by $8 million. Adjusted EBITDA also showed marked improvement year over year.
Dan: When adjusting for our 55% ownership share total revenue would have exceeded $80 million higher than the $77 6 million reported in Q1 2024.
Dan: Net loss improved significantly to $2 5 million from a net loss of $13 6 million in Q1 2024.
Dan: Gross profit rose by $3 5 million of our operating expenditures dropped by $8 million.
Dan: Adjusted EBITDA also showed marked improvement year over year.
Daniel Sceli: At the end of Q1, we also announced the proposed sale of our light-duty business. through which I aim to align Westport more with the hardest to decarbonize applications, primarily long-haul and heavy-duty transit. Our HPDI and high-pressure technologies offer a clear path forward in these segments. This transaction is expected to deliver immediate cash proceeds to strengthen our balance sheet and fuel growth in both Suspira and our high pressure controls and systems business.
Dan: At the end of Q1, we also announced the proposed sale of our light duty business.
Dan: Through which I aim to align Westport more with the hardest to decarbonize applications, primarily long haul and heavy duty transport our H P. D R and high pressure technologies offer a clear path forward in these segments.
This transaction is expected to deliver immediate cash proceeds to strengthen our balance sheet and fuel growth in both the spirit and our high pressure controls and systems business.
Daniel Sceli: This is an exciting time to be doing this. It is clear the market recognizes that the internal combustion engine utilizing alternative fuels will be instrumental in decarbonizing long haul heavy duty transport. And natural gas is no longer viewed as a bridge to hydrogen, but rather is the foundation of the future. At our core, we are a clean tech innovation company positioned to help drive this change. Through Suspira, the HPDI fuel system does the on-engine work to our high-pressure controls and systems business where our components do the off-engine work. We are providing OEMs with simplified solutions to decarbonize.
Dan: This is an exciting time to be doing this it's clear the market recognizes that the internal combustion engine utilizing alternative fuels will be instrumental in decarbonising long haul heavy duty transport.
Natural gas is no longer viewed as a bridge to hydrogen, but rather as the foundation of the future.
Dan: At our core we are a clean tech innovation company positioned to help drive this change through the spirit. The <unk> fuel system does the on engine work to our high pressure controls and systems business, where our components to the off engine work, we're providing Oems with simplified solutions to Decarbonize.
Daniel Sceli: As you know, we welcome Carlos Gonzalez as president of Suspira back in April. Carlos is already fully engaged in leading Suspira into its future of growth and success. As stated before, Carlos comes to Suspira with many years of tier one supplier experience and Earlier this month, we were pleased to see Volvo Trucks highlight the success they achieved with their gas powered solution using Suspira's HPDI technology. In 2024, sales increased by more than 25%, and we saw demand continue to grow into the first quarter of 2025. Sweden, Norway, Netherlands, Spain, and the UK have been the key markets, and we are also excited to see increased interest from the Indian market for this solution.
Dan: As you know we welcome Carlos Gonzales as President of the Spirit back in April Carlos is already fully engaged in leading spirit intuit's future of growth and success as stated before Carlos comes to spirit with many years of tier one supplier experience and connections.
Dan: Earlier. This month, we were pleased to see Volvo trucks highlight the success they achieved with their gas powered solution using spirits, each PDI technology and.
Dan: In 2024 sales increased by more than 25% and we saw demand continue to grow into the first quarter of 2025, Sweden, Norway, Netherlands, Spain, and the U K have been the key markets and we are also excited to see in increased ink Inc.
Dan: Increased interest from the Indian market for this solution.
Daniel Sceli: We continue to do things to right size the business and cut costs where we can. In Q1, gross margin improved significantly compared to last quarter, as well as an increase in efficiencies partly evidenced through the material reduction in operating expenses.
Dan: We continue to do things to rightsize, the business and cut costs, where we can in.
Dan: In Q1 gross margin improved significantly compared to last quarter as well as an increase in efficiencies, partly evidenced through the material reduction in operating expenditures.
Daniel Sceli: As we mentioned last quarter, we are still charging ahead with the sale of Westport's light-duty business. Once we close this deal, will we have the liquidity, and therefore the opportunity, to further rationalize our costs? We will continue to remain diligent when it comes to cost. and decreasing expenses, ensuring that the business runs more efficiently and effectively over time.
Dan: As we mentioned last quarter, we are still charging ahead with the sale of Westport light duty business. Once we close this deal when we have the liquidity and therefore the opportunity to further rationalize our costs.
Dan: We will continue to remain diligent when it comes to cost.
Dan: And decreasing expenses, ensuring that the business runs more efficiently and effectively over time, we are pleased with our progress so far but acknowledged that there is still much work ahead of us on this front.
Daniel Sceli: We are pleased with our progress so far, but acknowledge that there is still much work ahead of us on this front.
Daniel Sceli: We remain confident in the role that alternative fuels will play in driving sustainability in the future of transportation and industrial application space. Over the last several months, we have addressed that there is a slowdown in hydrogen infrastructure development, which is leading to a slower adoption of automotive and industrial applications powered by hydrogen. We have also presented the solutions that Westport can bring to fruition today, specifically related to natural gas. While we remain focused on scaling our alternative fuel solutions, including LNG, CNG, and RNG, and hydrogen systems, we are matching the cleanest gaseous fuels with the most efficient engine technology.
Dan: We remain confident in the role that alternative fuels will play in driving sustainability in the future of transportation and industrial application spaces over the last several months. We have addressed that there is a slowdown in hydrogen infrastructure development, which is leading to a slower adoption of automotive and industrial applications powered by hydrogen.
Dan: We have also presented the solutions that Westport can bring to fruition today, specifically related to natural gas applications.
Dan: While we remain focused on scaling our alternative fuel solutions, including LNG, CMG and LNG and hydrogen systems, we are matching the cleanest gaseous fuels with the most efficient engine technologies.
Daniel Sceli: We are committed to delivering practical, commercially viable, low carbon solutions today and providing sustainable, high performance solutions that help our customers achieve their goals now and for years to come.
We are committed to delivering practical commercially viable low carbon solutions today, and providing sustainable high performance solutions that help our customers achieve their goals now and for years to come.
Daniel Sceli: Westport is focused on its future and the proposed divestment of our light duty business will lead us to what's next. The transaction allows Westport to significantly strengthen its financial perspective and taper our focus on creating solutions for hard to decarbonize segments of the long haul, heavy duty transport and industrial space. In the evolving landscape of sustainable transportation, Suspira and Westport stand at the forefront, redefining what's possible with internal combustion engines.
Dan: Westport is focused on its future and the proposed divestment of our light duty business will lead us to what's next the transaction allows westport to significantly significantly strengthened its financial perspective, and taper our focus on creating solutions for hard to decarbonize segments of the long haul heavy duty transport and industrial space.
Dan: In the evolving landscape of sustainable transportation spirit, and Westport stand at the forefront redefining what is possible with internal combustion engines. This commitment to innovation has led our teams to the latest breakthrough a CMG H PDI solution running on 700 bar storage without a compressor this advancement not only enhances performance.
Daniel Sceli: This commitment to innovation has led our teams to the latest breakthrough, a CNG HPDI solution running on 700 bar storage without a compressor. This advancement not only enhances performance, but also expands the horizons for cleaner fuel alternatives. Successfully operating at pressures up to 600 bar, the HPDI fuel system demonstrated normal operation even with a 5-10% hydrogen blend by volume. This innovation opens up new decarbonization pathways, especially in regions where CNG is more accessible than LNG. Developed in collaboration with GFI, our High Pressure Controls and Systems team, this project exemplifies our commitment to innovation and sustainability.
Dan: But also expand the horizons for cleaner fuel alternatives.
Dan: Successfully operating at pressures up to 600 bar the H P. D. I fuel system demonstrated normal operation, even with a 5% to 10% hydrogen blend by volume.
Dan: This innovation opens up new decarbonization pathways, especially in regions, where <unk> is more accessible than LNG.
Dan: Developed in collaboration with GFR or high pressure controls and systems team. This project exemplifies our commitment to innovation and sustainability.
Daniel Sceli: Speaking to our GFI brand, or High Pressure Controls and Systems We are excited about the upcoming completion of our new Hydrogen Innovation Centre and manufacturing facility located in China. Production at the facility is anticipated to come online later this year and will focus on delivering the Chinese market. Westport's GFI branded hydrogen fuel system components have had a strong presence in the Chinese marketplace for over 10 years, supporting both fuel cell and internal combustion engine applications that use hydrogen fuel. Currently, China represents approximately half of our high pressure controls and systems revenue.
Dan: Speaking to our <unk> high pressure controls and systems business. We are excited about the upcoming completion of our new hydrogen UV innovation Center and manufacturing facility located in China production at the facility isn't just anticipated to come online later this year.
Dan: We will focus on delivering the Chinese market.
Dan: Westport GFR branded hydrogen fuel system components have had a strong presence in the Chinese marketplace for over 10 years supporting both fuel cell and internal combustion engine applications that use hydrogen fuel currently China represents approximately half of our high pressure controls and systems revenue.
William Larkin: I'll now hand the call over to Bill so he can provide some more information on the financial results. Thanks, Anne, and good morning to everyone. Moving on to our first quarter 2025 results, we reported $71 million in revenue for the quarter, which was a 9% decrease compared to the same period last year. As expected, the transition of the heavy duty OEM business into Suspiria shifted revenue to the JV in Q125 as we were accounting for the Suspiria JV under the equity method of accounting. This impact to our porter revenue was partially offset by an increase in sales in our light duty segment.
Dan: I'll now hand, the call over to Bill. So he can provide some more information on the financial results Bill.
Bill: Thanks, Pat and good morning to everyone moving onto our first quarter 2025 results.
Bill: We reported $31 million in revenue for the quarter, which was a 9% decrease compared to the same period last year.
Bill: As expected the transition of the heavy duty OEM business into spirit shifted rapidly to the JV in Q1 25.
Bill: We are accounting for the spirit JV under the equity method of accounting.
Bill: This impact to our reported revenue was partially offset by an increase in sales in our light duty segment.
William Larkin: We continue to deliver improved margins. In Q1 of 25, gross margin increased to $15.2 million, or 21% of revenue. This is up from $11.7 million, or 15% of revenue in Q1 of 24. This improvement was driven by sales mix with higher OEM and DOEM sales, plus we are seeing the benefits of our cost reduction initiative. Also, we had significant reduction in our Q1 2025 operating costs, where R&D and SG&A expenses declined by $8 million compared to the prior year period. The reduction in operating expenses for Q125 is a combination of transition and heavy-duty OEM businesses to SBIR, which account for approximately $5 million reduction, and continuing our disciplined approach to cost reductions and operational efficiency.
Bill: We continue to deliver improved margins in Q1 of 25 gross margin increased to $15 2 million or 21% of revenue.
Bill: This is up from $11 7 million or.
Bill: Or 15% of revenue in Q1 24.
Bill: This improvement was driven by sales mix with higher OEM and deal we haven't sale plus we are seeing the benefits of our cost reduction initiatives.
Bill: Also we had significant reduction in our Q1 2025 operating cost were R&D and SG&A expenses declined by $8 million compared to the prior year period.
Bill: The reduction in operating expenses for Q1, 25 is a combination of transition and heavy duty OEM business, the sphere, which account for approximately 5 million reduction and continuing our disciplined approach to cost reductions and operational efficiency.
William Larkin: For Q125, we generated operating income of $1.79 million compared to operating loss of $12.59 million in the prior year period, which is a $14.29 million improvement. We also demonstrate continued improvement in our adjusted EBITDA for the quarter ended March 31, 2025, reporting adjusted EBITDA of nil, which is a significant improvement over the reported adjusted EBITDA loss of $6.6 million in Q1 of 2015. Our light-duty revenue for Q1 of 25 was $64.2 million, as compared to $63.3 million for Q1 of 24. This increase was primarily driven by an increase in sales in our light-duty OEM as a result of the Year 6 program, an increase in delayed OEM business as compared to Q1 of 24, where we saw a significant decline in sales because of an inventory build within our key delayed OEM customers.
Bill: For Q1, 'twenty five we generated operating income of $1 79, compared to operating loss of $12 5 million in the prior year period, which is a $14 2 million improvements.
Bill: We also demonstrated continued improvement in our adjusted EBITDA for the quarter ended March 31 2025.
Bill: <unk> adjusted EBITDA.
Bill: Which is a significant improvement over the reported adjusted EBITDA loss of $6 6 million in Q1 of 'twenty four.
Bill: Our light duty revenue for Q1, 'twenty five was $64 2 million as compared to $63 3 million for Q1 24.
Bill: This increase was primarily driven by an increase in sales in our light duty OEM as a result of the Euro six program, but increasingly the OEM business as compared to Q1 of 'twenty four where we saw a significant decline in sales because of an inventory built within our key OEM customer.
William Larkin: Gross margin or light-duty business increase in the quarter to $14 million, or 22% of revenue, as compared to $12.4 million, or 20% of revenue in Q1 of 2024. This improvement was primarily driven by a change in sales mix with an increase in sales to European customers and a reduction in sales to developing regions and an increase in sales volume. High pressure controls and systems revenue for Q125 was $1.4 million. This is a decrease as compared to $2.4 million for Q124. This decline was primarily driven by a slowdown in the hydrogen industry. Gross margin decreased in the quarter to $200,000 or 14% of revenue as compared to $400,000 or 17% of revenue in Q124.
Bill: Gross margin of our light duty business increased in the quarter to $14 million or 22% of revenue compared to $12 4 million or 20% of revenue in Q1 of 'twenty four.
Bill: This improvement was primarily driven by a change in sales mix with an increase in sales to European customers.
Bill: And a reduction in sales to developing regions and an increase in sales volumes.
Bill: My personal controls and systems revenue for Q1 at $25 4 million, that's a decrease as compared to $2 4 million for Q1 24.
Bill: Decline was primary driven by a slowdown in the hydrogen industry.
Bill: Gross margin decreased in the quarter to 200000 or 14% of revenue as compared to 400000 or 17% of revenue in Q1 24.
William Larkin: This decrease is primarily driven by lower sales volumes, therefore increasing the pre-unit manufacturing costs of the components in the quarter. Heavy-duty OEM revenue for the first quarter of 25 was $5.4 million. The revenue decrease compared to the same period last year was the result of the transfer and continuation of the business in Suspera. Revenue earned in the first quarter of 25 relates to our transitional services agreement with Suspera, which is expected to be in place until mid-2025. Gross margin in our heavy-duty OEM business in the first quarter of 2025 was $1 million, or 19% of revenue, compared to negative $1.1 million, or negative 9% of revenue in Q1 of 2024.
Bill: This decrease was partly driven by lower sales volumes, therefore, increasing our per unit manufacturing cost the components in the quarter.
Bill: Okay.
Bill: Heavy duty OEM revenue for the first quarter of $25 $5 4 million.
Bill: The revenue decrease compared.
Bill: Compared to the same period last year was the result of the transfer and continuation of business since the spirit.
Bill: Revenue earned in the first quarter 'twenty five relates to our transitional services agreement with spirit, which is expected to be in place in mid 2025.
Bill: Gross margin in our heavy duty OEM business in the first quarter of $25 1 million or 19% of revenue compared to negative $1 1 million or negative 9% of revenue in Q1 24.
William Larkin: Gross margin in Q1 of 2025 is positively impacted by realizing $900,000 in credits from component suppliers for inventories sold during the quarter. Sparrow generated $16.7 million in Q1 of 25 in the prior year heavy-duty OEM segments which at that time included our HPDI business to have revenues of $11.9 million. This was primarily driven by an increase in HPDI fuel systems sold in the quarter. Gross profit for Suspiria was $500,000 for the three months in March 31, 2025. In the prior year, the heavy duty OEM segments had negative $1.1 million in gross profit. The increase in gross profit was primarily driven by the increase in sales lines compared to the prior year and reductions in manufacturing costs.
Bill: Margin in Q1, 25 is probably impacted by realizing 900000 credits from component suppliers for inventory sold during the quarter.
Bill: The spirit generated $16 7 million in Q1 of 'twenty five.
Bill: In the prior year heavy duty OEM segment, which at that time include our HPA business had revenues of $11 90.
Bill: This was primarily driven by an increase in <unk> fuel systems sold in the quarter.
Bill: Gross profit for Spirit was 500000 for the three months ended March 31 2025.
Bill: In the prior year, the heavy duty OEM segment had a negative $1 1 million and gross profit increase.
Bill: The increase in gross profit was mainly driven by the increase in sales volumes compared to prior year and reductions in manufacturing cost.
William Larkin: Regarding liquidity, our cash and cash equivalents at March 31, 2025 was $32.6 million, as compared to $37.6 million at December 31, 2024. For Q1 2025, net cash used in operating activities was $4.9 million. Cash Use and Operating Activities were primarily driven by an $8.19 increase in net working capital, specifically in inventory and accounts receivable related to our light duty business. The cash provided by investment utilities was $2.7 million for the quarter, driven by the collection of a total of $11.4 million from Cummins for a holdback receivable, of which $10.5 million was allocated to the holdback and the remainder was allocated to interest.
Bill: Regarding liquidity, our cash and cash equivalents at March 31, 2025 was $32 6 million as compared to $37 6 million as of December 31, 2024.
Bill: For Q1, 2025 net cash used in operating activities was $4 $9 million.
Bill: Cash used in operating activities was primarily driven by $8 1 million increase in net working capital, particularly in inventory and accounts receivable related to our light duty business.
Bill: Net cash provided by investing activities was $2 seven loans for the quarter driven by the collection of a total of $11 4 million from Cummins for a whole back receivable of which $10 5 million allocated to the hold back and a remainder was allocated interest.
William Larkin: We purchased capital assets of $3.1 million, mostly for our European operations, and finally, we contributed $4.7 million into Suspiria in the quarter, representing approximately a quarter of our anticipated 2025 cash contributions to Suspiria. Net cash used in financing activities is $3.9 million in Q1 of 2025 due to payments on our long-term credit facilities. This is compared to $17.7 million in the prior year period as we had higher payments related to the revolving financing facility that was closed in November of 2014.
Bill: We purchased capital assets of $3 1 million, mostly for our European operations and finally, we contributed $4 7 million into spirit in the quarter, representing approximately a quarter of our anticipated 2025 cash contributions to <unk>.
Bill: Net cash used in financing activities was $3 9 million in Q1 of 2025 dispute of payments on our long term credit facilities. This compared to $17 7 million in the prior year period, as we had higher payments related to the revolving financing facility that was closed in November of 'twenty four.
William Larkin: We've had a strong start to 2025 and truly believe that the proposed divestiture transaction will shift our business in the right direction while allowing us to follow through on our commitment to strengthening the balance sheet, as well as continue to develop the HPDI and high-pressure controls and systems segment.
Bill: We've had a strong start to 2025 and truly believe that the proposed divestiture divestiture transaction will shift our business in the right direction, while allowing us to follow through.
Bill: Our commitment to strengthening the balance sheet as well as continuing to develop the H PDI and high pressure controls and systems segments.
Daniel Sceli: With that, I'll pass the call back to Dan. Thank you, Bill. To recap, the proposed light duty transaction allows for the company to return to its strategic roots with a focus on providing solutions for hard to decarbonize mobility and industrial applications. significantly strengthen the balance sheet and provide essential proceeds to focus on strategic growth opportunities and continued leadership in fuel system solutions for clean, low-carbon fuels.
Speaker Change: With that I'll pass the call back to Dan.
Speaker Change: Thank you Bill to recap the proposed light duty transaction allows for the company to return to its strategic routes with a focus on providing solutions for hard to Decarbonize mobility and industrial applications significantly strengthened the balance sheet and provide a central proceeds to focus on strategic growth.
Speaker Change: <unk> and continued leadership in fuel system solutions for clean low carbon fuels.
Daniel Sceli: Thank you to everyone who joined the earnings call today. Your continued support is immensely important to us. We are excited about Westport's future and we want to move through 2025 with purpose, creating value for our shareholders and cultivating opportunities to grow as a company. We believe that shifting our focus to our HPDI and high pressure controls and system segment will provide us with the best possible future.
Thank you to everyone who join the earnings call. Today. Your continued support is immensely important to US we are excited about Westport future and we want to move through 2025 with purpose, creating value for our shareholders and cultivating opportunities to grow as a company.
Speaker Change: We believe that shifting our focus to our H PDI and high pressure controls and systems segment will provide us with the best possible future.
Unknown Executive: Finally, we are holding a virtual annual general meeting tomorrow morning, 7 a.m. Pacific Time, 10 a.m. Eastern Time, and encourage current and prospective investors to join us. The details for the call can be found on our website.
Speaker Change: Finally, we are holding a virtual annual general meeting Tomorrow morning, seven a M Pacific time, 10, a M eastern time and encourage current and prospective investors to join US the details for the call can be found on our website. Thank you again for joining us today.
Unknown Executive: Thank you again for joining us today. Thank you.
Unknown Executive: As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.
Speaker Change: Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one to one again please.
Speaker Change: Please stand by while we compile the Q&A roster.
Amit Dayal: Our first question comes from the line of Amit Dayal from H.C. Wainwright. Morning, Amit. Hey, good morning, guys. Thank you for taking my questions.
Speaker Change: Our first question comes from the line of Amit Dayal.
Speaker Change: The yellow from H C Wainwright.
Speaker Change: Good morning, Amit.
Speaker Change: Hey, good morning, guys. Thanks for taking my questions.
William Larkin: Just to clarify on the divestiture, is this closing in 2Q or has it already been closed? Closing in Q2. Okay understood and that is when the cash proceeds etc will show up in the Q2 financials or will we see those in the third quarter?
Speaker Change: Just to clarify on the divestiture is this closing in <unk> or has it already been closed closing in Q2.
Speaker Change: Okay understood.
Speaker Change: And that is when the cash proceeds et cetera would show up.
Bill: In the Q2 financials or will we see those in the third quarter financials Bill.
William Larkin: Bill. I expect that it should, you know, we expect to close it by the end of the quarter. So therefore, you expect the cash to show up in our June 30 balance sheet when we present that. Okay, understood.
Speaker Change: Bill and I expect that.
Speaker Change: It should we expect that closed by the end of the quarter. So therefore, we expect the cash to show up in our June 30 balance sheet, when we present that.
William Larkin: And then sort of with respect to, you know, SESPERA margins going forward, any color, you know, what the path to higher margins looks like? Is it just more volume that will drive this? Or are there any other factors that we should keep in mind? Well, you know, getting SESPERA profitable is a combination of things. Volume is the number one key to that business, and we're on a projected growth path. Also, the efforts of the team to reduce their costs. to become more efficient and manage the supply base better. So as in many businesses, it's a multifaceted attack to profitability.
Speaker Change: Okay understood.
Speaker Change: And then sort of as with respect to <unk> margins going forward any color on you know what the path to higher margins looks like is it just more volume.
That will drive this or are there any other factors that we should keep in mind, you know getting some spirit profitable is a combination of things volume as the number one key to.
Speaker Change: That business and more on our projected growth path I'm also the efforts of the team to reduce their costs to become more efficient and manage the supply base better. So as many businesses, it's a multi faceted attack to our profitability.
Unknown Executive: Last quarter, you mentioned the CNG-related opportunity in North America.
Speaker Change: Understood and then last quarter, you mentioned you know the CND related opportunity in North America, I know, it's still sort of early in transition.
Daniel Sceli: I know it's still early in your transition phase, but any progress on that front and any new developments that we should be aware of? I actually just came back from California from the Clean Truck Show and sat through all of the discussion panels, the presentations, talked to a lot of customers on the floor, and I can tell you the pendulum is swinging hard back to the natural gases.
Speaker Change: Transition fees.
Speaker Change: But any any progress on that front and any any new developments that we should be aware of.
Speaker Change: Well, so I actually just came back from California from the clean truck show and sat through all of the.
Speaker Change: Discussion panels, the presentations talk to a lot of our customers on the floor and I can tell you. The the pendulum is swinging hard back to the natural gases I think I think the world has recognized that.
Daniel Sceli: I think the world has recognized that the hydrogen solutions are farther off than anyone would like, and that's a reality. The combination of that and the new administration in the US pushing for natural gas, I think we're going to see the pendulum swing even further. I think the opportunities are going to start rolling in fairly quickly. On the back of that, we still have a very strong liquid natural gas market in Europe that's starting to pick up volume. You heard me talk about a 25% growth on HPDI. It's on LNG in Europe. I think that we're all going to be participating in a natural gas market that is a foundational market, not a bridge to hydrogen.
Speaker Change: <unk> solutions are further often then.
Speaker Change: Than anyone would like and Thats a reality so the combination of that in the in the new administration in the U S. Pushing for natural gas I think we're going to see.
Speaker Change: The pendulum swing, even further and I think the opportunities are going to start rolling in fairly quickly.
Speaker Change: And on the back of that we still have a very strong liquid natural gas market in Europe, that's starting to pick up volume.
Speaker Change: <unk> heard me talk about a 25%.
Speaker Change: Gross.
Speaker Change: On <unk>, it's all in LNG in Europe.
Speaker Change: <unk>.
Speaker Change: I think that we're all going to be participating in a in a natural gas market that is a foundational market not a bridge to hydrogen.
Daniel Sceli: Understood. And with respect to China, is China going to be a focus for you as well in the new, emerging Westport? Absolutely. China has been an important piece of our business. It's been 50% of our high-pressure components business for some time. That GFI brand is very much a world leader in China and specifically for those markets. We are seeing natural gas accelerate in China. Hydrogen is still being developed in China. We're developing lots of products for customers there.
Speaker Change: Understood.
Speaker Change: With respect to China.
Speaker Change: Is China going to be a focus for you as well in the new emerging Westwood.
Speaker Change: Yeah, absolutely I mean, China has been a an important piece of our business. It's been 50% of our high pressure components business for some time and that GSI brand is very much a world leader and are in China and.
Speaker Change: Specifically for those markets, we are seeing natural gas accelerate in China.
Speaker Change: Origin is still being developed in China, we're developing lots of products for customers. There. So yes, China is a is a very important.
Daniel Sceli: China is a very important cog in our wheel that we're going to continue to develop.
Coggin, our wheel that we're going to continue to develop.
Amit Dayal: Thank you, Dan. That's all I have.
Speaker Change: Okay.
Amit Dayal: I'll take my other questions offline. Thanks, Amit. Thank you.
Speaker Change: That's all I have I'll take my other questions offline. Thanks.
Speaker Change: Thank you.
Unknown Executive: One moment for our next question.
Speaker Change: Thank you one moment for our next question.
Eric Stine: Our next question comes from the line of Eric Stine from Craig Hallam Capital Group. Morning, Eric. Hi Dan, Hi Bill. Good morning. Well, you just kind of touched on it, you know, everything going on out in California a couple weeks ago.
Speaker Change: Our next question comes from the line of Eric Stine from Craig Hallum Capital Group.
Speaker Change: Eric.
Dan: Dan Hi, Bill.
Speaker Change: Good morning.
Speaker Change: Well, you just kind of touched on it.
Everything going on out in California, a couple of weeks ago.
Eric Stine: And, you know, I did talk to Volvo and it sounds to me like they do not have a natural gas product in North America, which would sure seem to be an opportunity for Westport down the road. But that begs the question. You mentioned the development of a CNG HPDI solution that you have done, but how long, you know, if Volvo were to make that decision to bring it to North America because their customers clearly want it, how long would that take from a development? Sure. So, you know, we talked a little bit about this when we were together in California, but engine development and, you know, whether you're talking light-duty or heavy-duty, engine development is a fairly long cycle.
Speaker Change: I did talk to Volvo and it sounds to me like they do not have any natural gas product in North America.
Speaker Change: To ensure it seem to be an opportunity for west for down the road, but thanks for the question.
Speaker Change: You mentioned the development of a <unk> solution that you have done, but how long if all of our work to make that decision to bring it to North America.
Speaker Change: The customers clearly wanted how long would that take from a development perspective sure. So we talked a little bit about this when we were together in California, but engine.
Speaker Change: Element.
Speaker Change: Whether youre talking like your heavy duty engine development is a fairly long cycle.
Daniel Sceli: And the biggest part of that cycle always ends up being the certification process where you have to accumulate so many miles or kilometers in testing, and that's a big time lag. The typical engine development for a heavy-duty The work that we've been doing, it's all been quite recent, demonstrating that we can have CNG, and even CNG hydrogen blends run on the same HPDI system is the first step in hoping to get Volvo to bring a CNG engine to North America. But there's other customers as well. Our solution can fit on any platform.
Speaker Change: The biggest part of that cycle always ends up being the certification process, where you have to accumulate so many.
Speaker Change: Miles or kilometers.
Speaker Change: In testing and that's a big time lag is typical engine development.
Speaker Change: For heavy duty truck is about four years and.
Speaker Change: The work that we've been doing most of it's all been quite recent demonstrating that.
We can have CMG and even CMG hydrogen blends run on the same <unk> system as a first step in and hoping to get Volvo to bring our <unk> engine to North America.
Speaker Change: But theres other customers as well radar solution can fit on any.
Daniel Sceli: As we've talked about for the last year, the Suspiria joint venture was structured and its mandate was to have multiple OEMs. It was never structured to be simply a Volvo joint venture. It was structured to build out and become an independent business supplying all the OEMs. Got it.
Speaker Change: Any platform and.
Speaker Change: As we've talked about for the last year of the spirit joint venture was was structured and its mandate was to have multiple Oems. It was never structured to be simply a Volvo joint venture it was structured to build out and become an independent business supplying all the Oems.
Daniel Sceli: And, and you touched on your own development, and you said, you know, kind of, well, recent, but I'm just curious. I mean, is that is that in response to requests from OEMs? Is that more proactive on your part, just to show that, you know, or at least get a jump on it. So maybe it can shorten that that long development cycle to some extent, or is it a mix of both? Well, it's it's actually very proactive on our trying to, to pull the market. I mean, HPDI was born and raised on pulling the market to it.
Speaker Change: Got it.
Speaker Change: You touched on.
Speaker Change: Your own development and you said kind of recent but I'm. Just curious I mean is that is that in response to requests from Oems is that more proactive on your part just to show that.
Speaker Change: Or at least get a jump on it so maybe it can shorten that that long development cycle to some extent or is it a mix of both.
Speaker Change: Well its actually very proactive on our part trying to two.
Speaker Change: <unk> pulled the market I mean <unk>.
Speaker Change: Was born and raised on pulling the market to it and we intend to continue to do that type of activity, while the Oems evaluate the business cases for each of their regions.
Daniel Sceli: And we intend to continue to do that type of activity while the OEMs evaluate the business cases for each of their regions. And I think that that the The head start that we have would help any OEM that chooses to move forward. And one of the things I think you probably heard it as well in California, you know, the market only has one solution today and they're looking for alternative solutions. Yeah, absolutely. Thank you.
Speaker Change: And.
Speaker Change: I think that the.
Speaker Change: Head start that we have would help any OEM that chooses to move forward and one of the things I think you probably heard it as well in California.
Speaker Change: The market only has one solution today and Theyre looking for alternative solutions.
Daniel Sceli: Okay, so maybe just last one for me just on the divestiture. Can you just remind us of the steps that are needed? I mean, clearly, you've got a high level of confidence that that closes, but you know, maybe things to look for between now and the end of the second quarter? Sure.
Speaker Change: Yes, absolutely.
Speaker Change: Okay. So maybe just last one for me just on the divestiture can you just remind us of the steps that are needed I mean, clearly you've got a high level of confidence that that closes.
Speaker Change: Maybe things to look forward between now and the end of the second quarter.
Daniel Sceli: We're down to the countdown now. All the work has been done. It's a transition time to the actual close itself. So all the work has been done. It's just getting to the close date here in Q2. And we anticipate no issues to block that.
Speaker Change: I mean, we're down to the account down now the all the work has been done it's a transition time to the actual close itself.
Speaker Change: So all that work has been done it's just getting to the close date here in Q2.
Speaker Change: And we anticipate no issues too.
Speaker Change: <unk> block that.
Unknown Executive: Okay, thank you.
Unknown Executive: Thanks Eric.
Speaker Change: Okay. Thank you alright, thanks, Eric Thank you.
Unknown Executive: Thank you.
Unknown Executive: One moment for our next question.
Speaker Change: Thank you one moment for our next question.
Rob Brown: Our next question comes from the line of Rob Brown from Lake Street Capital Markets. Morning, Rob. Good morning.
Speaker Change: Our next question comes from the line of Rob Brown from Lake Street capital markets.
Speaker Change: Good morning, Rob.
Rob Brown: Good morning.
Daniel Sceli: I just want to get a sense on the high-pressure controls business, what you sort of think that runs at this year, and kind of where you see some of the growth opportunities in that. If you go back a couple of quarters to the reporting we were doing on high pressures, we were winning new contracts on components for the hydrogen sector at quite a rate. I think we had won $70 million or $80 million in new contracts. Those contracts are still moving forward, they've just been delayed. As most hydrogen projects around the world are slowing down, we still have that book of business coming on over the next few years.
Speaker Change: Operating.
Speaker Change: I just wanted to get a sense on the the high pressure controls business. What you sort of think that runs runs at this.
Speaker Change: This year and kind of where you see some of the growth opportunities in that segment sure. If you go back.
Speaker Change: A couple of quarters to the reporting we were doing on high pressures, we were winning new contracts on components for the hydrogen SEC.
Speaker Change: Sector at quite a rate we were we I think we had $1 70 or $80 million in new contracts.
Speaker Change: Those contracts are still moving forward, they've just been delayed as most hydrogen projects around the world are slowing down.
We still have that book of business coming on over the next few years.
Daniel Sceli: In the meantime, we've been winning more. We can't even keep up with the number of quotes we're dealing with for hydrogen contracts.
Speaker Change: And in the meantime, we've been winning more we continue to.
Speaker Change: We can't even keep up with the number of quotes were dealing with in.
Daniel Sceli: The thing that we're also doing is we're trying to re-establish a pivot to take those same type of pressure control components into the CNG world. As I talked about the pendulum swinging, the CNG presence is going to grow dramatically and these components can run on CNG as well with slight modifications. Our view of high pressure controls is that it's a growth business. It's early in that growth swing, but it's coming.
Speaker Change: For hydrogen contracts.
Speaker Change: The thing that we're also doing is we're trying to reestablish a pivot to take those same type of pressure control components.
Speaker Change: Into the <unk> World.
Speaker Change: As <unk> heard that as I talked about the pendulum swinging the CMG.
Speaker Change: Presence is going to grow dramatically and these components.
Speaker Change: And run on CMG as well.
Speaker Change: With slight modifications and so are our view of a high pressure controls is that it's a.
Speaker Change: It's a growth business.
Speaker Change: It's early.
Daniel Sceli: It's one of the reasons we're finalising the plant in China because the market is pulling hard for us to be there for local supply of all those components. Okay, thank you.
Speaker Change: In that growth swing, but its coming and its one of the reasons. We're finalizing the plant in China, because the market is pulling hard for us to be there for local supply of all those components.
Daniel Sceli: And then on the Suspira business, you talked about nice growth.
Speaker Change: Okay. Thank you.
Speaker Change: And then on the spira.
Speaker Change: Business, you talked about nice growth 25.
Daniel Sceli: Center Better. Where's that coming from? I know in Europe in general, but specifically, where do you see the activity there? It is primarily in Europe and in those countries I mentioned in my earlier statements. Volvo is starting to market heavier. Volvo is starting to put their foot on the gas pedal, no pun intended, to build that market out. They're also looking at India as a beachhead. They've got trucks going to India. The 25% growth that we're seeing was always actually built into the business plan to build out Suspira. We anticipate to see continued growth.
Speaker Change: Percent or better.
Speaker Change: Where's that coming from any now in Europe in general, but specifically, where do you see the activity there and what sort of the dynamics of the pick up.
Speaker Change: Sure. It is it is primarily in Europe and in those countries I mentioned in my in my earlier statements.
Speaker Change: <unk> is starting to a market heavier global is starting to.
Speaker Change: Put their foot on the gas pedal no pun intended to build that market out.
Speaker Change: They're also looking at India as a beachhead there they've got trucks going to India.
Speaker Change: So the 25% growth that we're seeing was was always actually built into the business plan too.
Speaker Change: To build out spira.
Speaker Change: We anticipate to see continued growth.
Speaker Change: Okay. Thank you I'll turn it over thank you.
Unknown Executive: Thank you.
Daniel Sceli: At this time, I would now like to turn the conference back over to Daniel Sceli, CEO, for closing remarks. Thank you. I'd like to thank everyone again for participating in our call. I hope you are going to share in our excitement on the future of Westport. I think we have re-established our positioning strategically to take advantage of what's happening in our markets, and we'll continue to drive for an efficient, well-run business. And again, thank you very much.
Daniel: Thank you at this time I would now like to turn the conference back over to Daniel <unk> CEO for closing remarks.
Daniel: Thank you I'd like to thank everyone again for participating in our call.
Speaker Change: I hope you are going to share in our excitement on the future of Westport I think we have.
Speaker Change: We established our positioning strategically to take advantage of what's happening in our in our markets and we will continue to drive for efficient well run business.
Speaker Change: Again, thank you very much.
Unknown Executive: This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].