Mr. David Johnson reports

WESTPORT FUEL SYSTEMS REPORTS FIRST QUARTER 2023 FINANCIAL RESULTS

Westport Fuel Systems Inc. has released financial results for the first quarter ended March 31, 2023, and has provided an update on operations. All figures are in U.S. dollars unless otherwise stated.

Q1 2023 highlights:

• Revenues increased 7 per cent to $82.2-million compared with the same period in 2022, driven by an increase of $4.5-million or 9 per cent in its original equipment manufacturer (OEM) business and a $1.2-million or 5-per-cent increase in its independent aftermarket (IAM) business.
• Net loss was $10.6-million for the quarter, compared with net income of $7.7-million for the same quarter last year. The decrease in earnings was driven by the loss of equity income from the sale of its interest in the Cummins Westport Inc. (CWI) joint venture, including a $19.1-million gain recorded in the first quarter of 2022, partially offset by an increase in gross margin.
• Cash and cash equivalents were $72.0-million at the end of the first quarter of 2023. Cash used in operating activities during the quarter was $8.6-million, due to operating losses of $9.4-million and net-cash used in working capital of $3.9-million. Net debt repayment was $3.5-million in the quarter.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) (1) was negative $4.5-million compared with negative $6.1-million for the same period in 2022.
• Westport announced an expanded global manufacturing footprint in China supporting continuing and future growth in hydrogen.
• Westport announced a third major OEM collaborator to evaluate the H2 HPDI fuel system.
• In April, two papers showcased the industry-leading performance of H2 HPDI on two different OEM engine platforms, presented at the Vienna Motor Symposium.
• In May, Westport showcased its liquefied natural gas and H2 HPDI fuel systems for internal combustion engines for heavy-duty applications with two fully functioning heavy-duty demonstration vehicles at the ACT Expo in California.

(1) Adjusted earnings before interest, taxes and depreciation is a non-generally accepted accounting principle measure. Please refer to non-GAAP financial measures in Westport's management's discussion and analysis for the reconciliation.

"We delivered solid operational and financial results in the first quarter of 2023, supported by our diversified business model, which allows us to combine our sustainable lower-growth core businesses with our higher-growth future, all leading to a low-carbon world. Operationally, our businesses performed well despite continued challenges related to chip shortages and a slow return of customers who have lingering concerns from the high LNG prices seen in 2022. We saw significant improvements in gross margin this quarter, to a level we were much more comfortable with, though work still remains and is ongoing to generate continued margin improvement. We remain focused on taking actions to strengthen our balance sheet, including improving margins, volumes and constraining spending. The closing of Cartesian debt following quarter-end and release of the security interest in our HPDI 2.0 fuel system intellectual property provides us flexibility for financing alternatives. Going forward, liquidity remains a key priority.

"Our OEM business benefited from strong growth in our delayed OEM, fuel storage, hydrogen and electronics businesses, as well as higher pricing partially offset by modest volumes from our European OEM launch partner. Our IAM business, despite experiencing some market and inflationary headwinds, performed well, with both the top- and bottom-line growth over the prior-year period.

"Looking to the remainder of 2023, we remain focused on growth in our key markets to achieve sustainable profitability as the demand for clean, affordable low-emissions-transportation solutions grows. We continue to work diligently to enhance margins with a commitment to both top-line and bottom-line improvements. We welcome the return of the European LNG pricing advantage as compared to diesel, combined with the launch of a new product by our lead European HPDI OEM partner. Late 2023 also marks the beginning of our [liquefied petroleum gas] fuel system production and sales to our European OEM customer. The growth of LPG is driven by its price advantage versus petrol and the lower cost to access lower-carbon transportation. This is where LPG beats [battery electric vehicle], hybrids and [fuel cell electric vehicles] in terms of product affordability. This becomes accentuated when governments end incentives on those more expensive options. We look forward to continuing to support our customers in delivering LPG growth long into the future.

"Vehicle makers around the world are recognizing that there are many possible paths to reaching the important goal of significantly reducing or eliminating emissions -- a one-size-fits-all approach to emissions reduction does not exist. Our ongoing testing and development work is prioritized as we work with our three announced OEM partners to demonstrate the benefits of H2 HPDI in real-world applications. We also recognize that demonstrating the strength of our H2 HPDI fuel system at venues like ACT Expo and the Vienna Motor Symposium is an important part of the path to commercialization. We educate OEMs and fleets on the ability to maintain existing diesel engine architecture and related manufacturing infrastructure while delivering timely, efficient, cost-effective peak performance in transport applications," said David M. Johnson, chief executive officer.

Revenues for the three months ended March 31, 2023, increased by 7 per cent to $82.2-million compared with $76.5-million in the same quarter last year, primarily driven by increased sales volumes of its delayed OEM, fuel storage, hydrogen and electronics products, and increased sales volumes of IAM in the North American and Eastern Europe markets. These were offset by lower sales volumes to Indian customers in the light-duty OEM business and lower sales of compressed natural gas and LNG products due to higher natural gas prices in the European market.

Gross margin for the three months ended March 31, 2023, increased by 34 per cent to $13.3-million or 16 per cent of revenue compared with $9.9-million or 13 per cent of revenue in the same quarter last year.

Net loss was $10.6-million for the first quarter of 2023, compared with net income of $7.7-million for the same quarter last year. The decrease in earnings was driven by the loss of equity income from the termination and sale of the CWI joint venture and a $19.1-million gain recorded in the first quarter of 2022, partially offset by higher year-over-year gross margins of $3.4-million.

Westport generated negative $4.5-million in adjusted EBITDA during the first quarter of 2023, compared with negative $6.1-million Adjusted EBITDA for the same period in 2022.

Financial statements and management's discussion and analysis

To view Westport financials for the first quarter ended March 31, 2023, please visit the company's website.

Conference call and webcast

Westport has scheduled a conference call for Tuesday, May 9, 2023, at 7 a.m. Pacific Time (10 a.m. Eastern Time) to discuss these results. To listen to the conference call by telephone, please dial 1-800-319-4610 (Canada and United States toll-free) or 1-604-638-5340. The live webcast of the conference call will be available through the Westport website.

To listen to the conference call replay, please dial 1-800-319-6413 (Canada and United States toll-free) or 1-604-638-9010 using the passcode 0003. The telephone replay will be available until May 16, 2023.

About Westport Fuel Systems Inc.

At Westport, it is driving innovation to power a cleaner tomorrow. It is a leading supplier of advanced fuel delivery components and systems for clean, low-carbon fuels such as natural gas, renewable natural gas, propane and hydrogen to the global automotive industry. Its technology delivers the performance and fuel efficiency required by transportation applications and the environmental benefits that address climate change and urban air quality challenges. Headquartered in Vancouver, Canada, with operations in Europe, Asia, North America and South America, it serves its customers in more than 70 countries with leading global transportation brands. At Westport, it thinks ahead.

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