Q3 2025 Westport Fuel Systems Inc Earnings Call

November 11, 2025

Operator: Good day, welcome to Westport's Q3 2025 Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Ms. Ashley Newell, Vice President of Investor Relations. Please go ahead.

Good day and welcome to westports. Q3 2025 conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session

Ashley Newell: Good morning, everyone. Welcome to Westport Fuel Systems Conference Call regarding its Q3 2025 financial and operational results. This call is being held to coincide with the press release containing Westport's financial results that was issued yesterday after markets closed. On today's call, speaking on behalf of Westport will be our Chief Executive Officer and Director, Dan Sceli, and Chief Financial Officer, Elizabeth Owens. Attendance on this call is open to the public, but questions will be restricted to the analyst and the institutional investor community. You are reminded that certain statements made on this call and our responses to certain questions may constitute forward-looking statements within the meaning of US and applicable Canadian securities laws. As such, forward-looking statements are made based on our current expectations and involve certain risks and uncertainties. With that, I'll turn the call over to you, Dan.

Ashley Nuell: Good morning, everyone. Welcome to Westport Fuel Systems Conference Call regarding its Q3 2025 financial and operational results. This call is being held to coincide with the press release containing Westport's financial results that was issued yesterday after markets closed. On today's call, speaking on behalf of Westport will be our Chief Executive Officer and Director, Dan Sceli, and Chief Financial Officer, Elizabeth Owens. Attendance on this call is open to the public, but questions will be restricted to the analyst and the institutional investor community. You are reminded that certain statements made on this call and our responses to certain questions may constitute forward-looking statements within the meaning of US and applicable Canadian securities laws. As such, forward-looking statements are made based on our current expectations and involve certain risks and uncertainties. With that, I'll turn the call over to you, Dan.

To ask a question during the session, you will need to press star 1. 1 on your telephone. You will then hear an automated message. Advising. Your hand is raised to withdraw your question. Press star 1 1 again, please be advised. That today's conference is being recorded. I would now like to hand the conference over to your speaker, Miss Ashley, Newell vice president of investor relations. Please go ahead.

Good morning everyone. Welcome to Westport fuel systems conference. Call regarding its third quarter 2025 financial and operational results.

This call is being held to coincide with the press release containing westport's Financial results. That was issued yesterday. Aftermarket is closed.

On today's call, speaking on behalf of Westport will be Chief Operating off our chief executive officer and director Dan, Eli and Chief Financial Officer. Elizabeth Owens.

Attendance on this call is open to the public, but questions will be restricted to the analyst in an Institutional Investor community.

Dan Sceli: Thank you, Ashley, and good morning, everyone. To start, I want to welcome Elizabeth Owens to her first conference call following her appointment as CFO at Westport. We are thrilled to have her at the helm. For her first CFO conference call, I'm happy to have Elizabeth run through some financial details first, and then I'll cover some of our business and strategy updates afterwards. Over to you, Elizabeth.

You are reminded that certain statements made on the call and our responses to certain questions, May constitute forward-looking statements within the meaning of us and applicable Canadian Securities laws. And as such forward looking statements are made based on our current expectations and involves certain risks and uncertainties with that, I'll turn the call over to you Dan.

Thank you, Ashley. And good morning, everyone.

To start, I want to welcome Elizabeth Owens to her first conference call following her appointment as CFO at Westport.

We are thrilled to have her at the helm and for her. First CFO conference call. I'm happy to have Elizabeth run through some Financial details first and then I'll cover some of our business and strategy updates afterwards over to you, Elizabeth

Elizabeth Owens: Thank you, Dan. First, I want to say thank you for welcoming me to my first conference call as CFO of Westport. It's an honor to serve shareholders in this new capacity. Now, getting into the details of our Q3 results. Westport reported revenue of $1.6 million for the quarter. Our reported revenue this quarter reflects the expected decline from the $4.9 million reported in the same quarter of last year based on some changes I'll address in a moment. On an upward trend, however, it was great to see Cespira increase its revenue by 19% over the same period last year to $19.3 million in the quarter. As you know, our heavy duty segment was utilized to capture revenue generated by a transitional service agreement or TSA in place to facilitate the transition of Cespira to a standalone organization.

Thank you, Dan.

First, I want to say thank you for welcoming me to my first conference calling, as CFO of Westport. It's an honor to serve shareholders in this new capacity.

Now, getting into the details of our Q3 results, Westport reported revenue of 1.6 million for the quarter.

Our reported Revenue this quarter reflects the expected decline from the 4.9 million reported in the same quarter of last year.

Based on some changes, I'll address in a moment.

On an upward Trend. However it was great to see suspira increase its Revenue by 19% over. The same period last year to 19.3 million in the quarter.

Elizabeth Owens: As intended, the TSA concluded in Q2 of this year. We therefore did not record any revenue related to it this quarter. Revenue this quarter was representative of our continuing high pressure controls and systems segment, which produced $1.6 million in comparison to $1.8 million in the same quarter last year. Our adjusted EBITDA for the quarter was -$5.9 million, as compared to the -$0.8 million reported for the same quarter of last year. The change was primarily driven by lower gross profit related to the divestiture of the light duty business, partially offset by lower operating expenditures. Our net loss from continuing operations included some extraneous items.

Buy a transitional service agreement or TSA in place to facilitate the transition of suspira to a standalone organization.

As intended, the TSA concluded in the second quarter of this year and we therefore did not record any Revenue related to it this quarter.

Revenue. This quarter was representative of our continuing high-pressure controls assistance segment, which produced 1.6 million in comparison to 1.8 million in the same quarter last year.

Our adjusted ebit doll for the quarter was negative 5.9 million as compared to the negative, 0.8 million reported for the same quarter of last year.

The change was primarily driven by lower growth profit related to the deveste of the light duty business.

Partially offset by lower operating expenditures.

Elizabeth Owens: The net loss from continuing operations of $10.4 million for the quarter is compared to a net loss from continuing operations of $6 million for the same quarter last year. This was primarily the result of an increase in operating expenditures in research and development, and SG&A, a decrease in profit of $0.2 million compared to the prior year, and a negative impact from a swing in foreign exchange impact by $3 million. Further on this topic, for the three months ended 30 September 2025, we recognized foreign exchange losses of $1.3 million as compared to a foreign exchange gain of $1.7 million for the three months ended 30 September 2024. The loss recognized in the current period primarily relates to unrealized foreign exchange losses resulting from the translation of previous US dollar-denominated debt in our Canadian legal entities.

Our net loss from continuing operations, including some extraneous items.

The net loss from continuing operations of 10.4 million. For the quarter is compared to a net loss from continuing operations of 6 million for the same quarter last year.

This was primarily the result of an increase in operating expenditures in research, and development, and sgna a decrease in profit of 0.2 million compared to the prior year.

And a negative impact from a swing in Foreign Exchange impact by 3 million.

Further on this topic for the 3 months, ended September 30th 2025. We recognized foreign exchange losses of 1.3 million as compared to a foreign exchange gain of 1.7 million for the 3 months, ended September 30th 2024

The loss recognized in the current period. Primarily relates to unrealized Foreign Exchange losses resulting from the translation of previous US dollar denominated debt in our Canadian legal entities.

Elizabeth Owens: This quarter, we incurred one-time costs of approximately $1 million for severance and restructuring. Looking ahead, we expect more cost reductions on a relative basis in the near future as we adjust to become a smaller organization after the divestiture of the light-duty segment. Looking at our specific business units, high pressure controls and systems revenue for Q3 2025 was $1.6 million, a slight decrease over Q3 2024. As Dan mentioned, we are in the process of moving these production lines from the facility in Italy that was part of the divestiture of the light-duty business to sites in Canada and China. Prior to the move, our team worked to increase inventories to ensure our customers experience minimal impact from the move.

Additionally this quarter, we incurred 1-time costs of approximately 1 million for severance and restructuring.

Moving ahead, we expect more cost reductions on a relative basis in the near future as we adjust to become a smaller organization after the destitute of the late Duty segment.

Looking at our specific business units, high pressure control systems high, pressure controls and systems revenue for Q3 of 2025 was 1.6 million. A slight decrease over Q3 of 2024

and then mentioned we are in the process of moving. These production lines from the facility in Italy. That was part of the destitute of the light duty business to sites in Canada and China.

Elizabeth Owens: Construction at these facilities is ongoing through Q4, with the majority of the capital spending to be wrapped up by the end of this year. The facilities in China, as well as our Canadian site, are anticipated to be producing initial product late this year. Gross profit for this business was largely unchanged, increasing slightly as a % of revenue, was driven by the higher margin with respect to engineering services revenue. Moving on to Cespira, it generated $19.3 million in Q3 2025, up 19% from the same period last year, driven by higher volumes. Gross profit was negative $1.1 million for Q3 2025 as compared to negative $0.2 million in Q3 2024.

Prior to the move, our team worked to increase inventory, to ensure our customers experience, minimal impact from the move.

Construction at these facilities is ongoing through Q4, with the majority of the capital spending to be wrapped up by the end of this year.

The facilities in China, as well as our Canadian site are anticipated to be producing initial product late this year.

Gross profit for this business. Was largely unchanged increasingly slightly as a percent of Revenue.

Uh, we were driven by the higher margin, uh, with respect to Engineering Services revenue.

Moving on to Sapero. It generated $19.3 million in Q3 2025, up 19% from the same period last year, driven by higher volumes.

Gross profit was negative 1.1 million for Q3 2025 as compared to negative 0.2 million in Q3 2024.

Elizabeth Owens: Gross profit continues to be negative as Cespira needs higher volumes to achieve a positive margin on a per unit basis for its systems sold. Regarding liquidity, as of 30 September 2025, our cash and cash equivalents total $33.1 million, with only the EDC term loan remaining and reflects a significant increase in cash from the sale of our light-duty business. Net cash used in operating activities from continuing operations was $4.5 million, a significant improvement over $11.7 million used in operations in the same quarter last year. The improvement is primarily a result of decreases in working capital, partially offset by an increase in operating losses. Proceeds from the sale of the light-duty business drove improvements in net cash provided by investing activities of continuing operations.

Gross profit continues to be negative as the spyra needs higher volumes to achieve a positive margin on a per unit basis for its systems sold.

regarding liquidity as of September 30th 2025 our cash and cash, equivalents total 33.1 million, the only the EDC Term Loan remaining,

And reflects a significant increase in cash from the sale of our light duty business.

Net cash used in operating activities from continuing operations was 4.5 million. A significant improvement over 11.7 million used in operations in the same quarter last year.

The Improvement is primarily a result of decreases in working capital partially offset by an increase in operating losses.

Elizabeth Owens: We reported $14.5 million in Q3 2025 as compared to $9.4 million in Q3 2024. Capital contributions to the Cespira joint venture of $11 million were also made in the quarter. As a reminder, in Q4 2024, we received proceeds of $9.6 million from the sale of shares to Volvo related to the formation of the Cespira joint venture and from the sale of our investment in Weichai Westport Inc. Net cash used in financing activities of continuing operations was $1 million, compared to $4.4 million in Q3 2024. Our outstanding debt currently sits at $3.9 million, with a maturity date of September 2026. To date, in 2025, we have reduced our debt, we have strengthened our balance sheet, and helped to reduce the complexity of our corporate structure.

Continuing operations.

We we reported 14.5 million in Q3 2025 as compared to 9.4 million in Q3 2024.

Capital contributions to the suspira joint venture of 11 million were also made in the quarter.

As a reminder in Q4 2024, we received proceeds of 9.6 million from the sale of shares, to Volvo related to the formation of the sphere joint venture and from the sale of our investment in wage, I Westport Inc.

Net cash used in financing activities of continuing operations was 1 million compared to 4.4 million in Q3 2024.

Our outstanding debt currently sits at 3.9 million for the maturity date of September 2026.

To date in 20205, we have reduced our debt. We have strengthened our balance sheet and helped to reduce the complexity of our corporate structure.

Elizabeth Owens: Our business is focused on the right markets for us, and we are continually looking at ways to streamline our operations. With that, I will pass the call back to Dan.

Our business is focused on the right markets for us and we are continually looking at ways to streamline our operations.

Dan Sceli: Thank you, Elizabeth. As our CFO noted, our Q3 results reflect the continued execution of the transformation we began earlier this year, anchored by our commitment to sharpen Westport's focus, strengthen our financial foundation, and position the company for growth. The successful completion of the light-duty segment divestiture marked an important milestone in simplifying our business and concentrating on our core heavy-duty and alternative fuel systems. Operationally, our Q3 performance highlights the early benefits of our disciplined approach. While revenue declined as an expected outcome to the light-duty divestiture, we achieved a stronger gross margin of 31% in Q3 2025 compared to a 14% in Q3 2024, driven by higher margin engineering services revenue, and we demonstrated tighter cost management year-to-date versus the prior year.

with that, I will pass the call back to Dan

Thank you Elizabeth as our CFO noted. Our third quarter results, reflect the continued execution of the transformation. We began earlier this year, anchored, by our commitment to sharpen westport's Focus, strengthen our financial foundation and position the company for growth the successful completion of the light duty segment. Divestiture marked. An important milestone in simplifying, our business and concentrating on our core, heavy duty, and alternative fuel systems.

Dan Sceli: As noted by Elizabeth, adjusted EBITDA results were impacted by the light-duty divestiture, partly offset by decreased operating expenditures providing a more efficient and focused underlying business. We also remain disciplined in strengthening our balance sheet, ending the quarter with $33.1 million in cash and less than $4 million in debt, while keeping cost efficiency and operational agility at the forefront. This solid financial position enables us to execute our strategic priorities and engage more proactively with OEM and fleet partners who are increasingly seeking affordable, low carbon solutions. The Cespira joint venture continues to play a central role in Westport's growth strategy. During the quarter, deliveries increased year-over-year, supported by aftermarket sales growth as supply chain constraints continue to ease. This progress reinforces our belief that Cespira provides a scalable, high-impact platform to accelerate the adoption of the HPDI systems in the key markets worldwide.

Operationally, our third quarter performance, highlights the early benefits of our disciplined approach while Revenue declined as an expected outcome to the light duty, the best cheer. We achieved a stronger gross margin of 31% in Q3 2025 compared to a 14% in Q3 2024 driven by higher margin, Engineering Services revenue and we demonstrate titer cost management year to date versus the prior year.

As noted by Elizabeth adjusted ebit Dar results for impacted by the light. Duty to vesture, partly offset by decreased operating expenditures. Providing a more efficient and focused underlying business.

We also remain disciplined and our balance sheet ending the quarter with 33.1 million in cash, and less than 4 million in debt, while keeping cost efficiency and operational agility, agility at the Forefront.

This solid financial position enables us to execute our strategic priorities and engage more proactively with OEM and Fleet Partners who are increasingly seeking affordable, low-carbon Solutions.

This is Spirit joint, venture continues to play a central role in westport's growth strategy. During the quarter. Deliveries increased year-over-year supported by an aftermarket sales growth as supply chain constraints. Continue to ease. This progress, reinforces our belief that Sapphira provides a scalable high impact platform to accelerate the adoption of the hpdi systems in the key markets worldwide.

Dan Sceli: We continue to make progress on Westport's strategic transformation. Westport is taking the necessary steps to execute on a new, focused, and integrated competitive strategy. The divestiture strengthened our balance sheet and provided the liquidity to begin to fund our growth through new system and related market expansions, including North America and our recently announced CNG solution when combined with the on-engine HPDI fuel system. We are in the process of evolving a new, more focused Westport that we can support and drive into more sustainable transportation industry. We recognize that we're operating within an evolving macroeconomic environment, which is enabling us to capitalize on renewed market momentum, especially as it relates to the use of natural gas as a transport fuel in the North American market. CNG has gained acceptance as an alternative to diesel fuel for long-haul trucking in North America, driven by its affordability and abundant supply.

We continue to make progress on Westport strategic transformation. Westport is taking the necessary steps to execute on a new focused and integrated competitive strategy, the destitute strength and our balance sheet and provided the liquidity, to begin to fund our growth through new system and related Market, expansions including North America. And our recently announced CG solution when combined with the on engine hpdi fuel system.

we are in the process of evolving, a new more focused, Westport

That we can support and drive into more sustainable Transportation industry.

We recognize that we're operating within an evolving macroeconomic environment, which is enabling us to capitalize on renewed Market, momentum, especially as it relates to the use of natural gas as a transport fuel in the North American Market.

Dan Sceli: Westport's innovative and proprietary CNG solution hopes to set a new standard for high-efficiency performance while delivering superior economics. As I mentioned last quarter, Westport will be focused on the following key drivers. On engine, Cespira is pursuing strategic market expansion via technological leadership in heavy-duty transportation and truck OEMs. Off engine, high-pressure controls and systems complement the energy transition regardless of the powertrain, and a variety of financial initiatives. Westport's goal for Cespira is to deliver demonstrated volume growth over the coming year, driven by expanding into new geographies and adding new OEM customers. Cespira is seeing success here, delivering revenue growth of almost 20% in the Q3 and recently adding a second OEM customer in the form of a customer truck trial with a leading OEM utilizing Cespira's HPDI components.

CNG has gained acceptance as an alternative to diesel fuel for Long. Haul Trucking. In North America driven by its affordability and abundant Supply

Westport's Innovative and proprietary CNG solution, hopes to set a new standard for high efficiency performance while delivering Superior economics.

As I mentioned, last quarter, Westport will be focused on the following key drivers.

On engine.

Spear is pursuing strategic market expansion via technological leadership and heavy-duty transportation and truck OEMs.

Off-engine high-pressure controls and systems complement the energy transition, regardless of the powertrain.

And a variety of financial initiatives.

And adding new OEM customers.

Dan Sceli: The trial will include several hundred sets of key component and is designed to assess the market and viability of the direct injection system in certain heavy-duty trucking markets. It is also expected to form the basis upon which the OEM will decide whether to make a further investment toward commercializing the system. Regarding our high-pressure controls and systems business, we are currently developing components that are critical to performance and reliability. As a reminder, we are selling into three primary markets, China, Europe, and North America. Following the close of the light-duty transaction, we have focused on moving our manufacturing to Canada and China. Both facilities are in the final stages before start of production, and we anticipate both to be online at the end of the year.

Suspira is seeing success here. Delivering Revenue growth of almost 20% in the third quarter and recently adding a second OEM customer in the form of a customer truck trial with a leading OEM utilizing suspira, hpdi components.

The trial will include several hundred sets of key components and is designed to assess the market and liability of the direct injection. System is also expected to form the basis of upon which the OEM will decide. Whether to make a further investment toward commercializing, the system,

Regarding our high-pressure controls and systems business, we are currently developing components that are critical to performance and reliability. As a reminder, we are selling into three primary markets: China, Europe, and North America.

Following the close of the light-duty transaction, we have focused on moving our manufacturing to Canada and China.

Both facilities are in the final stages before start a production and we anticipate both to be online at the end of the year.

Dan Sceli: The global truck market continues to expand and is expected to reach 1.95 million units in 2025. The long-haul truck market has historically struggled to decarbonize. Fleets around the world are focused beyond just reducing emissions and now prioritizing the total cost of ownership. Natural gas is affordable, infrastructure is ample, and RNG production is growing at a fast pace. We are ideally positioned for this. What sets Westport apart from competitors is ability. We have solutions that can meet growing demand, delivering a total cost of ownership that is compelling to customers. We are optimistic about the company's future as well as that of Cespira. We have strengthened our balance sheet through the sale of our light-duty business and made a strategic return to our roots by developing innovative new technology to transform the heavy-duty market.

The global truck Market continues to expand and is expected to reach 1.95 million units in 2025.

The Long Haul truck Market has historically struggled to decarbonize fleets. Around the world are focused Beyond, just reducing emissions and now prioritizing the total cost of ownership. Natural gas. Is affable infrastructure is ample and RNG production is growing at a fast pace

We are ideally positioned for this. What sets Westport apart from competitors ability, we have solutions that can meet growing demand, delivering a total cost of ownership that is compelling to customers.

Dan Sceli: In addition to new growth opportunities, we are making difficult economic decisions to enhance future shareholder value through planned reductions of 60% in CapEx and 15% in SG&A in 2026. Regardless of the unknowns or uncertainties ahead, we are paving our own path in the transportation industry that we believe will truly make a difference. Thank you to everyone who joined the call today. Your continued support is important to us. We continue to move through 2025 with purpose to create value for our shareholders. Thank you again.

We are Optum optimistic about the company's future as well as that of suspira. We have strengthened our balance sheet, through the sale of our light duty business and made a strategic return, to Our Roots by developing Innovative new technology to transform the heavy duty Market.

In addition to new growth opportunities, we are making difficult economic decisions to enhance future shareholder value through planned reductions of 60% in capex and 15% in SG&A in 2026.

Regardless of the unknowns or uncertainties ahead, we are Paving our own path in the transportation industry.

That we believe will truly make a difference. Thank you to everyone who joined the call today. Your continued support is important to us. We continue to move through 2025 with purpose, to create value for our shareholders. Thank you again.

Operator: I do believe we're ready to take questions. 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, press star 11 again. One moment while we compile the Q&A roster. Our first question will come from the line of Eric Stine with Craig-Hallum. Your line is open.

I do believe. We're ready to take questions as a reminder to ask a question. Please press star 1, 1 on your telephone and wait for your name to be announced to withdraw your question. Press star 1 1 again, 1 moment while we compile the Q&A roster,

Eric Stine: Hi, Dan. Hi, Elizabeth. Good morning.

And our first question will come from the line of Eric Stein with Craig Hallam. Your line is open.

Dan Sceli: Hey, good morning, Eric.

Hi Dan, hi Elizabeth, good morning. Hey, good morning, Eric.

Eric Stine: Just wondering, can we start on the new OEM development with Cespira? I mean, just, if you could provide a little more detail there. I know that, you know, that that OEM needs to go through a number of steps to make the decision about moving towards a development agreement and then, you know, beyond that, a commercial agreement. You know, what are kind of the signposts that we should look for over, you know, whether it's over 2026 and beyond? How do you kind of envision this playing out, you know, as Volvo obviously wants more OEMs than just, their use of HPDI.

Dan Sceli: Yeah, absolutely. You know, I'll just remind everybody listening that in this industry, the OEMs are very protective of their commercial strategies. We are completely unable to talk about, you know, the who and any specifics. That's not gonna change, unfortunately. We'd love to be able to talk about it, but that's the business we're in. This is a typical development, not unlike what we went through with Volvo originally, you know, trialing the technology on trucks. The development programs going forward should be more shorter, because Right. We're almost 10,000 trucks in 31 countries. It is a development cycle that will follow their a standard path in the industry.

Um, I just wondering, can we start on the new OEM uh, development with spyra? I mean, just if you could provide a little more detail there, I know that, uh, you know, the the that, that that OEM needs to go through a number of steps to make the decision about moving towards the development agreement. And then, you know, beyond that a, a commercial agreement. But you know what, are kind of the signposts that we should look for over, you know, whether it's over 2026 and Beyond. Um, and and how do you kind of Envision this playing out? Um, you know, as as Volvo, obviously wants, uh, more oems than just, uh, their use of hpdi?

Yeah, absolutely. Um, and and you know, I I'll just remind uh, everybody listening that in this industry. The oems are very very uh protective of their commercial strategies. And uh so we are completely unable to talk about, you know, The Who and and any specifics. Uh, and that's not going to change. Unfortunately, we'd love to be able to talk about it, but that's the, the business we're in. Um, this is a typical, uh, development not unlike what we went through with with Volvo originally. Uh, you know, trialing the technology on trucks.

Um, the development programs.

Dan Sceli: We think we're gonna start to, you know, get some feedback from that OEM, probably mid-2026. We'll be talking about it at that point. I hope that, you know, we're in a position to communicate that we're moving to the next phase.

We'll be talking about it at that point. I hope that uh, you know, we're in a position to uh uh communicate that we're moving to the next phase.

Eric Stine: Got it. Yeah, that's what I was getting at. Is this typical, but also because you've got Volvo in the market, is it something that potentially is shorter than, you know, what you've seen in the past? It sounds like yes. Okay. Maybe, you know, sticking with the joint venture, you know, I mean, any thoughts on additional OEMs? Again, I know that the nature of this business is you can't give details, names, et cetera, but just maybe what that pipeline looks like. I also know that, you know, Volvo is looking at growth with their HPDI truck in other markets. I think you mentioned India, South America last quarter. Maybe an update on that as well.

Got it. And yeah, that's what I was getting at is this is this typical? But also because you've got Volvo in the market, is it something that potentially is shorter than? You know what? You've seen in the past and it sounds like, yes. Um,

Dan Sceli: Sure. Well, we continue Excuse me. We continue to talk to all the OEMs about HPDI through Cespira. Clearly, you know, volume is the key to getting this business to the place where we all want it to be. We've got the interest of many OEMs. I think we're at a point where we don't have to prove the technology anymore. It's simply when does the timing fit for the OEM in terms of their specific markets and their business cases. You know, the technology is proven, the performance is proven, and Volvo continues to expand its reach where they want these trucks. I did mention India and South America. Those are beachheads that are being opened up.

Okay, maybe you know, sticking with the joint venture. Um, you know, any I mean any thoughts on additional oems and again I know that the nature of this business is you can't give details names, Etc. But just maybe what that pipeline looks like. And I also know that uh you know Volvo is looking at uh growth with their hpdi um truck in other markets, I think you mentioned India, South America last quarter. So maybe an update on that as well.

Sure. Well, we continue.

To uh, uh, talk to all the oems uh, about uh, h.

Through sapira and um and and clearly, you know, volume is the key to getting this business uh um to the place where we all want it to be. Um,

We've got the interest of many OEMs. Um, I think we're at a point where.

We don't have to prove the technology anymore; it's simply about timing.

Uh, fit for the OEM in terms of their specific markets and their business cases. So

you know, the technology is proven, the performance is proven and uh and Volvo continues to um expand its reach.

Dan Sceli: You know, we expect continued volume increases. At least that's what we're hoping for. One of the big tickets will be in Europe, the legislative changes to the system. Biogas being credited for the emissions standards in Europe is a really big deal that we're hoping will come in the next year.

Uh, where they want these trucks. I did mention India. So South America. Those are those are Beach heads that are being opened up. Um, and uh, you know, we expect continued. Um, continued, uh, volume increases at least. That's what we're, we're hoping for, uh, 1 of the big tickets will be in Europe, uh, the legislative changes to the system.

and uh,

Um, uh, biogas, being credited for the emissions standards in Europe, is a really big deal that we're hoping will come, uh, in the next year.

Eric Stine: All right, thanks. I'll jump back into the queue.

Dan Sceli: Thanks, Eric.

Operator: Thank you. One moment for our next question, that will come from the line of Rob Brown with Lake Street Capital Markets. Your line is open.

All right, thanks. I'll jump back into the queue. Thanks, Eric.

Thank you. 1 moment for our next question.

And that will come from the line of Rob Brown with the Lake Street Capital markets. Your line is open.

Dan Sceli: Morning, Rob.

Rob Brown: Good morning. Good morning. On the Cespira joint venture, you made a capital contribution in the quarter. Does that sort of set you for a while, or what's the capital needs over the next sort of 12 months there?

Good morning, Rob.

Morning morning.

Dan Sceli: Yeah. I think we've talked about this a number of times over the last at least 9, 18 months here. you know, there's always been a 3-year build-out, you know, setting this business up to be completely standalone. The joint venture was always structured to have about a 3-year build-in of capital contributions to get it set to standalone. obviously we're in year 2 of that now. yeah, there's additional capital will be needed next year.

Spirit to inventure. You you made a capital contribution in the quarter. Does that uh, sort of set you for a while or what's the capital needs? Um, over the next sort of 12 months there. Yeah. So I think we we've talked about this a number of times over

19 months here. Um there was a you know there's always been a 3 year, build out uh you know setting this business up to be completely Standalone. So the joint venture was always

uh, structured to uh, have about a 3 year, build in of capital contributions to get it set to Standalone and uh, obviously we're in uh

Uh year 2 if that now so yeah. There's additional Capital will be needed. Uh, next year.

Rob Brown: Okay. Thank you. On the High Pressure Controls business, when do you expect to have that fully, the manufacturing fully, moved out of Italy and under your operations?

Dan Sceli: Sure. Well, it's all out of Italy now completely. We're in the process now of installing the equipment in both our Cambridge site and our Chinese plant site, Zhengzhou, and expect to have both those facilities up and running by year-end.

Okay, thank you. Um, I guess and then the high pressure controls business. Uh, when do you expect to have that fully? Um the manufacturing fully uh moved and moved out of Italy and and um and and under your operations? Sure. Well it's all out of Italy. Now completely, um, we're in the, in the process now of installing the equipment in, both our Cambridge site and our our uh Chinese uh plant site in Jew and uh expect to have both those facilities up and running by year end.

Rob Brown: Okay, great. Will you have a, I guess, lower revenue run rate during that period or, do you have stock that can, carry you through?

Dan Sceli: No, it'll be a bit lower revenue. I mean, there is some stock, it'll be a bit lower revenue. you know, I mean, the underlying theme here is that we want The Chinese market is the biggest market for hydrogen components today. you know, it was very important for us to manufacture it locally for a couple of reasons. One, you know, geopolitically, it's just a lot easier to make it there and for that market than it is to ship it in from Europe. Two, cost, right? We can be a lot more competitive out of a Chinese plant. of course, the North American market is starting to turn on natural gases, as we've talked about.

Dan Sceli: It's a pendulum swing that we're very excited about, and we wanna be in a position to take advantage of that market from a Canadian site.

Okay, great. And and will you have a, um, I guess lower Revenue run rate during that period or or um, do you do you have a stock that can? Um, carry you through know? It'll be a bit lower Revenue. Um, and I mean, there is some stock, uh, but there's it'll be a bit lower revenue and then, you know, I mean, that the, the underlying theme Here is that we want further, the Chinese market is the biggest market for a hydrogen components today. Um, and uh, you know, it was very important for us to manufacture it locally for a couple of reasons 1, um, you know geopolitically. It's just a lot easier to make it there and for that market than it is to ship it in from Europe to cost, right? We can be a lot more competitive out of a Chinese Plant. Then, of course the North American Market is starting to turn on on, uh, natural gases. As we've talked about, it's it's a pendulum swing that we're very excited about. And, uh, we want to be in a position to take advantage of that market from a Canadian site.

Rob Brown: Okay, thank you. I'll turn it over.

Dan Sceli: Thanks, Rob.

Operator: Thank you. As a reminder, if you would like to ask a question, please press star one one. Our next question will come from the line of Chris Dendrinos with RBC Capital Markets. Your line is open.

Thank you as a reminder, if you would like to ask a question, please press star 1 1. Our next question will come from the line of Chris dendrinos with RBC Capital markets. Your line is open.

Chris Dendrinos: Yeah, thank you and good morning.

Dan Sceli: Morning.

Chris Dendrinos: I wanted to ask on the CNG solution announcement here, I think it was last week at this point. You know, what's the timing look like for potential deployment there and does your partner, Suspower, need to, I guess, move trucks over to the United States or, I guess, how does that sort of, I guess timeline look for potential development? Thanks.

Yeah, thank you and good morning. Um, I wanted to ask on the the, the CNG solution announcement here. Um, I think it was last week at this point. Um, you know what, What's the timing look like for a potential deployment there and does, does your partner suspira need to, I guess move move trucks over to the United States or um, I guess, uh, how does that sort of, um,

Dan Sceli: Yeah, sure. The intention isn't for trucks to come from Europe to North America at all. You know, we're developing a CNG solution that is what we call the off engine side of the thing. The on engine, the Cespira's HPDI on engine stuff is fully developed and ready to go. What this CNG strategy in North America will do for Cespira is bring additional volume. What it does for Westport, what we call the back of cab system, the storage system for CNG, combined with our high-pressure controls and our AFS engine control system is it's a full package that can be deployed into North America. The initial steps are going to be demonstration fleets. We're gonna have trucks built with these CNG systems that fleets are gonna run in trial.

I guess timeline look for for potential development, thanks. Yeah, sure. The intention isn't for trucks to come from Europe to North America at all. Um, you know, we're developing a CG solution that is what we call the off engine side of the thing. The on engine, the sphere is hpdi on engine stuff is fully developed and ready to go. Um and uh so what this CNG strategy in North America will do for Sira is bring additional volume. What it does for Westport. The what we call the back of cab system, the storage system for CNG combined with our high-pressure controls and uh, and our AFS uh, um, engine control system is it's a full package.

Dan Sceli: Certainly, our anticipation is that they'll be screaming for commercialization. Once we're through the demonstrations and have it proven out, you know, we'll be working with the OEM to build out a commercialization plan. Again, the on engine side is fully developed with HPDI. It's just a matter now of certifying a back of cab and doing the EPA certification, which is just simply miles on trucks.

That can be deployed into North America. The the initial steps are going to be demonstration fleets, uh, we're going to have trucks built with these CNG systems, uh, that fleets are going to run in trial and uh, um, and certainly, uh, are anticipation. Is that they'll be, uh, screaming for commercialization, uh, once we're through the demonstrations and, and have it proven out, um, you know, we'll be working with the OEM to, um, build out a commercialization plan. Um, again the on engine side is, is fully developed with hpdi. It's just a matter now, of of, uh, certifying a back of cab and doing, uh, the EPA certification, which is just simply miles on trucks.

Chris Dendrinos: Got it. Thanks. You know, maybe just shifting gears a little bit to the engineering revenue that you all recognized in the quarter. I mean, is that sort of an ongoing, I guess, revenue stream, or was this sort of a one-time, I guess, recognition this quarter? Thanks.

Got it. Thanks. And then, you know, maybe just shifting gears a little bit to the, the engineering Revenue that you all recognized in the quarter. I mean, is, is that sort of an ongoing, um,

Dan Sceli: Well, yeah. In our high pressure controls business, we are paid for a lot of development work for the hydrogen systems from our OEM customers. That's an ongoing thing. You know, we'll be spending R&D money over the next three years, and the customer pays for it at start of production. Excuse me, we have a bit of a run here of cash out for R&D before we get the customer's payment to cover it. It's an ongoing part of this business. These are very complex components that the customers, the OEMs, look to us to develop the technology for them.

I, I guess Revenue stream or or was this sort of a 1-time? Um, I guess recognition this quarter next. Well yeah, so in our high-pressure controls business, we we um, are paid for a lot of um, development work for the hydrogen systems from our OEM customers. Um, and so that's an ongoing thing and and, you know, we'll be spending, we'll be spending, uh, or a d money over the next 3 years and the customer pays for it, at start of production. So,

Excuse me.

We have a bit of a run here of of, uh, cash out for R&D before we get the uh, the customer's payment to cover it.

But it's an ongoing. It's an ongoing part of this business. So these are, these are very complex components that, uh, the customers, the oem's. Uh, look to us to develop the technology for them.

Chris Dendrinos: Got it. Thank you.

Got it. Thank you.

Operator: Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Dan Sceli for any closing remarks.

Dan Sceli: Well, it's a pleasure always to share our story with our investors and the market. Thank you for your participation and have a great day.

Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Dan Seive for any closing remarks.

Dan Sceli: Well, it's a pleasure always to share our story with our investors and the market. Thank you for your participation and have a great day.

Thank you. Well it's a it's a pleasure always to uh to share our our uh story with our investors and uh and the market. Um thank you for your participation and uh have a great day.

Operator: This concludes today's program. Thank you all for participating. You may now disconnect.

This concludes today's program. Thank you all for participating. You may now. Disconnect

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