Mr. Tony Guglielmin reports

WESTPORT FUEL SYSTEMS REPORTS THIRD QUARTER 2023 FINANCIAL RESULTS

Westport Fuel Systems Inc. has released its financial results for the third quarter ended Sept. 30, 2023, and has provided an update on operations. All figures are in United States dollars unless otherwise stated.

"Our third quarter was an important one in our evolution at Westport, including the announcement of our HPDI joint venture with Volvo. We have made great progress working with the Volvo team to finalize the details of the joint venture. We are now at a stage where I can confidently say that we plan to have the definitive agreements signed no later than the end of January, 2024, and the joint venture closed and operational in the second quarter of 2024.

"While we remain focused on closing the joint venture, we also remain committed to our other key priorities, including finding operational efficiencies, crystallizing cost reductions and strengthening our balance sheet. During the quarter, consistent with these objectives, we prioritized the reorganization of our presence in India to streamline our business, including the monetization of non-core assets and reduction of our cash burn. We are looking for opportunities to further improve our liquidity through working capital efficiencies across the organization.

"Yesterday, we announced that Westport has entered new markets with our H2 HPDI fuel system solution with a proof-of-concept project with a leading global provider of locomotives and related equipment for the freight and transit rail industries. This represents our first application of the H2 HPDI system for the locomotive sector. In our view, the hard to abate medium and heavy duty as well as high horsepower sectors are where HPDI creates significant value. We believe this is an affordable path to decarbonizing the rail sector without compromising performance or efficiency.

"We remain steadfast in our commitment to sustainable growth in our existing markets and unlocking new and emerging opportunities. Looking to the fourth quarter of 2023 and heading into the 2024 fiscal year, we expect continued strong performance in our results as we recognize a full quarter of HPDI fuel system sales following the launch of Volvo's more powerful, extended range option and we prepare to begin delivery of Euro 6 LPG fuel systems to a global original equipment manufacturer, now anticipated to begin in January. We also see continued strong long-term demand in our hydrogen business.

"Finally, we expect to transition to a permanent CEO for Westport in the coming months. In the interim, I remain committed to working with management to deliver on our key priorities."

Tony Guglielmin, interim chief executive officer and director

Third quarter 2023 highlights

• Quarterly revenue of $77.4-million, up 9 per cent compared with the same period in 2022, primarily driven by increased sales volumes in the delayed OEM (original equipment manufacturer), electronics, and fuel storage businesses and additional sales from the heavy-duty OEM business were partially offset by lower sales to customers in the light-duty OEM business.
• Demonstrated improvement in gross margin, increasing $1.9-million to $13.2-million, or 17.1 per cent of revenue for the quarter as compared with $11.3-million or 15.9 per cent of revenue, for the three months ended Sept. 30, 2022. The increase was driven by the positive revenue impacts mentioned, offset by higher production input costs stemming from global supply chain challenges and inflation in logistics, labour and other costs, which the company only partially been able to pass on to the company's OEM customers as well as a lower margin sales mix in the company's IAM business.
• Net loss of $11.9-million for the quarter ended Sept. 30, 2023, compared with net loss of $11.9-million for the same quarter last year. Increased gross margins, a decrease in foreign exchange losses and reduced spending on research and development, were partially offset by increased general and administrative expenditures.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of negative $3.0-million for the quarter as compared with negative $4.5-million for the same period in 2022.
• Cash and cash equivalents were $44.0-million at the end of third quarter 2023.

Operational highlights

Westport remains committed to its priorities -- driving sustainable growth in the company's existing markets, unlocking new and emerging markets, driving operational excellence, and extracting efficiencies through prudent capital management. In the near term, the company's immediate priorities are finalizing the HPDI joint venture with Volvo, elevating the performance and efficiency of the core business and improving margins, while continuing to improve the company's management of working capital. Based on these priorities, Westport can report several achievements that occurred during and subsequent to the third quarter of 2023.

Westport, together with Volvo, continues to work toward the formalization and launch of the HPDI joint venture. The company currently expects definitive agreements between Westport and Volvo to be signed no later than the end of January, 2024, and the joint venture to close and be operational in the second quarter of 2024.

Also, Westport is entering new markets with a two-year H2 HPDI proof-of-concept project with a leading global provider of locomotives and related equipment for the freight and transit rail industries. The project will adapt Westport's H2 HPDI fuel system for use with the locomotive OEM engine design.

Consistent with Westport's objective of improving profitability and strengthening the company's balance sheet, in September, the company reorganized its partnership with Minda in India decreasing its stake in the joint venture, Minda Westport Technologies Ltd., from 50 per cent to 24 per cent in exchange for approximately $1.8-million on closing. The transaction with Minda is anticipated to close by the end of Q1 2024 and is expected to reduce Westport's near-term cash burn. In addition, Westport is amending its joint venture agreement to include future hydrogen components in addition to CNG/LNG/LPG components and kits (all focused on the Indian market), but to exclude any interest in HPDI. The amended agreement and resulting rationalization of local costs allows Westport to maintain participation in the alternative fuels market in India with a focus on improved profitability. Moreover, the joint venture provides Westport with an opportunity to lower operations costs, while expanding volumes in the fast-growing market in India and, at the same time, having access to a lower-cost manufacturing footprint through the joint venture for some of the Westport business outside of India. Following closing of the transaction any litigation or claims between the two parties will no longer be pursued.

Q3 2023 operations

Revenues for the three months ended Sept. 30, 2023, increased 9 per cent to $77.4-million compared with $71.2-million in the same quarter last year, primarily driven by increased sales volumes in delayed OEM, electronics, fuel storage and additional revenues from the heavy-duty OEM business. These were offset by lower customer sales in the light duty OEM business.

The company reported a net loss of $11.9-million for the three months ended Sept. 30, 2023, compared with net loss of $11.9-million for the same quarter last year. This was primarily the result of:

• $1.9-million increase in gross margin related to higher revenues;
• $1.2-million decrease in foreign exchange losses;
• Lower research and development expenses incurred in the company's heavy-duty OEM business;
• Which was partially offset by a $4.3-million increase in general and administrative expenses related to severance costs and increased consulting costs.

Westport generated negative $3.0-million in adjusted EBITDA during the second quarter of 2023, compared with negative $4.5-million adjusted EBITDA for the same period in 2022.

Financial statements and management's discussion and analysis

To view Westport financials for the quarter ended Sept. 30, 2023, please visit the company website.

Conference call and webcast

Westport has scheduled a conference call for Wednesday, Nov. 8, 2023, at 7 a.m. Pacific Time (10:00 a.m. Eastern Time) to discuss these results. To access the conference call by telephone, please dial 1-888-390-0546 (Canada and United States toll-free) or 416-764-8688. The live webcast of the conference call can be accessed through the Westport website.

To access the conference call replay, please dial 1-888-390-0541 (Canada and United States toll-free) or 1-416-764-8677 using the pass code 977286 followed by pound key. The telephone replay will be available until Nov. 22, 2023. Shortly after the conference call, a replay will be available in streaming audio and a downloadable MP3 file.

About Westport Fuel Systems Inc.

At Westport Fuel Systems, the company is driving innovation to power a cleaner tomorrow. The company 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 transportation industry. The company's 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, Westport serves its customers in more than 70 countries with leading global transportation brands.

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