Q3 2025 Westport Fuel Systems Inc Earnings Call
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.
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, which was issued yesterday after the market closed.
On today's call, speaking on behalf of Westport, will be chief operating on 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 the institutional investor community.
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.
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
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. Sira 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 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.
6 million in comparison to 1.8 million in the same quarter last year.
Our adjusted ebitda 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 gross profit related to the destitute of the light duty business partially offset by lower operating expenditures.
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.
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
As Dan mentioned, we are in the process of moving these production lines and the facility in Italy that was part of the deveste 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.
Construction at these facilities is ongoing through the fourth quarter with a 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, was driven by the higher margin uh, with respect to Engineering Services Revenue.
Moving on to suspira, it generated 19.3 million in Q3 2025 up. 19% from the same period last year, driven by high higher volumes.
Gross profit was negative 1.1 million for Q3 2025 as compared to negative 0.2 million in Q3 2024.
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 with only the EDC Term Loan remaining.
And reflects the 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% 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.
From the sales of the light G business drove improvements in net cash.
Provided by investing activities of 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.
Related to the formation of the spera joint venture, and on 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 a reduced our debt. We have strengthened our balance sheet and helped to reduce the complexity of our corporate structure.
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
Thank you, Elizabeth.
Is 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.
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 bester, 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 titer cost management year to date versus the prior year.
As noted by Elizabeth adjusted debit Dar results for impacted by the light duty destitute partly offset by decreased operating expenditures. Providing a more efficient and focused underlying business.
We also remain disciplined and 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, 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.
The key markets worldwide.
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 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 C&G 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
Of natural gas as a transport fuel in the North American market.
CMG 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.
It's a 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.
Westport's goal for CPA is to deliver demonstrated volume growth over the coming year, driven by expanding into new geographies and adding new OEM customers.
CPA is seeing success here, deliver, 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 sapir's, hpdi components.
Parking 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 3, 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 the start of production, and we anticipate both to be online at the end of the year.
The global truck Market continues.
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.
We are Optum optimistic about the company's future as well as that of sapira. 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 making difficult economic decisions to enhance future. Shareholder value through planned, reductions of 60% in capex, and 15% in sgna 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.
I do believe we're ready to take questions. As a reminder, to ask a question, please press star, 1, 1, 1 on your telephone and wait for your name to be announced to withdraw your question. Press star, 1, 1, 1 again. One moment while we compile the Q&A roster.
And our first question will come from the line of Eric Stein with Craig Hallum. Your line is open.
Hi Dan, hi, Elizabeth, good morning. Hey, good morning. Eric.
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, um, 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 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, you know,
Mind. 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 going forward, which might be more shorter. Um, because right, we're 10 almost 10,000 trucks and 31 countries, um, but it is a development cycle that will follow their standard, a standard path in the industry. And, uh, um, so we think we're going to start to, you know, uh, you know, get some feedback from that OEM, uh, probably mid 26, uh, and and 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.
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,
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, excuse me. We continue to uh,
Uh, talk to all the oems, uh, about uh, h.
PDI uh 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 and simply when does the 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.
Uh, where they want these trucks. I did mention India, and South America. Those are those are Beach heads that are being opened up. Um, and, uh,
you know, we expect
Continued.
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 bio gas, being credited for uh for the emissions standards in Europe is a really big deal that we're hoping will come uh in the next year.
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.
Good morning. Rob morning.
Morning morning.
Period, 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? Yeah. So I think we talked about this a number of times over.
Last at least my 18 months here. Um, there was a, you know, there's always been a 3-year buildout 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 of that now. So yeah, there's additional Capital will be needed. Uh, next year.
Okay, thank you. Uh, I guess none of the high pressure controls business. Uh, when do you expect to have that fully? Um the manufacturing fully uh moved moved out of Italy and and um and 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 plant site in Jew and uh expect to have both those facilities up and running by year end.
Okay. 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
To uh 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.
Okay, thank you. I'll turn the number.
Thanks Rob, thank you. As a reminder, if you would like to ask a question, please press star 1, 1 1. Our next question will come from the line of Chris dendrinos with RBC Capital markets. Your line is open.
Potential deployment there. Does your partner, Suspira, need to, I guess, move trucks over to the United States? Or, um, I guess, how does that sort of, um,
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 CNG 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 sir 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 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, screen.
Aiming 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 certifying, a back of cab and doing, uh, the EPA certification, which is just simply miles on trucks.
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,
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, R&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 oems look to us to develop the technology for them.
Got it. Thank you.
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 saline. For any closing, remarks.
Thank you. Well, it's a pleasure, always.
share our
With our investors and uh and the market. Um, thank you for your participation and uh have a great day.
This concludes today's program. Thank you all for participating. You may now disconnect.