2024
A N N U A L R E P O R T
2
3
TABLE OF CONTENTS
About Westport Fuel Systems................................................4
Letter to Shareholders.................................................................6
At a Glance....................................................................................... 10
Financial Highlights.................................................................... 10
Management Discussion and Analysis.............................12
Financial Statements ................................................................ 37
4
We are a leading supplier of advanced fuel delivery systems,
components, and software for a wide range of affordable,
alternative, low-carbon, renewable fuels.
We are ‘Driving Cleaner Performance’ with advanced, alternative-fuel systems and
components for today’s combustion-powered vehicles and for future fuel cell and hydrogen-
fueled vehicles. Our systems reduce carbon emissions without compromise, and without
drastic or expensive changes to vehicle architecture, manufacturing, and supply chains.
Our market-ready solutions help reduce emissions, meet greenhouse gas standards and, in
most cases, realize fuel cost savings or passenger cars and light-, medium-, and heavy-duty
trucks utilizing alternative fuels including hydrogen (“H2”), liquefied natural gas (“LNG”),
renewable natural gas (“RNG”), compressed natural gas (“CNG”), and liquefied petroleum
gas (“LPG”).
About Westport
5
Our Strategy at a Glance
Driving Success with
Cespira, our HPDI JV
Advancing HPDI
technology to reduce CO2
emissions in long-haul and
off-road sectors.
Improving
Operational Excellence
Utilize bold initiatives to
streamline processes, boost
efficiency and cut costs.
Advancing fuel-agnostic
technologies and expanding RNG
systems today to deliver scalable,
cost-effective hydrogen solutions
tomorrow.
Shaping a Future Powered
by Alternative Fuels
1
2
3
Preparing for the Next
Harness fuel-agnostic technologies and develop
cost-effective, advanced zero-emission
hydrogen solutions for the future.
Focused on the Now
Providing effective solutions for decarbonization
by utilizing alternative fuels, including biofuels,
that are available today to address decarbonizing
hard-to-abate mobility applications.
Our three strategic pillars
drive our long-term vision,
growth, and value creation
Now to Next, Built for the Long-Term
Our strategic direction focuses on the Now
while keeping a sharp eye for what’s Next
We are committed to advancing technologies, services
and products that reduce emissions, enhance efficiency,
and promote a greener sustainable future, ensuring our
customers have affordable solutions to meet their
environmental and commercial goals.
Embedding
purpose in
all we do
continued on next page
6
Letter to Shareholders
I have had the privilege to be Westport’s CEO for just over a year now and wanted to take
a moment to reflect on the remarkable progress we have made over that time and provide
a view into our plans and expectations for 2025. The past year was a transformative period
for the Company. I am proud of the strides we have made in our commitment to advancing
technologies, services and products that reduce emissions, enhance efficiencies, and promote
a sustainable future. Westport is working to ensure that customers have affordable solutions to
meet their commercial and environmental goals. As Westport’s leader, I am motivated to not
only achieve our short- and long-term goals but to make a significant positive difference in the
transport industry.
Key Accomplishments
2024 was a strong year for Westport.
We strengthened an important
alliance, tightened the alignment
between our competitive strategy and
our internal operations, and made
substantial efficiency improvements
that have enhanced our cost structure.
Last year, we saw our gross margin
improve, increasing from 9% in Q4 of
2023 to 19% in Q4 of 2024. We also demonstrated a significant $20.4 million improvement in
our net cash provided by operating activities to $7.2 million for the year ended December 31,
2024, representing one of the first times Westport has generated positive cash from operations.
In June, we advanced cleaner commercial transport through the beginning of our joint venture
with Volvo Group, named Cespira. And in March 2025, we announced the proposed divestiture
of our Light-Duty business, which is expected to strengthen our balance sheet and focus
Westport on its competitive strengths, to meet the diverse market needs for effective solutions
to decarbonize hard-to-abate applications in the transport space utilizing alternative fuels.
I am committed to
producing results,
driving productivity,
and enhancing value
for shareholders.
“
”
7
continued on next page
To be successful on an annual basis, Westport needs to continue to deliver on our purpose,
be disciplined in our operations and align our decision-making to a strong strategic plan.
Accordingly, over the past year we executed against our three strategic priorities; driving
success via the HPDI joint venture, improved operational excellence and shaping a future
powered by alternative fuels, all while evolving with intent, and prudent financial stewardship.
Crystalized our Strategic Relationship with Volvo Group
Our joint venture with Volvo Group, named Cespira,
has begun its journey toward the decarbonization
of heavy transport. The joint venture, which began
operations in June of 2024, aims to expand the
availability of the High-Pressure Direct Injection
(“HPDITM”) fuel system, with carbon neutral fuels like hydrogen and renewable natural gas as
its propellants. The formation of the partnership was an important milestone for Westport
and a true endorsement of our HPDI technology and fuel system.
Acting Today, Shaping Tomorrow
Westport is ‘Driving Cleaner Performance’ with practical yet innovative applications available
today, to shape a sustainable and responsible transportation industry long into the future.
We believe that 2025 will be another eventful year on our journey to create technologies that
not only reduce emissions and enhance efficiency for customers but also to highlight our
dedication to a future of alternative fuels. However, it’s clear that our target markets are in a
state of change. We are seeing global and economic pressures leading to turbulence in the
automotive sector, which is coinciding with a slowdown in the hydrogen market and volatility
in the passenger car market. While we are persevering through these challenging times, we
are taking this opportunity to reposition the Company. We have many opportunities in front
of us and are determined to forge a path to capitalize on a promising current set of emerging
prospects. Ultimately, we are striving to ensure that our customers have access to affordable
solutions that help them achieve their commercial and environmental goals, now and for
many years to come.
7
Providing Solutions for Hard to Decarbonize
Transport and Industrial Applications
In early 2025, Westport announced its intention to divest of its Light-Duty business. I am
confident the proposed disposition enhances long-term value for Westport shareholders
by creating a focused company dedicated to providing solutions to decarbonize hard-
to-abate mobility and industrial applications. Following the divestiture, Westport will
be structured to execute against a distinct value proposition with the ability to pursue
and achieve greater success. This includes tailored strategies targeted at driving and
leveraging fuel agnostic technologies today, to create mature, affordable zero emissions
hydrogen solutions tomorrow.
Despite technological advancements, decarbonizing long-haul heavy-duty transport
remains a challenge, with substantial reductions in CO2 emissions still to be realized.
Original Equipment Manufacturers have explored multiple alternatives, yet widespread
adoption has been limited. Fleet operators are prioritizing cost-effectiveness and total
cost of ownership, with emissions often taking a secondary role. Hydrogen is recognized
as a solution for long haul applications, but its adoption timeline is uncertain. Meanwhile,
demand continues to grow for low- and zero-carbon alternatives in hard to decarbonize
applications, such as heavy-duty trucking. However, for solutions to gain traction, they
must maintain performance and be cost-effective.
To address these challenges, Westport is advancing fuel-agnostic technologies, growing
its natural gas solutions today, while laying the groundwork for hydrogen adoption in
the future. In 2025, we plan to continue building on our alternative fuel technology,
including, but not limited to, CNG components and application advancements and RNG
systems growth, aiming to scale production and enhance commercialization of hydrogen
fuel systems for a wide range of transportation applications. In addition, the HPDI fuel
system is the most affordable commercially viable option that does not compromise on
performance and that can deliver net zero carbon emissions in heavy duty transport. As
more difficult to decarbonize applications emerge in the transport sector, high pressure
systems and controls will be required regardless of the powertrain, and they complement
the transition from natural gas to renewables to hydrogen. Westport components and
solutions are already powering emission-reducing innovations today, across a range of
alternative fuels, including natural gas, renewable natural gas, and hydrogen.
8
9
DAN SCELI,
CEO & Director
The resurgence of natural gas and renewable natural gas globally provides a market
opportunity for Westport, particularly in North America where natural gas infrastructure
is abundant and RNG production is growing. We believe that hydrogen will play a role in
‘hard to decarbonize’ mobility applications, although the timeline is uncertain and has
lengthened recently. However, Westport’s products are timeline-agnostic, leveraging our
High-Pressure Controls & Systems segment and stake in Cespira which have solutions
available now, to address decarbonization with net zero fuels and low carbon fuels while
also having the most affordable solutions when zero carbon hydrogen becomes more
available, with a clear focus on the ecosystem surrounding the HPDI fuel system and our
Cespira JV.
To ensure that we are positioned as a key player in this rapidly growing and changing
market, we also must focus on our financial strength. We remain committed to
strengthening our balance sheet to enable us to fund the growth that will deliver value
to our shareholders. With a focus on cost controls, operational excellence, and prudent
capital allocation, in addition to the opportunities we see in front of us, we are excited to
position ourselves at the forefront of this transformative shift.
Conclusion
The improvements that we’ve embraced over the past year have positioned us to deliver
more affordable and sustainable solutions that help our customers meet their commercial
and environmental goals. I am proud of what we accomplished in 2024 and am grateful
for your continued support. As your CEO, I am committed to producing results, driving
productivity, and enhancing value for shareholders. We are optimistic about 2025’s
opportunity set, as we work to leverage our core capabilities from our roots, advance clean
technology solutions, and contribute to a more sustainable future.
10
Westport at a Glance
2024 Financial Highlights
(US$ millions, except where noted)
2024 revenue of
$302.3
million
100+
distributors
worldwide
~70
countries
Sales in
Operations
2024
2023
2022
2021
2020
Revenue
302.3
331.8
305.7
312.4
252.5
Gross profit
57.6
48.9
36.2
48.2
39.5
Gross margin
19%
15%
12%
15%
16%
Net income (loss) per year
(21.8)
(49.7)
(32.7)
13.7
(7.4)
Adjusted EBITDA
(11.2)
(21.5)
(27.8)
17.5
14.7
Financial position
Cash and cash equivalents (including restricted cash)
37.6
54.9
86.2
124.9
64.3
Total assets
291.6
355.7
407.5
471.3
346.3
Debt, including current portion
33.7
60.2
53.0
69.4
85.4
Shareholders’ equity
137.0
160.4
204.0
236.4
104.1
65 years of innovation
+
11
Commitment to Sustainability
Since its inception, Westport aspires to contribute to a world where climate change is
mitigated, and global air quality contributes to a healthy society. A world where clean
transportation is accessible and affordable, ensuring everyone can take part in building
sustainable communities for themselves and future generations. We encourage every
member of our organization to make a daily commitment toward creating transportation
solutions that not only enhance the well-being of people and the environment but also
contribute to the prosperity of our communities. Our central aim is to hasten the impact
of the energy transition by bringing our products to market, all while meticulously
minimizing our environmental footprint.
Throughout 2024, our commitment to minimizing our environmental footprint was
evident. We successfully developed and endorsed our Corporate Environmental Policy,
which underscores our awareness of the necessity for ongoing initiatives and projects
dedicated to minimizing the environmental footprint of our organizational activities.
We know that meaningful change occurs through the adoption of our technologies by
fleets and OEMs and that our fuel systems pave the way to carbon neutrality through
reduced emissions and costs.
Going forward, we’re implementing measures to ensure that Westport’s products
and business operations generate positive impacts across the value chain. Westport’s
sustainability journey continues with a focus on agility, adaptability, and resilience.
Through our sustainability-driven business model, robust governance practices, and
dedicated workforce, we’re committed to generating long-term value for shareholders
while championing global decarbonization efforts.
BASIS OF PRESENTATION
This Management’s Discussion and Analysis (“MD&A”) for Westport Fuel Systems Inc. (“Westport”, the
“Company”, “we”, “us”, “our”) for the three months and year ended December 31, 2024 is intended to
assist readers in analyzing our financial results and should be read in conjunction with the audited
consolidated financial statements, including the accompanying notes, for the fiscal year ended
December 31, 2024 ("Annual Financial Statements"). Our Annual Financial Statements have been
prepared in accordance with generally accepted accounting principles in the United States ("U.S.
GAAP"). The Company’s reporting currency is the United States dollar ("U.S. dollar"). This MD&A is
dated as of March 31, 2025.
Additional information relating to Westport, including our Annual Information Form ("AIF") and Form
40-F each for the year ended December 31, 2024, is available on SEDAR at www.sedar.com and on
EDGAR at www.sec.gov. All financial information is reported in U.S. dollars unless otherwise noted.
FORWARD-LOOKING STATEMENTS
This MD&A contains forward-looking statements that are based on the beliefs of management and
reflects our current expectations as contemplated under the safe harbor provisions of Section 21E of
the United States Securities Act of 1934, as amended. Such forward-looking statements include, but
are not limited to, future strategic initiatives and future growth, future of our development programs
(including those relating to HPDI and Hydrogen), our expectations for 2025 and beyond, including the
demand for our products or our HPDI joint venture's products (including from the HPDI 2.0TM fuel
systems), the future success of our business and technology strategies, opportunities available to sell
and supply our products in North America, consumer confidence levels, our ability to strengthen our
liquidity, growth in our HPDI joint venture and improvements in our light-duty original equipment
manufacturer ("OEM") business and timing thereof, improved aftermarket revenues, our capital
expenditures, our investments, cash and capital requirements, the intentions of our partners and
potential customers, monetization of joint venture intellectual property, the performance of our
products, our future market opportunities, our ability to continue our business as a going concern and
generate sufficient cash flows to fund operations, the availability of funding and funding
requirements, our future cash flows, our estimates and assumptions used in our accounting policies,
our accruals, including warranty accruals, our financial condition, the timing of when we will adopt or
meet certain accounting and regulatory standards and the alignment of our business segments.
These forward-looking statements are neither promises nor guarantees but involve known and
unknown risks and uncertainties that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of activity, performance or
achievements expressed in or implied by these forward-looking statements. These risks include risks
related to revenue growth, operating results, liquidity, our industry and products, the general
economy, conditions of the capital and debt markets, government or accounting policies and
regulations, regulatory investigations, climate change legislation or regulations, technology
innovations, as well as other factors discussed below and elsewhere in this report, including the risk
factors contained in the Company’s most recent AIF filed on SEDAR at www.sedar.com. The forward-
looking statements contained in this MD&A are based upon a number of material factors and
assumptions which include, without limitation, market acceptance of our products, product
development delays in contractual commitments, the ability to attract and retain business partners,
competition from other technologies, conditions or events affecting cash flows or our ability to
continue as a going concern, price differential between compressed natural gas, liquefied natural gas,
and liquefied petroleum gas relative to petroleum-based fuels, unforeseen claims, exposure to factors
beyond our control as well as the additional factors referenced in our AIF. Readers should not place
undue reliance on any such forward-looking statements, which are pertinent only as of the date they
were made.
The forward-looking statements contained in this document speak only as of the date of this MD&A.
Except as required by applicable legislation, Westport does not undertake any obligation to release
12
publicly any revisions to these forward-looking statements to reflect events or circumstances after this
MD&A, including the occurrence of unanticipated events. The forward-looking statements contained
in this MD&A are expressly qualified by this cautionary statement.
GENERAL DEVELOPMENTS
•
On June 3, 2024, Westport deconsolidated the HPDI business and transferred certain net
assets into a newly formed joint venture with Volvo Group.
•
On September 13, 2024, Westport announced an at-the-market equity offering program (the
"ATM Program") that allows the Company to issue an sell up to $35.0 million of common shares
of the Company from treasury to the public.
•
Westport announced that Brenda Eprile retired from Westport's Board of Directors effective
January 6, 2025. The Board will evaluate alternatives with respect to appointment of an
independent director to fill the vacancy.
•
In January 2025, Cespira announced that it had appointed Carlos Gonzalez as the new
President and CEO, effective April 1, 2025. Dan Sceli, CEO of Westport, will continue to sit on
Cespira's Board of Directors.
•
On March 30, 2025, Westport entered into a share purchase agreement with a wholly-owned
vechicle of Heliaca Investments Coöperatief U.A. ("Heliaca Investments"), a Netherlands based
investment firm supported by Ramphastos Investments B.V. ("Ramphastos") a prominent
Dutch venture capital and private equity firm.
BUSINESS OVERVIEW
Headquartered in Vancouver, British Columbia, Canada, with operations in Europe, Asia, North
America, and South America, Westport serves customers in approximately 70 countries with leading
global transportation brands through a network of distributors, service providers for the aftermarket
and direct to Original Equipment Manufacturers (“OEMs”) and Tier 1 and Tier 2 OEM suppliers.
With a focus on engineering, manufacturing, and supplying alternative fuel systems and components
for transportation applications, Westport’s diverse product offerings, sold under a wide range of
established global brands, enable the use of a number of alternative fuels in the transportation sector
that provide environmental and/or economic advantages as compared to diesel, gasoline, or battery
powered electric vehicles.
Westport designs, manufactures, develops, validates, certifies, and sells alternative fuel (including
alternative fuels such as hydrogen (“H2”), liquefied natural gas (“LNG”), biogas, biomethane, and
renewable natural gas (collectively “RNG”), compressed natural gas (“CNG”), and liquefied petroleum
gas (“LPG”) components and systems for passenger cars and light-, medium- and heavy-duty
commercial vehicles and off-highway applications.
Our portfolio of products includes pressure regulators, injectors, electronic control units, valves and
filters, complete bi-fuel, mono-fuel and dual-fuel LPG and natural gas conversion kits and high-
pressure hydrogen components. Cespira, our 55% owned joint venture (“JV”) with the Volvo Group
("Volvo"), launched in 2024, is advancing the development and commercialization of the HPDITM fuel
system, a fully OEM-integrated solution that enables heavy-duty trucks to operate on natural gas,
RNG, hydrogen and other alternative fuels.
Business Segments
Our diverse portfolio of technologies, products, and services are sold under a wide range of
established brands. They provide the foundation for sustainable growth in existing markets and guide
our expansion into new and emerging markets worldwide. Our business is operated under the
following four segments:
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Cespira
In June 2024, Westport and Volvo entered into a series of joint venture agreements (collectively, the
"JV Agreement"), establishing Cespira to promote, develop, and commercialize the HPDI fuel system
technology (see Material Contracts – Joint Venture Governance Agreements). The JV will prioritize
scaling the HPDI fuel system and supporting the global transition to carbon-neutral fuel systems,
particularly in heavy-duty, long-haul trucking, where multiple technologies are required to achieve
substantial decarbonization. Under the terms of the agreement, Westport owns a 55% equity interest
in Cespira, while Volvo owns 45%. Cespira's business operations involve supplying systems,
engineering services and components, including LNG HPDI fuel system products, to engine
manufacturers and commercial vehicle OEMs. The fully integrated LNG HPDI fuel systems enable
diesel engines to operate predominantly on alternative fuels while delivering equivalent power,
torque, and fuel efficiency as conventional compression ignition engines. The system can be a cost-
effective way to reduce greenhouse gas emissions using renewable fuels such as RNG. Furthermore,
the JV is engaged in adapting HPDI fuel systems for hydrogen and other alternative fuel applications
in internal combustion engines.
Light-Duty
The Light-Duty segment specializes in LPG and CNG solutions, including fuel storage tanks, catering
to OEM, delayed OEM (“DOEM”), and independent aftermarket (“IAM”) markets. Customers can
choose from Westport IAM conversions, DOEM solutions, or OEM-manufactured mono-fuel and bi-
fuel vehicles. The segment offers industry-leading direct injection engine technology that complies
with EURO 7 and EPA 24 standards, along with lightweight, high-quality fuel storage solutions.
The Light-Duty business serves three distinct markets:
1.
OEM: Systems are integrated into production lines by vehicle manufacturers.
2.
DOEM: Conversions are performed at 0 km in specialized centers operated by Westport or its
partners.
3.
IAM: Aftermarket products, including conversion kits, support post-sale conversions through
an extensive dealer and installer network operating in approximately 70 countries worldwide.
Westport works to distinguish itself as a global company that integrates and manufactures
mechanical components, electronics, and fuel storage systems, providing a seamless and efficient
solution for our customers.
High-Pressure Controls and Systems
Our High-Pressure Controls and Systems segment is at the forefront of the clean energy revolution,
designing, developing, and producing high-demand components for transportation and industrial
applications. We partner with the world's leading fuel cell, hydrogen engine and alternative fuel
engine manufacturers and companies committed to decarbonizing transport, offering versatile
solutions that serve a variety of fuel types. While hydrogen is key to the future decarbonization of
transport, our components and solutions are already powering emission-reducing innovation today
across a range of alternative fuels. While we are a small enterprise, our strategic position and
innovative capabilities put us on the cusp of significant growth, ensuring we are the go-to choice for
those shaping the future of clean energy, today and tomorrow.
Heavy-Duty OEM
Our Heavy-Duty OEM business represents historical results from our heavy-duty business for the
period January 1, 2024, until the formation of the Cespira joint venture which occurred on June 3, 2024.
Going forward, the Heavy-Duty OEM segment will reflect revenue earned from a transitional services
agreement in place with Cespira, intended to support the JV in the short-term as the organization
establishes its operations.
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RISKS, LONG-TERM PROFITABILITY & LIQUIDITY
Government Regulation and Inflationary Environment
Government regulation is a key factor in driving accelerated global demand and adoption of reduced
emission vehicles. Supportive government policy combined with rising corporate adherence to
emission reduction goals are creating growth catalysts for Westport in some of its key markets. While
we have benefited historically from certain government environmental policies, mandates and
regulations around the world, there can be no assurance that these policies, mandates, and
regulations will be continued. If these are discontinued, if current requirements are relaxed, or if other
regulations are implemented that may impact our business, we may experience a material impact on
our competitive position.
Global inflation trends remain inconsistent, with inflationary pressures easing in developed countries,
while continuing to impact certain emerging and developed markets. In key LPG markets such as
Poland, Turkey, and Italy, LPG prices have experienced upward pressure. Westport sources its
components from global suppliers and continues to face inflationary pressure on production input
costs. Specifically, the cost of semiconductors, raw materials, and parts has increased, along with
higher labor costs, all of which are contributing to margin compression.
Increased Interest Rates
In response to inflationary pressures, central banks in major markets have raised interest rates to
multi-decade highs. While some regions, including Canada, the United States, and Europe, have
begun reducing rates, current levels remain restrictive and are having a significant impact on both the
automotive and clean energy sectors.
Automotive manufacturers and OEMs are facing challenges as higher interest rates are compressing
profit margins. This environment is leading to delays and cancellations of clean energy investments as
companies prioritize cost-cutting measures. Additionally, elevated interest rates have contributed to a
slowdown in global economic growth, particularly in emerging markets where economic conditions
are already volatile, are facing heightened financial pressures, which could further dampen demand
for clean energy solutions.
Hydrogen Eco-System Uncertainty
The hydrogen industry is currently facing economic challenges associated with limited load of
available hydrogen which has resulted in high operational costs across the value chain. This has led to
delays and cancellations of projects. Key cost factors, such as rising renewable electricity prices and
increased electrolyzer costs, are having a significant impact on the economics of renewable (green)
hydrogen projects. These higher costs, coupled with uncertainties surrounding fuel supply and
infrastructure development, make it challenging to predict when hydrogen technology for transport
will become a viable decarbonization solution.
Fuel Prices
European natural gas prices, although elevated recently, are still significantly below the record highs
of 2022. Lower demand, influenced by reduced economic activity and previous mild weather, has
contributed to price moderation. Additionally, the diversification of gas imports continues to be a key
focus of European energy policy. Long-term forecasts suggest that natural gas prices will remain well
below 2022 peaks. This outlook reinforces the fuel’s cost-effectiveness and its role in advancing the
transition to natural gas-powered vehicles
Refer to our discussion in our AIF "Near-Term Industry Challenges" and "Industry Growth Drivers" for
more information.
15
Liquidity and Going Concern
We believe that we have considered all possible impacts of known events arising from the risks
discussed above related to supply chain, and fuel prices in the preparation of the annual financial
statements for the year ended December 31, 2024. However, changes in circumstances due to the
forementioned risks could affect our judgments and estimates associated with our liquidity and other
critical accounting assessments.
For the year ended December 31, 2024, we continue to sustain operating losses and use cash to
support our business activities. Cash provided by operating activities was $7.2 million for the year
ended December 31, 2024 and was primarily driven by reductions in working capital.
As at December 31, 2024, we had cash and cash equivalents of $37.6 million and long-term debt of
$33.7 million, of which $14.7 million was current. Based on our projected capital expenditures, debt
servicing obligations and operating requirements under our current business plan, we are projecting
that our cash and cash equivalents will not be sufficient to fund our operations through the next
twelve months from the date of the issuance of this MD&A. These conditions raise substantial doubt
about Westport's ability continue as a going concern within one year after the date of this MD&A is
issued.
We plan to improve our liquidity position by selling certain subsidiaries in Europe and Argentina
which comprise substantially all the assets and liabilities of the Light-Duty segment and continue our
cost reduction initiatives. On March 30, 2025, we entered into a share purchase agreement ("SPA")
with a wholly-owned investment vehicle of Heliaca Investments, a Netherlands based investment firm
supported by Ramphastos a prominent Dutch venture capital and private equity firm, to sell all of the
issued and outstanding shares of Westport Fuel Systems Italia S.r.l. The transaction provides for a base
purchase price of $73.1 million (€67.7 million), subject to certain adjustments and potential earnouts of
up to an estimated $6.5 million (€6.0 million) if certain conditions are achieved, in accordance with the
terms of the SPA. If we are successful in closing the sale, we will receive sufficient cash to fund our
operations for the next twelve months and alleviate the risk of substantial doubt identified. As of the
date of issuance of these financial statements, we are seeking shareholder approval of the plan to
complete the sale of these businesses to the buyer. As such, there can be no assurances that Westport
will be successful in obtaining sufficient funding. Accordingly, we concluded under the accounting
standards that these plans do not alleviate the substantial doubt about Westport's ability to continue
as a going concern.
OVERVIEW OF FINANCIAL RESULTS FOR 2024
Revenues for the year ended December 31, 2024 decreased by 9% to $302.3 million compared to $331.8
million in the prior year, primarily driven by the transition of the Heavy-Duty OEM business into
Cespira, partially offset by an increase in revenue in our Light-Duty segment.
We reported a net loss of $21.8 million for the year ended December 31, 2024 compared to a net loss of
$49.7 million for the prior year. The net positive change was primarily the result of:
•
improvements in gross profit for the year ended December 31, 2024 of $8.7 million compared
to the prior year
•
$15.2 million gain on deconsolidation of the HPDI business arising from the formation of the
joint venture with Volvo Group on June 3, 2024
•
reductions in operating expenditures and depreciation and amortization expense due to
deconsolidation of the HPDI business
•
partially offset by higher income tax expense and foreign exchange losses in the year.
Cash and cash equivalents were $37.6 million as at December 31, 2024. Cash provided by operating
activities during the year was $7.2 million, primarily from a positive reduction in working capital of
16
$16.4 million. Cash provided by investing activities comprise the sale of investments for a total of $30.0
million, which includes proceeds received from the sale of 45% ownership interest in Cespira to Volvo,
sale of our remaining interest in WWI, and 26% interest in Minda Westport Technologies Limited
("MWTL"), partially offset by the purchase of capital assets of $16.9 million, and $9.9 million in capital
contributions to Cespira. Cash used in financing activities were net debt repayments of $25.2 million in
the year, which included borrowings of long-term debt of $3.8 million in the beginning of the year.
We reported negative adjusted EBITDA of $11.2 million (see "Non-GAAP Measures" section in this
MD&A) during the year ended December 31, 2024 as compared to negative adjusted EBITDA of $21.5
million for the same period in 2023.
SELECTED FINANCIAL INFORMATION
The following tables sets forth a summary of our financial results:
Selected Consolidated Statements of Operations Data
Years ended December 31,
2024
2023
2022
(in millions of U.S. dollars, except for per share amounts and shares outstanding)
Revenue
$
302.3
$
331.8
$
305.7
Gross profit
$
57.6
$
48.9
$
36.2
Gross margin1
19 %
15 %
12 %
Loss from operations
$
(24.7)
$
(45.9)
$
(50.3)
Income (loss) from investments accounted for by the equity
method
$
(5.4)
$
0.8
$
0.9
Net loss
$
(21.8)
$
(49.7)
$
(32.7)
Net loss per share - basic
$
(1.27)
$
(2.90)
$
(1.91)
Net loss per share - diluted
$
(1.27)
$
(2.90)
$
(1.91)
Weighted average basic shares outstanding in millions
17.2
17.2
17.1
Weighted average diluted shares outstanding in millions
17.2
17.2
17.1
EBIT1
$
(15.3)
$
(48.4)
$
(29.3)
EBITDA1
$
(6.6)
$
(35.9)
$
(17.5)
Adjusted EBITDA1
$
(11.2)
$
(21.5)
$
(27.8)
1These financial measures or ratios are non-GAAP financial measures or ratios. See the section 'Non-
GAAP Financial Measures' for explanations and discussions of these non-GAAP financial measures or
ratios.
17
Three Months Ended December 31,
2024
2023
(in millions of U.S. dollars, except for per share amounts and shares outstanding)
Revenue
$
75.1
$
87.2
Gross profit
$
14.3
$
8.0
Gross margin1
19 %
9 %
Loss from operations
$
(8.0)
$
(14.1)
Income (loss) from investments accounted for by the equity method
$
(2.0)
$
0.1
Net loss
$
(10.1)
$
(13.9)
Net loss per share - basic
$
(0.59)
$
(0.81)
Net loss per share - diluted
$
(0.59)
$
(0.81)
Weighted average basic shares outstanding in millions
17.2
17.2
Weighted average diluted shares outstanding in millions
17.2
17.2
EBIT1
$
(8.1)
$
(14.2)
EBITDA1
$
(6.1)
$
(10.9)
Adjusted EBITDA1
$
(1.8)
$
(10.0)
1These financial measures or ratios are non-GAAP financial measures or ratios. See the section 'Non-
GAAP Financial Measures' for explanations and discussions of these non-GAAP financial measures or
ratios.
Selected Balance Sheet Data
The following table sets forth a summary of our financial position:
December 31,
2024
December 31,
2023
(in millions of U.S. dollars)
Cash and short-term investments
$
37.6
$
54.9
Net working capital1
37.7
56.3
Total assets
291.6
355.7
Short-term debt
—
15.2
Long-term debt, including current portion
33.7
45.0
Non-current liabilities1
26.3
29.5
Total liabilities
154.6
195.3
Shareholder's equity
137.0
160.4
1These financial measures or ratios are non-GAAP financial measures or ratios. See the section 'Non-
GAAP Financial Measures' for explanations and discussions of these non-GAAP financial measures or
ratios.
RESULTS FROM OPERATIONS
REPORTABLE SEGMENTS
Westport discloses segment information under four reportable segments, consistent with the manner
in which its Chief Operating Decision Maker ("CODM") evaluates its businesses. The Company's CODM
is its Chief Executive Officer. These segments are the strategic pillars of the Company and are
managed separately as each represents a specific grouping of related automotive components and
systems. The reportable segments are further described below. In prior years, Westport presented its
results
under
2
reportable
segments:
Independent
aftermarket
and
Original
equipment
manufacturer.
18
Effective June 3, 2024, the Company changed how it evaluates and manages its businesses as a result
of the deconsolidation of its former HPDI business and formation of the joint venture. Westport now
reports its results in the following four reportable segments: Light-Duty, High-Pressure Controls &
Systems, Heavy-Duty OEM, and Cespira. The prior year comparatives were recast to reflect this change
in reportable segments.
Segment earnings or losses before income taxes, interest, depreciation, and amortization ("Segment
EBITDA") is the measure of segment profitability used by the Company. The accounting policies of our
reportable segments are the same as those applied in our consolidated financial statements.
Management prepared the financial results of the Company's reportable segments on basis that is
consistent with the manner in which Management internally disaggregates financial information to
assist in making internal operating decisions. Certain common costs and expenses, primarily
corporate functions, among segments differently than we would for stand-alone financial information
prepared in accordance with GAAP. These include certain costs and expenses of shared services, such
as IT, human resources, legal, finance and supply chain management. Segment EBITDA is not defined
under US GAAP and may not be comparable to similarly titled measures used by other companies
and should not be considered a substitute for net earnings or other results reported in accordance
with GAAP. Reconciliations of reportable segment information to consolidated statement of
operations can be found in section "NON-GAAP FINANCIAL MEASURES & RECONCILIATIONS" within
this MD&A.
Year ended December 31, 2024
Light-Duty
High-Pressure
Controls &
Systems
Heavy-Duty
OEM
Cespira
Total Segment
Revenue
$
262.2 $
8.8 $
31.3 $
43.1 $
345.4
Cost of revenue
206.8
7.3
30.6
42.6
287.3
Gross profit
55.4
1.5
0.7
0.5
58.1
Operating expenses:
Research &
development
13.0
4.4
4.2
4.7
26.3
General &
administrative
19.2
1.0
3.1
5.6
28.9
Sales & marketing
9.9
0.7
0.9
1.0
12.5
Depreciation &
amortization
2.6
0.3
0.1
1.7
4.7
Equity income
1.3
—
—
—
1.3
Add back:
Depreciation &
amortization1
6.4
0.5
1.4
3.8
12.1
Segment EBITDA
$
18.4 $
(4.4) $
(6.2) $
(8.7) $
(0.9)
19
Year ended December 31, 2023
Light-Duty
High-Pressure
Controls &
Systems
Heavy-Duty
OEM
Total Segment
Revenue
$
263.6 $
12.0 $
56.2 $
331.8
Cost of revenue
214.5
9.2
59.2
282.9
Gross profit
49.1
2.8
(3.0)
48.9
Operating expenses:
Research & development
13.1
3.6
9.3
26.0
General & administrative
21.6
1.3
6.4
29.4
Sales & marketing
10.6
0.7
2.9
14.1
Depreciation & amortization
3.2
0.2
0.4
3.8
Equity income
0.8
—
—
0.8
Add back: Depreciation & amortization1
6.7
0.4
4.9
11.9
Segment EBITDA
$
8.1 $
(2.6) $
(17.1) $
(11.6)
Revenue for the three months and year ended December 31, 2024
(in millions of U.S. dollars)
Three months ended
December 31,
Change
Years ended
December 31,
Change
2024
2023
$
%
2024
2023
$
%
Light-Duty
$
68.0
$
63.4
$
4.6
7 %
$
262.2
$
263.6
$
(1.4)
(1) %
High-Pressure Controls & Systems
1.4
2.5
(1.1)
(44) %
8.8
12.0
(3.2)
(27) %
Heavy-Duty OEM
5.7
21.3
(15.6)
(73) %
31.3
56.2
(24.9)
(44) %
Total revenue
$
75.1
$
87.2
$
(12.1)
(14) %
$
302.3
$
331.8
$ (29.5)
(9) %
Light-Duty
Revenue for the three months and year ended December 31, 2024 was $68.0 million and $262.2
million, respectively, compared with $63.4 million and $263.6 million for the three months and year
ended December 31, 2023.
Light-Duty revenue increased by $4.6 million for the three months ended December 31, 2024
compared to the prior year. This was primarily driven by a significant increase in sales of LPG fuel
system solutions to a global OEM for Euro 6 vehicle applications in our light-duty OEM business and
an increase in DOEM business, partially offset by lower revenues in other business lines.
Light-Duty revenue decreased by $1.4 million for the year ended December 31, 2024 compared to the
prior year. This was primarily driven by a decrease in sales in our DOEM business in the first half of
2024, decrease in sales to customers in developing markets and our fuel storage business. This was
partially offset by the aforementioned increase in sales of LPG fuel system solutions in our light-duty
OEM business.
High-Pressure Controls & Systems
Revenue for the three months and year ended December 31, 2024 was $1.4 million and $8.8 million,
respectively, compared with $2.5 million and $12.0 million for the three months and year ended
December 31, 2023.
Revenue for the three months ended December 31, 2024 decreased by $1.1 million compared to the
prior year period.
Revenue for the year ended December 31, 2024 decreased by $3.2 million compared to the prior year.
20
The decrease in revenue for the three months and year ended December 31, 2024 compared to the
prior year periods continues to be primarily driven by the general slowdown in the hydrogen
infrastructure development, leading to a slower adoption of automotive and industrial applications
powered by hydrogen.
Heavy-Duty OEM
Revenue for the three months and year ended December 31, 2024 was $5.7 million and $31.3 million,
respectively, compared to $21.3 million and $56.2 million for the comparative periods.
The decrease in revenue for the three months and year ended December 31, 2024 is a result of the
continuation of the business in Cespira. Refer to the "Selected Cespira Statement of Operations
information" within this MD&A for more information on the performance of the HPDI business.
Revenue for the three months ended December 31, 2024 reflects revenue from our transitional
services agreement with Cespira that we expect to expire by the end of Q2 2026.
Gross profit for the three months ended December 31, 2024
(in millions of U.S. dollars)
Three months
ended
Three months
ended
December 31,
% of
December 31,
% of
Change
2024
Revenue
2023
Revenue
$
%
Light-Duty
$
14.0
21 %
$
12.0
19 %
$
2.0
(17) %
High-Pressure Controls & Systems
—
— %
0.4
16 %
(0.4)
(100) %
Heavy-Duty OEM
0.3
5 %
(4.4)
(21) %
4.7
(107) %
Total gross profit
$
14.3
19 %
$
8.0
9 %
$
6.3
79 %
Light-Duty
Gross profit increased by $2.0 million to $14.0 million, or 21% of revenue for the three months ended
December 31, 2024, compared to $12.0 million, or 19% of revenue, for the same prior year period. This
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 along with an increase in sales volumes.
High-Pressure Controls & Systems
Gross profit for the three months ended December 31, 2024 decreased by $0.4 million to nominal, or
0% of revenue, compared to $0.4 million, or 16% of revenue, for the same prior year period. This was
primarily driven by lower sales volumes, increasing the per unit manufacturing costs in the quarter.
Heavy-Duty OEM
Gross profit for the three months ended December 31, 2024 increased by $4.7 million to $0.3 million, or
5% of revenue, compared to negative $4.4 million or negative 21% of revenue, for the three months
ended December 31, 2023. The Heavy-Duty OEM segment was impacted by a $4.5 million inventory
write-down in the prior year period.
Gross profit for the year ended December 31, 2024
(in millions of U.S. dollars)
Year ended
Year ended
December 31,
% of
December 31,
% of
Change
2024
Revenue
2023
Revenue
$
%
Light-Duty
$
55.4
21 %
$
49.1
19 %
$
6.3
13 %
High-Pressure Controls & Systems
1.5
17 %
2.8
23 %
(1.3)
(46) %
Heavy-Duty OEM
0.7
2 %
(3.0)
(5) %
3.7
(123) %
Total gross profit
$
57.6
19 %
$
48.9
15 %
$
8.7
18 %
21
Light-Duty
Gross profit for the year ended December 31, 2024 increased by $6.3 million to $55.4 million, or 21% of
revenue, compared to $49.1 million, or 19% of revenue, for the prior year. This 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. The segment's manufacturing operations continues to implement operational
improvement initiatives lowering its manufacturing overhead costs in the year. For the year ended
December 31, 2024, Light-Duty recorded inventory write-downs of $2.1 million related to our
restructuring activities in India for $0.9 million and $0.5 million related to components for markets
that we have exited, and the remainder due to our periodic analysis of excess and obsolete inventory.
High-Pressure Controls & Systems
Gross profit for the year ended December 31, 2024 decreased by $1.3 million to $1.5 million, or 17% of
revenue, compared to $2.8 million, or 23% of revenue, for the prior year. This was primarily driven by
decrease in sales volume for the year. The segment recorded $0.8 million in inventory write-downs in
the year due to slow-moving inventory.
Heavy-Duty OEM
Gross profit increased by $3.7 million to $0.7 million, or 2% of revenue, for the year ended December 31,
2024 compared to negative $3.0 million, or negative 5% of revenue, for the prior year. Heavy-Duty OEM
recorded $0.4 million in inventory write-downs in the year. The segment was impacted by the
aforementioned inventory write-down of $4.5 million in the prior year.
Research and Development Expenses ("R&D")
(in millions of U.S. dollars)
Three months ended
December 31,
Change
Years ended
December 31,
Change
2024
2023
$
%
2024
2023
$
%
Light-Duty
$
3.3
$
3.3
$
—
— %
$
13.0
$
13.1
$
(0.1)
(1) %
High-Pressure Controls & Systems
0.8
1.2
(0.4)
(33) %
4.4
3.6
0.8
22 %
Heavy-Duty OEM
—
2.7
(2.7)
(100) %
4.2
9.3
(5.1)
(55) %
Total R&D
$
4.1
$
7.2
$
(3.1)
(43) %
$
21.6
$
26.0
$ (4.4)
(17) %
Light-Duty
R&D expenses for the three months and year ended December 31, 2024 were $3.3 million and $13.0
million, respectively, compared to $3.3 million and $13.1 million for the same prior year periods. This
was primarily related to research and development activities for our customer programs with global
OEMs for their Euro 6 and Euro 7 vehicle applications.
High-Pressure Controls & Systems
R&D expenses for the three months and year ended December 31, 2024 were $0.8 million and $4.4
million, respectively, compared to $1.2 million and $3.6 million for the same prior year periods. This was
primarily related to research and development activities for our new 700 bar products, including
pressure regulators, manifolds, and tank valves.
Heavy-Duty OEM
R&D expenses for the three months and year ended December 31, 2024 were nominal and $4.2
million, respectively, compared to $2.7 million and $9.3 million for the same prior year periods. R&D
activities have continued in Cespira after the formation of the joint venture on June 3, 2024.
22
Selling, General and Administrative Expenses ("SG&A")
(in millions of U.S. dollars)
Three months ended
December 31,
Change
Years ended December
31,
Chang
e
2024
2023
$
%
2024
2023
$
%
Light-Duty
$
7.1
$
7.9
$ (0.8)
(10) %
$
29.1
$
32.2
$
(3.1)
(10) %
High-Pressure Controls & Systems
0.5
0.4
0.1
25 %
1.8
1.9
(0.1)
(5) %
Heavy-Duty OEM
—
2.0
(2.0)
(100) %
3.9
9.3
(5.4)
(58) %
Corporate
3.6
4.3
(0.7)
(16) %
15.6
17.1
(1.5)
(9) %
Total SG&A
$
11.2
$
14.6
$
(3.4)
(23) %
$
50.4
$
60.5
$ (10.1)
(17) %
Light-Duty
SG&A expenses for the three months and year ended December 31, 2024 were $7.1 million and $29.1
million, respectively, compared to $7.9 million and $32.2 million for the same prior year periods.
The SG&A expenses for the three months ended December 31, 2024 decreased by $0.8 million, which
was primarily driven by lower outside service costs, reduction in payroll costs and lower sales
commission in the quarter.
The SG&A expenses for year ended December 31, 2024 decreased by $3.1 million, which was primarily
driven by lower outside service costs, reduction in headcount, lower sales commission and significant
severance costs incurred in the prior year.
High-Pressure Controls & System
SG&A expenses for the three months and year ended December 31, 2024 were $0.5 million and $1.8
million, respectively, compared to $0.4 million and $1.9 million for the same prior year periods.
The SG&A expenses for the three months ended December 31, 2024 was consistent with the prior year
period.
The SG&A expenses for the year ended December 31, 2024 increased by $0.1 million due to an increase
in payroll costs and outside service costs compared to the prior year.
Heavy-Duty OEM
SG&A expenses for the three months and year ended December 31, 2024 were nominal and $3.9
million, respectively, compared to $2.0 million and $9.3 million for the same prior year periods. The
decrease in SG&A expenses were primarily driven by the transition of the HPDI business into Cespira
on June 3, 2024.
Corporate
SG&A expenses for the three months and year ended December 31, 2024 were $3.6 million and $15.6
million, respectively, compared to $4.3 million and $17.1 million for the same prior year periods.
The SG&A expenses for the three months ended December 31, 2024 decreased by $0.7 million, which
was primarily driven by lower stock-based compensation expenses, a reduction in payroll costs and
outside services compared to prior year period.
The SG&A expenses for year ended December 31, 2024 decreased by $1.5 million, which was primarily
driven by higher severance costs incurred in North America in the prior year and reduction in
headcount in the Corporate function.
23
Selected Cespira Statement of Operations information
We account for Cespira using the equity method of accounting. However, due to its significance to our
long-term strategy and operating results, we disclose certain Cespira's financial information in notes 8
and 22 in our Annual Financial Statements.
The following table sets forth a summary of the financial results of Cespira for the three months ended
December 31, 2024 and the period between June 3, 2024 to December 31, 2024:
(in millions of U.S. dollars)
Three months ended
December 31,
Change
Period from June 3 to
December 31,
Change
2024
2023
$
%
2024
2023
$
%
Revenue
$
22.8
$
—
$
22.8
— % $
43.1
$
—
$
43.1
— %
Gross profit
1.4
—
1.4
— %
0.5
—
0.5
— %
Gross margin1
6 %
— %
1 %
— %
Operating loss
(4.8)
—
(4.8)
— %
(12.1)
—
(12.1)
— %
Net loss attributable to the
Company
(2.6)
—
(2.6)
— %
(6.7)
—
(6.7)
— %
1Gross margin is non-GAAP financial measure. See the section 'Non-GAAP Financial Measures' for explanations and discussions
of these non-GAAP financial measures or ratios.
Revenue
Cespira revenue was $22.8 million for the three months ended December 31, 2024. For the prior year
period, the Heavy-Duty OEM segment, which included our HPDI business, earned $21.3 million. This
was primarily driven by an increase in HPDI fuel systems sold in the period.
Gross profit
Cespira gross profit was $1.4 million for the three months ended December 31, 2024. For the prior year
period, the Heavy-Duty OEM segment had negative $4.4 million in gross profit primarily driven by the
aforementioned $4.5 million inventory write-down in the prior year period.
Operating loss
Cespira incurred operating losses of $4.8 million for the three months ended December 31, 2024. For
the prior year quarter, the Heavy-Duty OEM had operating losses of $9.3 million. Aside from the
aforementioned inventory write-down in the prior year period, the Heavy-Duty OEM had comparable
operating losses compared to Cespira.
24
Other significant expense and income items for the year ended December 31, 2024
(in millions of U.S. dollars)
Years ended December 31,
2024
2023
Foreign exchange gains and losses
$
6.2
$
4.0
Depreciation and amortization:
Cost of sales depreciation and amortization
5.3
8.2
Operating expense depreciation and amortization
3.4
4.3
Total depreciation and amortization
$
8.7
$
12.5
Foreign exchange gains and losses reflect net realized gains and losses on foreign currency
transactions and net unrealized gains and losses on our net U.S. dollar denominated monetary assets
and liabilities in our Canadian operations that were mainly comprised of cash and cash equivalents,
accounts receivable and accounts payable. In addition, we have foreign exchange exposure on Euro
denominated monetary assets and liabilities where the functional currency of the subsidiary is not the
Euro. For the year ended December 31, 2024, we recognized a foreign exchange loss of $6.2 million
compared to a foreign exchange loss of $4.0 million for the year ended December 31, 2023. The loss
recognized in the current year primarily relates to unrealized foreign exchange losses resulting from
the remeasurement of U.S. dollar denominated debt in our Canadian legal entities.
Depreciation and amortization for the years ended December 31, 2024 and December 31, 2023 were
$8.7 million and $12.5 million, respectively. Depreciation and amortization decreased year-over-year,
primarily driven by the transition of the HPDI business into Cespira on June 03, 2024.
Income (loss) from investments accounted for by the equity method for the years ended
December 31, 2024 and December 31, 2023 were loss of $5.4 million and income of $0.8 million,
respectively. This is primarily driven by our 55% ownership interest in Cespira and our 24% ownership
interest in MWTL.
Interest on debt and amortization of discount
(in millions of U.S. dollars)
Three months ended
December 31,
Years ended December 31,
2024
2023
2024
2023
Interest expense on long-term debt
$
0.7
$
0.9
$
2.8
$
2.8
Royalty payable accretion expense
—
—
—
0.2
Total interest on long-term debt and accretion on royalty payable
$
0.7
$
0.9
$
2.8
$
3.0
Interest expense on long-term debt for the three months ended and for the year ended December 31,
2024 compared to prior year periods were consistent due to the rate cuts in the U.S. prime rate
lowering our interest expense in our EDC term loan, partially offset by additional interest expense
from a new term loan borrowed in the beginning of the year with UniCredit.
Income tax expense for the year ended December 31, 2024 was $5.0 million compared to $1.0 million
in the prior year. The increase in income tax expense was primarily driven by increase in taxes from
higher profitability in our European operations.
25
CAPITAL REQUIREMENTS, RESOURCES AND LIQUIDITY
Our cash and cash equivalents position decreased by $17.2 million to $37.6 million at December 31,
2024 compared to $54.9 million at December 31, 2023. The decrease in cash was primarily driven by
our debt repayments, partially offset by cash provided by our operating and investing activities.
Cash Flow from Operating Activities
For the year ended December 31, 2024, net cash provided by operating activities was $7.2 million
compared to net cash used of $13.2 million for the year ended December 31, 2023, a $20.4 million
increase in net cash provided by operating activities. The increase in net cash provided by operating
activities was primarily driven by a reduction in operating losses of $21.2 million, and an improvement
in working capital, specifically in accounts receivable and accounts payable partially offset by
increases in prepaid expenses and inventory, and a reduction in warranty liability.
Cash Flow from Investing Activities
For the year ended December 31, 2024, our net cash provided by investing activities was $4.5 million
compared to net cash used of $15.4 million for the year ended December 31, 2023. The increase in net
cash provided by investing activities was primarily driven by proceeds from sale of investments of
$30.0 million, partially offset by purchases of property, plant and equipment of $16.9 million and
capital contributions to Cespira of $9.9 million in the year ended December 31, 2024. Proceeds from
sale of investments include cash proceeds of $27.3 million from Volvo for the purchase of a 45%
ownership interest in Cespira as part of the formation of the joint venture.
Cash Flow from Financing Activities
For the year ended December 31, 2024, our net cash used in financing activities was $25.2 million,
compared to net cash used in financing activities of $2.2 million during the year ended December 31,
2023. On January 10, 2024, we borrowed from UniCredit a new term loan of $3.8 million with principal
repayments starting in 2025. On November 30, 2024, we closed our revolving financing facility with
Royal Bank of Canada and reduced our use of the credit facility in the year. In the prior year, we fully
repaid our royalty payable to Cartesian.
26
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
Carrying
amount
Contractual
cash flows
< 1 year
1 - 3 years
4-5 years
> 5 years
Accounts payable and accrued liabilities
$
88.1
$
88.1
$
88.1
$
—
$
—
$
—
Long-term debt, principal (1)
33.7
29.5
13.0
13.1
3.4
—
Long-term debt, interest (1)
—
5.7
2.4
2.1
1.2
—
Operating lease obligations (2)
19.1
21.6
2.6
5.0
2.9
11.1
$
140.9
$
144.9
$
106.1
$
20.2
$
7.5
$
11.1
Notes
(1) For details of our long-term debt, principal and interest, see note 16 of the annual financial
statements.
(2) For additional information on operating lease obligations, see note 14 of the annual financial
statements.
SHARES OUTSTANDING
On September 13, 2024, we announced an at-the-market equity offering program (the "ATM
Program") that allows us to issue up to $35.0 million in common shares from treasury to the public
from time to time, at our discretion and subject to regulatory requirements. As at December 31, 2024
and the date of issuance of this MD&A, no shares were issued from treasury related to the ATM
Program.
For the year ended December 31, 2024, the weighted average number of shares used in calculating
net loss per share was 17,248,090. During the year ended December 31, 2024, 224,050 share units were
granted to directors, executives and employees (2023 - 435,128 share units). This included 104,215
Restricted Share Units ("RSUs") (2023 - 147,557 RSUs), nil Performance Share Units ("PSUs") (2023 -
185,365 PSUs) and 119,835 Deferred Share Units (2023 - 102,206 DSUs). The common shares, share
options and share units outstanding and exercisable as at the following dates are shown below:
(weighted average exercise prices are presented in Canadian dollars)
December 31, 2024
March 31, 2025
Number
Weighted
average
exercise price
Number
Weighted
average
exercise price
$
$
Common shares outstanding
17,282,934
17,326,732
Share units
Outstanding
524,322
11.75
406,158
N/A
Exercisable
310
37
1,189
N/A
27
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our Annual Financials Statements are prepared in accordance with U.S. GAAP, which requires us to
make estimates and assumptions that affect the amounts reported in our Annual Financial
Statements. We have identified several policies as critical to our business operations and in
understanding our results of operations. These policies, which require the use of judgment, estimates
and assumptions in determining their reported amounts, include the assessment of accounts
receivable, liquidity and going concern, warranty liability, revenue recognition, inventories, and
property, plant and equipment. The application of these and other accounting policies are described
in note 3 of the Annual Financial Statements. Actual amounts may vary significantly from estimates
used.
Variable interest entities ("VIEs") and Gain on deconsolidation
We identified HPDI Technology LP and HPDI Technology AB as VIEs, as the entities are dependent on
funding from its owners. The funding and ownership interests of the entities are split on a 55/45 basis
between the owners of the VIEs. The voting rights and power to exercise control is shared equally on a
50/50 basis between the owners of the VIEs. Therefore, we have determined that we are not the
primary beneficiary of the VIEs. We account for our investment in VIEs for which we are not primary
beneficiaries of using the equity method of accounting.
Identifying a VIE and determining the primary beneficiary of a VIE requires the use of our judgment,
estimates, and assumptions including determining the most significant activities and decisions that
impact the economic performance of a VIE and the beneficiary who has the power over those
decisions. If events and circumstances change in a VIE, it may have a significant impact in how we
account for the entity.
When a legal entity is no longer consolidated by the parent company, a gain or loss is recognized
upon deconsolidation based on the considerations received for the transaction less any net assets
disposed and any contingent liabilities incurred. Considerations received may include cash
consideration, net assets received, and any contingent considerations (e.g., earnout) included in the
arrangement. Accounting for contingent considerations relies on our judgment, estimates, and
assumptions including whether a contingent consideration should be considered a derivative. The
potential earnout from the formation of our Cespira joint venture (note 5 in our consolidated financial
statements) was not identified as a derivative and we have elected to account for the contingent
consideration using the loss recovery approach. Under this approach, we did not recognize any
contingent receivable at inception and will recognize a contingent gain when such gain is realized or
realizable.
Revenue Recognition
We generate revenues primarily from product sales. Product revenues are derived primarily from
standard product sales contracts and from long-term fixed price contracts. Under ASC 606, revenue is
recognized when a customer obtains control of the goods or services. Determining the timing of the
transfer of control, at a point in time or over time, requires judgment. On standard product sales
contracts, revenues are recognized when customers obtain control of the product, that is when
transfer of title and risks and rewards of ownership of goods have passed and when the obligation to
pay is considered certain. Invoices are generated and revenue is recognized at that point in time.
Provisions for warranties are made at the time of sale.
Accounts Receivable
We make assumptions and have established current expected credit losses ("CECL") for pools of assets
with similar risk characteristics by evaluating historical levels of credit losses, current economic
conditions that may affect a customer's ability to pay, and creditworthiness of significant customers.
When specific customers are identified as no longer sharing the same risk profile as their current pool,
28
they are removed from the pool and evaluated separately. When we become aware of a customer’s
inability to meet its financial obligation, we record a specific credit loss provision to reduce the
customer's related accounts receivable to its estimated net realizable value.
Inventories
Our inventories consist of our fuel system products (finished goods), work-in-progress, purchased
parts and materials. Inventories are recorded at the lower of cost and net realizable value. The cost of
fuel system product inventories, assembled parts and work-in-progress includes materials, labour and
production overhead including depreciation. We record inventory write-downs based on an analysis
of excess and obsolete inventories determined primarily by future demand forecasts. In addition, we
record a liability for firm, non-cancelable, and unconditional purchase commitments with
manufacturers for quantities in excess of our future demand forecast consistent with our valuation of
excess and obsolete inventory.
Property, plant, & equipment ("PP&E") and Intangible Assets
We consider whether or not there has been an impairment in our long-lived assets, such as plant and
equipment, furniture and leasehold improvements and intangible assets, whenever events or
changes in circumstances indicate that the carrying value of the assets may not be recoverable. If
such assets are not recoverable, we are required to write down the assets to fair value. When quoted
market values are not available, we use the expected future cash flows discounted at a rate
commensurate with the risks associated with the recovery of the asset as an estimate of fair value to
determine whether or not a write down is required.
Impairment of PP&E
We have significant investments in PP&E related to our Light-Duty business. The Light-Duty business
has significant manufacturing operations in Italy and Poland. The Light-Duty business has historically
been profitable including for the year ended December 31, 2024. As of December 31, 2024, we have
concluded that there are no impairment indicators.
Impairment of Intangible assets
We concluded that there were no impairment indicators as of December 31, 2024 related to intangible
assets. Therefore, no impairment on intangible assets was recorded in the year ended December 31,
2024.
NEW ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS
New accounting standard adopted in 2024:
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards
Update ("ASU") 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures." It requires incremental disclosures related to an entity's reportable segments, including:
(i) significant segment expense categories and amounts for each reportable segment that are
provided to the Chief Operating Decision Maker ("CODM"),
(ii) an aggregate amount and description of other segment items included in each reported
measure,
(iii) all annual disclosures about a reportable segment's profit or loss and assets required by
Topic 280 to be disclosed in interim periods,
(iv) the title and position of the individual or name of the group identified as the CODM, and
(v) an explanation of how the CODM uses the reported measures of segment profit or loss to
assess performance and allocate resources to the segment.
29
The standard improves transparency by providing disaggregated expense information about an
entity's reportable segments. The standard does not change the definition of a segment, the method
for determining segments or the criteria for aggregating operating segments into reportable
segments. The Company has adopted this guidance in the current year reported and provided
additional comparative disclosures as required. Refer to Note 22 "Segment Information" of the Annual
Financial Statements for more information.
Upcoming accounting standards not yet adopted in 2024:
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements in Income
Tax Disclosures" to enhance the transparency and decision usefulness of income tax disclosures. This
amendment requires public companies to disclose specific categories in the rate reconciliation and
provide additional information for reconciling items that meet a quantitative threshold. Additionally,
under the amendment entities are required to disclose the amount of income taxes paid
disaggregated by federal, state and foreign taxes, as well as disaggregated by material individual
jurisdictions. Finally, the amendment requires entities to disclose income from continuing operations
before income tax expense disaggregated between domestic and foreign and income tax expense
from continuing operations disaggregated by federal, state and foreign. This guidance is effective for
annual reporting periods beginning after December 15, 2024. While this guidance may have an impact
on the disclosures, the Company does not expect this guidance to have a material impact on its
financial position, operations, and cash flows.
In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive
Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income
Statement Expenses." It requires entities to disclose, in the notes to the financial statements, specified
information related to certain costs and expenses disaggregated by type. The standard improves
transparency by providing more detailed information about the component of costs and expenses
that would enable users to better understand the major components of an entity's income statement
by referencing disclosures in the notes to financial statements. This guidance is effective for annual
reporting periods beginning after December 15, 2026. While this guidance may have an impact on the
disclosures, the Company does not expect this guidance to have a material impact on its financial
position, operations, and cash flows.
30
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL
REPORTING
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), are designed to provide reasonable assurance
that information required to be disclosed in the reports that we file or submit under the Exchange Act
and applicable Canadian securities law requirements is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms and applicable Canadian
securities law requirements, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") (our
principal executive officer and principal financial officer, respectively), as appropriate to allow timely
decisions regarding required disclosures.
We evaluated the effectiveness of our internal controls over financial reporting as of December 31,
2024 with the participation, and under the supervision of our management, including our CEO and
CFO. Based upon this evaluation, our CEO and CFO concluded that as of December 31, 2024, our
internal controls and procedures over financial reporting were effective for the period.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act.
Internal control over financial reporting is a process designed by, or under the supervision of, our CEO
and CFO and effected by our board of directors, management, and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of our
consolidated financial statements for external reporting purposes in accordance with U.S. GAAP and
the requirements of the SEC, as applicable. There are inherent limitations in the effectiveness of
internal control over financial reporting, including the possibility that misstatements may not be
prevented or detected.
Because of these inherent limitations, internal control systems, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance that the control system's objectives
will be met, and no evaluation of controls can provide absolute assurance that all control issues have
been detected. The design of any system of controls is based in part on certain assumptions about the
likelihood of future events, and there can be no assurance that any design will succeed in achieving its
stated goals under potential future conditions, regardless of how remote. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation.
Management, including the CEO and CFO, has evaluated the effectiveness of our internal control over
financial reporting, based on the criteria in Internal Control-Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation,
management has determined that our internal control over financial reporting was effective as of
December 31, 2024.
During the year ended December 31, 2024, there were no changes to our internal control over
financial reporting that materially affected, or are reasonably likely to materially affect our internal
controls over financial reporting.
KPMG LLP ("KPMG"), our independent registered public accounting firm, has audited our annual
financial statements and expressed an unqualified opinion thereon. KPMG has also expressed an
unqualified opinion on the effective operation of our internal control over financial reporting as of
December 31, 2024. KPMG's audit report on effectiveness of internal control over financial reporting is
included in the Annual Financial Statements.
31
SUMMARY OF QUARTERLY RESULTS AND DISCUSSION OF THE QUARTER ENDED DECEMBER 31,
2024
Our revenues and operating results can vary significantly from quarter to quarter depending on the
timing of product deliveries, product mix, product launch dates, R&D project cycles, timing of related
government funding, impairment charges, restructuring charges, stock-based compensation awards
and foreign exchange impacts. Net income and net loss has and can vary significantly from one
quarter to another depending on operating results, gains and losses from investing activities,
recognition of tax benefits and other similar events..
The following table provides summary unaudited consolidated financial data for our last eight
quarters:
Selected Consolidated Quarterly Operations Data
Three months ended
31-
Mar-23
30-
Jun-23
30-
Sep-23
31-
Dec-23
31-
Mar-24
30-
Jun-24
30-
Sep-24
31-
Dec-24
(in millions of U.S. dollars except for per
share amounts)
Total revenue
$ 82.2
$ 85.0
$ 77.4
$ 87.2
$ 77.6
$ 83.4
$ 66.2
$ 75.1
Cost of revenue
$ 68.9
$ 70.6
$ 64.2
$ 79.2
$ 65.9
$ 66.3
$ 51.7
$ 60.8
Gross profit
$
13.3
$ 14.4
$ 13.2
$
8.0
$
11.7
$
17.1
$ 14.5
$
8.0
Gross margin1
16.2 %
16.9 %
17.1 %
9.2 %
15.1 %
20.5 %
21.9 %
10.7 %
Net income (loss)
$ (10.6)
$ (13.2)
$ (11.9)
$ (13.9)
$ (13.6)
$
5.8
$ (3.9)
$ (10.1)
EBITDA1
$ (6.3)
$ (10.1)
$ (8.6)
$ (10.9)
$ (9.2)
$
9.0
$ (0.3)
$
(6.1)
Adjusted EBITDA1
$ (4.5)
$ (4.0)
$ (3.0)
$ (10.0)
$ (6.6)
$ (2.0)
$ (0.8)
$
(1.8)
U.S. dollar to Euro average exchange rate
0.93
0.92
0.95
0.92
0.92
0.93
0.91
0.94
U.S. dollar to Canadian dollar average
exchange rate
1.35
1.34
1.35
1.35
1.35
1.37
1.36
1.39
Earnings (loss) per share
Basic
(0.62)
(0.77)
(0.70)
(0.81)
(0.79)
0.34
(0.22)
(0.57)
Diluted
(0.62)
(0.77)
(0.70)
(0.81)
(0.79)
0.33
(0.22)
(0.57)
Notes
(1) These financial measures of ratios are non-GAAP financial measures or ratios. See the section,
'Non-GAAP Financial Measures' for explanations and discussion of these non-GAAP financial
measures or ratios.
32
NON-GAAP FINANCIAL MEASURES & RECONCILIATIONS
In addition to the results presented in accordance with U.S. GAAP, we used EBIT, EBITDA, Adjusted
EBITDA, gross margin, net working capital, and other non-current liabilities (collectively, the “Non-
GAAP Measures") throughout this MD&A. We believe these non-GAAP measures provide additional
information that is useful to stakeholders in understanding our underlying performance and trends
through the same financial measures employed by our management. We believe that EBIT, EBITDA,
and Adjusted EBITDA are useful to both management and investors in their analysis of our ability to
generate liquidity by producing operating cash flow to fund working capital needs, service debt
obligations and fund capital expenditures. Management also uses these non-GAAP measures in its
review and evaluation of the financial performance of the Company. EBITDA is also frequently used by
stakeholders for valuation purposes whereby EBITDA is multiplied by a factor or "EBITDA multiple"
that is based on an observed or inferred relationship between EBITDA and market values to
determine the approximate total enterprise value of a company. We believe these non-GAAP financial
measures also provide additional insight to stakeholders as supplemental information to our U.S.
GAAP results and as a basis to compare our financial performance period-over-period and to compare
our financial performance with that of other companies. We believe that these non-GAAP financial
measures facilitate comparisons of our core operating results from period to period and to other
companies by, in the case of EBITDA, removing the effects of our capital structure (net interest income
on cash deposits, interest expense on outstanding debt and debt facilities), asset base (depreciation
and amortization) and tax consequences. Adjusted EBITDA provides this same indicator of Westport's
EBITDA from operations and removing such effects of our capital structure, asset base and tax
consequences, but additionally excludes any unrealized foreign exchange gains or losses, stock-based
compensation charges and other one-time impairments and costs that are not expected to be
repeated in order to provide greater insight into the cash flow being produced from our operating
business, without the influence of extraneous events. Readers should be aware that non-GAAP
measures have no standardized meaning under U.S. GAAP and accordingly may not be comparable to
the calculation of similar measures by other companies. Non-GAAP measures are intended to provide
additional information and should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with U.S. GAAP.
NON-GAAP FINANCIAL MEASURES RECONCILIATION
Gross profit
Years ended December 31,
2024
2023
2022
(in millions of U.S. dollars)
Revenue
$
302.3
$
331.8
$
305.7
Less: Cost of revenue
$
244.7
$
282.9
$
269.5
Gross profit
$
57.6
$
48.9
$
36.2
Gross margin
Years ended December 31,
2024
2023
2022
(in millions of U.S. dollars)
Revenue
$
302.3
$
331.8
$
305.7
Gross profit
$
57.6
$
48.9
$
36.2
Gross margin
19 %
15 %
12 %
33
Year ended December 31, 2024
Total Segment
Less: Cespira
Add:
Corporate &
unallocated
Total
Consolidated
Revenue
$
345.4 $
43.1 $
— $
302.3
Cost of revenue
287.3
42.6
—
244.7
Gross profit
58.1
0.5
—
57.6
Operating expenses:
Research & development
26.3
4.7
—
21.6
General & administrative
28.9
5.6
14.4
37.7
Sales & marketing
12.5
1.0
1.2
12.7
Depreciation & amortization
4.7
1.7
0.4
3.4
Equity income (loss)
1.3
—
(6.7)
(5.4)
Year ended December 31, 2023
Total Segment
Add:
Corporate &
unallocated
Total
Consolidated
Revenue
$
331.8 $
— $
331.8
Cost of revenue
282.9
—
282.9
Gross profit
48.9
—
48.9
Operating expenses:
Research & development
26.0
—
26.0
General & administrative
29.4
14.8
44.2
Sales & marketing
14.1
2.2
16.3
Depreciation & amortization
3.8
0.5
4.3
Equity income
0.8
—
0.8
Reconciliation of Segment EBITDA to Loss before income taxes
Years ended December 31,
2024
2023
Total Segment EBITDA
$
(0.9) $
(11.6)
Adjustments:
Depreciation & amortization
8.7
12.5
Cespira's Segment EBITDA
(8.7)
—
Cespira's equity loss
6.7
—
Corporate and unallocated operating expenses
15.6
17.0
Foreign exchange loss
6.2
4.0
Loss on sale of assets
0.7
—
Gain on deconsolidation
(15.2)
—
Loss on sale of investment
0.4
—
Impairment of long-term investment
—
0.4
Loss on extinguishment of royalty payable
—
2.9
Interest on long-term debt and accretion of royalty payable
2.8
3.0
Interest and other income, net of bank charges
(1.2)
(2.7)
Loss before income taxes
$
(16.9) $
(48.7)
34
Net Working Capital
December 31, 2024
December 31, 2023
(in millions of U.S. dollars)
Accounts receivable
$
73.1
$
88.1
Inventories
53.5
67.5
Prepaid expenses
5.7
6.3
Accounts payable and accrued liabilities
(88.1)
(95.4)
Current portion of operating lease liabilities
(2.6)
(3.3)
Current portion of warranty liability
(3.9)
(6.9)
Net working capital
37.7
56.3
Other Non-Current Liabilities
December 31, 2024
December 31, 2023
(in millions of U.S. dollars)
Total liabilities
$
154.6
$
195.3
Less:
Total current liabilities
109.3
134.8
Long-term debt
19.1
31.0
Other non-current liabilities
26.3
29.5
EBIT and EBITDA
The Company defines EBIT as net income or loss before taxes adjusted for net interest expense. The
Company defines EBITDA as EBIT adjusted for depreciation and amortization.
Three months ended
31-
Mar-23
30-
Jun-23
30-
Sep-23
31-
Dec-23
31-
Mar-24
30-
Jun-24
30-
Sep-24
31-
Dec-24
Income (loss) before income
taxes
$
(9.7) $
(13.0) $
(12.0) $
(14.0) $
(12.9) $
6.8
$
(2.5) $
(8.3)
Interest expense (income), net1
0.4
(0.1)
0.2
(0.2)
0.5
0.5
0.4
0.2
EBIT
(9.3)
(13.1)
(11.8)
(14.2)
(12.4)
7.3
(2.1)
(8.1)
Depreciation and amortization
3.0
3.0
3.2
3.3
3.2
1.7
1.8
2.0
EBITDA
$
(6.3) $
(10.1) $
(8.6) $
(10.9) $
(9.2) $
9.0
$
(0.3) $
(6.1)
Notes
(1) Interest expense, net is calculated as interest and other income, net of bank charges and
interest on long-term debt and accretion of royalty payable.
35
Adjusted EBITDA
The Company defines Adjusted EBITDA as EBITDA adjusted for stock-based compensation, unrealized
foreign exchange gains or losses, and non-cash and other adjustments.
Three months ended
31-
Mar-23
30-
Jun-23
30-
Sep-23
31-
Dec-23
31-
Mar-24
30-
Jun-24
30-
Sep-24
31-
Dec-24
EBITDA
$
(6.3) $
(10.1) $
(8.6) $
(10.9) $
(9.2) $
9.0
$
(0.3) $
(6.1)
Stock based compensation
(recovery)
0.7
0.8
(0.3)
1.4
0.3
1.2
(0.1)
—
Unrealized foreign exchange
(gain) loss
1.1
2.4
1.4
(0.9)
1.8
0.1
(1.1)
5.4
Loss on extinguishment of royalty
payable
—
2.9
—
—
—
—
—
—
Severance costs
—
—
4.5
—
0.5
0.2
0.1
0.1
Gain on deconsolidation
—
—
—
—
—
(13.3)
—
(1.9)
Loss on sale of investment
—
—
—
—
—
—
0.4
—
Restructuring costs
—
—
—
—
—
0.8
0.2
—
Loss on sale of assets
—
—
—
—
—
—
—
0.7
Impairment of long-term
investment
—
—
—
0.4
—
—
—
—
Adjusted EBITDA
$
(4.5) $
(4.0) $
(3.0) $
(10.0) $
(6.6) $
(2.0) $
(0.8) $
(1.8)
BUSINESS RISKS AND UNCERTAINTIES
An investment in our business involves risk and readers should carefully consider the risks described
in our AIF and other filings on www.sedar.com and www.sec.gov. Our ability to generate revenue and
profit from our technologies is dependent on a number of factors, and the risks discussed in our AIF,
which, if they were to occur, could have a material impact on our business, financial condition,
liquidity, results of operation or prospects. While we have attempted to identify the primary known
risks that are material to our business, the risks and uncertainties discussed in our AIF may not be the
only ones we face. Additional risks and uncertainties, including those that we do not know about now
or that we currently believe are immaterial may also adversely affect our business, financial condition,
liquidity, results of operation or prospects. A full discussion of the risks impacting our business is
contained in the AIF for the year ended December 31, 2024 under the heading “Risk Factors” and is
available on SEDAR at www.sedar.com.
36
Consolidated Financial Statements
(Expressed in thousands of United States dollars)
WESTPORT FUEL SYSTEMS INC.
For the years ended December 31, 2024 and 2023
37
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Westport Fuel Systems Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Westport Fuel Systems Inc. (and subsidiaries)
(the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and
comprehensive loss, shareholders’ equity, and cash flows for each of the years then ended and the related notes
(collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the
results of its operations and its cash flows for each of the years then ended, in conformity with U.S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our report dated March 31, 2025, expressed an unqualified
opinion on the effectiveness of the Company’s internal control over financial reporting.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue
as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered
recurring losses from operations and, based on the projected capital expenditures, debt servicing obligations and
operating requirements under the current business plan, is projecting insufficient cash flows that raise substantial
doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also
described in Note 2. The consolidated financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these consolidated financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free
of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the
risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating
the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our
opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated
financial statements that were communicated or required to be communicated to the audit committee and that: (1)
relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
38
Accounting for equity investments in HPDI Technology LP and HPDI Technology AB
As discussed in Notes 3(g) and 5 to the consolidated financial statements, on June 3, 2024, the Company entered
into a joint venture agreement with Volvo Group (“Volvo”) and contributed certain net assets of its former HPDI
business to a newly formed joint venture ("Cespira"), consisting of two legal entities, HPDI Technology LP and HPDI
Technology AB, in which the Company retained a 55% non-controlling interest. The Company identified HPDI
Technology LP and HPDI Technology AB as variable interest entities (“VIEs”) as the entities are dependent on
funding from their owners. The Company determined that it is not the primary beneficiary of the VIEs because the
voting rights and power to exercise control is shared equally on a 50/50 basis between the owners of the VIEs, and
accounts for its 55% equity ownership of the VIEs as equity method investments.
We identified the assessment of the accounting for the equity method investments in HPDI Technology LP and
HPDI Technology AB as a critical audit matter due to the judgment made by management in the determination of the
primary beneficiary of the VIEs, in identifying the activities of the VIEs that most significantly impact their economic
performance and in evaluating whether the Company has the ability to direct these activities. This required a high
degree of auditor judgment and significant auditor effort.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of an internal control over the Company’s determination of the
accounting for the equity investments. We assessed the Company’s accounting analysis including the determination
of the primary beneficiary of the VIEs, the identification of the activities of the VIEs that most significantly impact
their economic performance and the evaluation of which party has the power to direct the significant activities of the
VIEs, for consistency with the relevant accounting standards. We read the investment agreement and underlying
documents to gain an understanding of the terms and conditions of the agreement, including of the contractual
rights of the Company and Volvo. We compared the relevant information in the accounting analysis to the
investment agreement and other underlying documentation and assessed the reasonableness of the Company’s
conclusions.
Evaluation of the fair value of the Company’s investment in Cespira
As discussed in Notes 5, 8 and 9 to the consolidated financial statements, on June 3, 2024, the Company entered
into a joint venture agreement with Volvo and contributed net assets of $45,687, including property, plant and
equipment with a net book value of $33,244, from its former HPDI business to Cespira. The Company
deconsolidated the HPDI business and accounted for its investment in Cespira under the equity method. The
Company's initial investment in Cespira of $35,621 was recognized at the fair value of the Company's 55% non-
controlling interest, which was estimated using the income approach.
We identified the evaluation of the fair value of the Company’s investment in Cespira as a critical audit matter, due
to the magnitude of the property, plant and equipment contributed by the Company. Complex auditor judgment was
required to evaluate the application of the methodology used to estimate the fair value of the contributed assets and
liabilities.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of an internal control related to the Company’s process to determine
the fair value of the investment in Cespira. We tested the completeness and accuracy of the underlying data used in
the determination of the fair value of the property, plant and equipment contributed to Cespira by comparing to the
Company’s accounting records. We involved valuation professionals with specialized skills and knowledge, who
assisted in (1) evaluating the estimated fair value of the contributed property, plant and equipment by comparing to
independently developed ranges of estimated replacement costs of property, plant and equipment and (2)
evaluating the application of the methodology used to determine the fair value of the Company’s investment in
Cespira.
/s/ KPMG LLP
Chartered Professional Accountants
We have served as the Company’s auditor since 2015.
Vancouver, Canada
March 31, 2025
39
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Westport Fuel Systems, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Westport Fuel Systems, Inc.’s (and subsidiaries’) (the Company) internal control over financial
reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related
consolidated statements of operations and comprehensive loss, shareholders’ equity, and cash flows for each of the
years then ended, and the related notes (collectively, the consolidated financial statements), and our report dated
March 31, 2025, expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
“Management’s Discussion and Analysis – Disclosure Controls and Procedures and Internal Controls over Financial
Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audit also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ KPMG LLP
Chartered Professional Accountants
Vancouver, Canada
March 31, 2025
40
December 31,
2024
2023
Assets
Current assets:
Cash and cash equivalents (including restricted cash, note 3(c))
$
37,646
$
54,853
Accounts receivable (note 6)
73,054
88,077
Inventories (note 7)
53,526
67,530
Prepaid expenses
5,660
6,323
Total current assets
169,886
216,783
Long-term investments (note 8)
39,732
4,792
Property, plant and equipment (note 9)
41,956
69,489
Operating lease right-of-use assets (note 14)
19,019
22,877
Intangible assets (note 10)
5,277
6,822
Deferred income tax assets (note 19(b))
9,695
11,554
Goodwill (note 11)
2,876
3,066
Other long-term assets (note 12)
3,180
20,365
Total assets
$
291,621
$
355,748
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities (note 13)
$
88,123
$
95,374
Current portion of operating lease liabilities (note 14)
2,624
3,307
Short-term debt (note 15)
—
15,156
Current portion of long-term debt (note 16)
14,660
14,108
Current portion of warranty liability (note 17)
3,861
6,892
Total current liabilities
109,268
134,837
Long-term operating lease liabilities (note 14)
16,433
19,300
Long-term debt (note 16)
19,067
30,957
Warranty liability (note 17)
1,456
1,614
Deferred income tax liabilities (note 19(b))
4,029
3,477
Other long-term liabilities
4,343
5,115
Total liabilities
154,596
195,300
Shareholders’ equity:
Share capital (note 18):
Unlimited common and preferred shares, no par value
17,282,934 (2023 - 17,174,502) common shares issued and
outstanding
1,245,805
1,244,539
Other equity instruments
9,472
9,672
Additional paid-in-capital
11,516
11,516
Accumulated deficit
(1,096,275)
(1,074,434)
Accumulated other comprehensive loss
(33,493)
(30,845)
Total shareholders' equity
137,025
160,448
Total liabilities and shareholders' equity
$
291,621
$
355,748
Commitments and contingencies (note 21)
Subsequent events (notes 2 and 6)
See accompanying notes to consolidated financial statements.
Approved on behalf of the Board
Anthony Guglielmin
Director
Daniel Sceli
Director
WESTPORT FUEL SYSTEMS INC.
Consolidated Balance Sheets
(Expressed in thousands of United States dollars, except share amounts)
December 31, 2024 and 2023
41
Years ended December 31,
2024
2023
Revenue
$
302,299
331,799
Cost of revenue
244,708
282,862
Gross profit
57,591
48,937
Operating expenses:
Research and development
21,587
26,003
General and administrative
37,679
44,234
Sales and marketing
12,676
16,278
Foreign exchange loss
6,248
3,974
Depreciation and amortization (notes 9 and 10)
3,367
4,299
Loss on sale of assets (note 12)
703
32
82,260
94,820
Loss from operations
(24,669)
(45,883)
Income (loss) from investments accounted for by the equity
method (notes 8 and 22)
(5,402)
780
Gain on deconsolidation (note 5)
15,198
—
Loss on sale of investment (note 8)
(352)
—
Loss on extinguishment of royalty payable
—
(2,909)
Interest on long-term debt and accretion of royalty payable
(2,797)
(2,981)
Impairment of long-term investment (note 8)
—
(413)
Interest and other income, net of bank charges
1,161
2,690
Loss before income taxes
(16,861)
(48,716)
Income tax expense (recovery) (note 19(a)):
Current
3,183
1,786
Deferred
1,797
(784)
4,980
1,002
Net loss for the year
(21,841)
(49,718)
Other comprehensive income (loss):
Cumulative translation adjustment
(2,535)
4,473
Ownership share of equity method investments' other
comprehensive loss
(113)
—
(2,648)
4,473
Comprehensive loss
$
(24,489) $
(45,245)
Loss per share:
Net loss per share - basic and diluted
$
(1.27) $
(2.90)
Weighted average common shares outstanding:
Basic and diluted
17,248,090
17,173,016
See accompanying notes to consolidated financial statements.
WESTPORT FUEL SYSTEMS INC.
Consolidated Statements of Operations and Comprehensive Loss
(Expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2024 and 2023
42
Common
shares
Additional
Accumulated
Accumulated
other
Total
outstanding
(Adjusted,
note 18)
Share
capital
Other equity
instruments
paid-in
capital
deficit
comprehensive
loss
shareholder's
equity
January 1, 2023
17,130,316
$ 1,243,272
$
9,212
$
11,516
$
(1,024,716) $
(35,318) $
203,966
Issuance of common shares on
exercise of share units
44,186
1,267
(1,267)
—
—
—
—
Stock-based compensation
—
—
1,727
—
—
—
1,727
Net loss for the year
—
—
—
—
(49,718)
—
(49,718)
Other comprehensive income
—
—
—
—
—
4,473
4,473
December 31, 2023
17,174,502
$ 1,244,539
$
9,672
$
11,516
$ (1,074,434) $
(30,845) $
160,448
Issuance of common shares on
exercise of share units
108,432
1,266
(1,266)
—
—
—
—
Stock-based compensation
—
—
1,066
—
—
—
1,066
Net loss for the year
—
—
—
—
(21,841)
—
(21,841)
Other comprehensive loss
—
—
—
—
—
(2,648)
(2,648)
December 31, 2024
17,282,934
$ 1,245,805
$
9,472
$
11,516
$
(1,096,275) $
(33,493) $
137,025
See accompanying notes to consolidated financial statements.
WESTPORT FUEL SYSTEMS INC.
Consolidated Statements of Shareholders’ Equity
(Expressed in thousands of United States dollars, except share amounts)
December 31, 2024 and 2023
43
Years ended December 31,
2024
2023
Operating activities:
Net loss for the year
$
(21,841) $
(49,718)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization
8,661
12,490
Stock-based compensation expense
1,066
1,727
Unrealized foreign exchange loss
6,248
3,974
Deferred income tax expense (recovery)
1,797
(784)
Loss (income) from investments accounted for by the equity method
5,402
(780)
Interest on long-term debt and accretion of royalty payable
74
9
Impairment of long-term investment (note 8)
—
413
Change in inventory write-downs to net realizable value (note 7)
3,283
7,066
Gain on deconsolidation (note 5)
(15,198)
—
Loss on sale of investment (note 8)
352
—
Net loss on sale of assets (notes 9 and 12)
627
32
Loss on extinguishment of royalty payable
—
2,909
Change in bad debt expense
282
56
Changes in operating assets and liabilities:
Accounts receivable
25,567
5,340
Inventories
(6,836)
9,481
Prepaid expenses
(153)
2,869
Accounts payable and accrued liabilities
2,233
(2,448)
Warranty liability
(4,380)
(5,829)
Net cash provided by (used in) operating activities
7,184
(13,193)
Investing activities:
Purchase of property, plant and equipment
(16,923)
(15,574)
Proceeds on sale of investments (note 5 and 8)
29,994
—
Proceeds on sale of assets (note 9)
998
161
Dividends received from investments accounted for by the equity
method (note 8)
297
—
Capital contributions to investments accounted for by the equity
method (note 8)
(9,900)
—
Net cash provided by (used in) investing activities
4,466
(15,413)
Financing activities:
Drawings on operating lines of credit and long-term facilities
19,336
46,367
Repayment of operating lines of credit and long-term facilities
(44,546)
(39,904)
Payment of royalty payable
—
(8,687)
Net cash used in financing activities
(25,210)
(2,224)
Effect of foreign exchange on cash and cash equivalents
(3,647)
(501)
Net decrease in cash and cash equivalents
(17,207)
(31,331)
Cash and cash equivalents, beginning of year (including restricted
cash)
54,853
86,184
Cash and cash equivalents, end of year (including restricted cash)
37,646
54,853
See accompanying notes to consolidated financial statements.
WESTPORT FUEL SYSTEMS INC.
Consolidated Statements of Cash Flows
(Expressed in thousands of United States dollars)
Years ended December 31, 2024 and 2023
44
Years ended December 31,
2024
2023
Supplementary information:
Interest paid
$
2,721 $
2,972
Taxes paid, net of refunds
2,108
2,302
See accompanying notes to consolidated financial statements.
WESTPORT FUEL SYSTEMS INC.
Consolidated Statements of Cash Flows (continued)
(Expressed in thousands of United States dollars)
Years ended December 31, 2024 and 2023
45
1.
Company organization and operations:
Westport Fuel Systems Inc. (the “Company”) was incorporated under the Business Corporations Act
(Alberta) on March 20, 1995. Westport Fuel Systems Inc. is a global company focused on engineering,
manufacturing, and supplying alternative fuel systems and components for transportation
applications. The Company’s diverse product offerings sold under a wide range of established global
brands enable the use of a number of alternative fuels in the transportation sector that provide
environmental and/or economic advantages as compared to diesel, gasoline, batteries or fuel cell
powered vehicles. The Company's fuel systems and associated components control the pressure and
flow of these alternative fuels, including liquid petroleum gas ("LPG"), compressed natural gas ("CNG"),
liquified natural gas ("LNG"), renewable natural gas ("RNG") or biomethane, and hydrogen. The
Company supplies its products in approximately 70 countries through a network of distributors,
service providers for the aftermarket and directly to original equipment manufacturers (“OEMs”) and
Tier 1 and Tier 2 OEM suppliers. The Company’s products and services are available for passenger car
and light-, medium- and heavy-duty commercial vehicles and off-highway applications.
2.
Liquidity and Going Concern:
For year ended December 31, 2024, the Company reported an operating loss of $24,669. The Company
continues to sustain operating losses and to use cash to support its business activities. As at
December 31, 2024, the Company had cash and cash equivalents of $37,646 and long-term debt of
$33,727, net of deferred financing fees, of which $14,660 was current. In the prior year, the Company
amended the minimum cash covenant under the term loan with Export Development Canada
("EDC") reducing the minimum cash requirement to $15,000. If the Company's cash and cash
equivalents fall below the minimum cash requirement, the Company may be required to repay the
outstanding amount of the term loan, which was $6,836 at December 31, 2024.
On September 13, 2024, the Company announced an at-the-market equity offering program (the "ATM
Program") that allows the Company to issue up to $35,000 in common shares from treasury to the
public from time to time, at the Company's discretion and subject to regulatory requirements. As at
December 31, 2024, no shares were issued from treasury.
In connection with preparing consolidated financial statements for each annual and interim reporting
period, the Company is required to evaluate whether there are conditions or events, considered in
aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern
within one year after the date the financial statements are issued. Substantial doubt exists when
conditions and events, considered in aggregate, indicate that it is probable a company will be unable
to meet its obligations as they become due within one year after the date the consolidated financial
statements are issued. This evaluation initially does not take into consideration the potential
mitigating effect of management’s plans and actions that have not been fully implemented as of the
date the financial statements are issued. When substantial doubt exists, management evaluates
whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s
ability to continue as a going concern. The mitigating effect of management’s plans, however, is only
considered if both: (1) it is probable the plans will be effectively implemented within one year after the
date the financial statements are issued; and (2) it is probable the plans, when implemented, will
mitigate the relevant conditions or events that raise substantial doubt about the Company’s ability to
continue as a going concern within one year after the date the financial statements are issued.
Based on the Company's projected capital expenditures, debt servicing obligations and operating
requirements under its current business plan, management is projecting that its existing cash and
cash equivalents will not be sufficient to fund its operations through the next twelve months from the
date of the issuance of these consolidated financial statements. These conditions raise substantial
doubt about the Company's ability to continue as a going concern within one year after the date
these consolidated financial statements are issued.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
46
2.
Liquidity and Going Concern (continued):
Management plans to improve the Company's liquidity position by selling certain subsidiaries in
Europe and Argentina which comprise substantially all the assets and liabilities of the Light-Duty
segment and continue its cost reduction initiatives. On March 30, 2025, the Company entered into a
share purchase agreement ("SPA") with a wholly-owned investment vehicle of Heliaca Investments
Coöperatief U.A. ("Heliaca Investments"), a Netherlands based investment firm supported by
Ramphastos Investments Management B.V. a prominent Dutch venture capital and private equity
firm, to sell all of the issued and outstanding shares of Westport Fuel Systems Italia S.r.l. The
transaction provides a base purchase price of $73.1 million (€67.7 million), subject to certain
adjustments and potential earnouts of up to an estimated $6.5 million (€6.0 million) if certain
conditions are achieved, in accordance with the terms of the SPA. If management is successful in
closing the sale, the Company will receive sufficient cash to fund its operations for the next twelve
months and alleviate the risk of substantial doubt identified. As of the date of issuance of these
consolidated financial statements, management is seeking shareholder approval of the plan to
complete the sale of these businesses to the buyer. As such, there can be no assurance that the
Company will be successful in obtaining sufficient funding. Accordingly, management has concluded
under the accounting standards that these plans do not alleviate the substantial doubt about the
Company's ability to continue as a going concern.
These consolidated financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.
The consolidated financial statements do not include any adjustments related to the recoverability
and classification of recorded asset amounts or the amounts and classification of liabilities that may
be necessary if the Company were unable to continue as a going concern.
3.
Significant accounting policies:
(a)
Basis of presentation:
The consolidated financial statements include the accounts of the Company and its subsidiaries. All
intercompany balances and transactions have been eliminated on consolidation.
These consolidated financial statements are presented in accordance with accounting principles
generally accepted in the United States (“U.S. GAAP”). In the statement of operations and
comprehensive loss, certain prior period figures have been adjusted to conform to current period
presentation.
(b)
Foreign currency translation:
The Company’s functional currency is the Canadian dollar and its reporting currency for its
consolidated financial statement presentation is the United States dollar ("U.S. Dollar"). The functional
currencies for the Company's subsidiaries include the following: U.S. Dollar, Canadian Dollar, Euro,
Argentina Peso, Chinese Renminbi (“RMB”), Swedish Krona, Indian Rupee and Polish Zloty. The
Company translates assets and liabilities of non-U.S. dollar functional currency operations using the
period end exchange rates, shareholders’ equity balances using the weighted average of historical
exchange rates, and revenues and expenses using the monthly average rate for the period with
the resulting exchange differences recognized in other comprehensive loss.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
47
3.
Significant accounting policies (continued):
Transactions that are denominated in currencies other than the functional currencies of the
Company’s or its subsidiaries' operations are translated at the rates in effect on the date of the
transaction. Foreign currency denominated monetary assets and liabilities are translated to the
applicable functional currency at the exchange rates in effect on the balance sheet date. Non-
monetary assets and liabilities are translated at the historical exchange rate. All foreign exchange
gains and losses are recognized in the consolidated statements of operations, except for the
translation gains and losses arising from available-for-sale instruments, which are recorded through
other comprehensive loss until realized through disposal or impairment.
Except as otherwise noted, all amounts in these financial statements are presented in U.S. dollars. For
the years presented, the Company used the following exchange rates:
Year-end exchange rate as at:
Average for the year ended:
December 31,
2024
December 31,
2023
December 31,
2024
December 31,
2023
Canadian dollar
1.44
1.32
1.37
1.35
Euro
0.96
0.90
0.92
0.92
RMB
7.30
7.10
7.20
7.08
Polish Zloty
4.12
3.92
3.98
4.59
Swedish Krona
11.03
10.04
10.57
10.60
Indian Rupee
85.60
83.18
83.66
82.57
Argentine Peso
1,032.12
806.72
910.42
285.97
(c)
Cash and cash equivalents (including restricted cash):
Cash and cash equivalents include cash on hand, term deposits, banker acceptances and guaranteed
investment certificates with maturities of ninety days or less when acquired. Cash and cash
equivalents at December 31, 2024 include restricted cash of $406 (2023 - $103). Restricted cash at
December 31, 2024 and 2023 is related to cash used to secure a letter of credit.
(d)
Accounts receivable, net:
The accounts receivable balance reflects invoiced and accrued revenue and is presented net of an
allowance for credit losses. The Company expects most of its accounts receivable balances to continue
to come from large customers as it supplies the majority of its products and services through a
network of distributors and OEMs and provides Delayed OEM ("DOEM") services. The Company
establishes current expected credit losses ("CECL") for pools of assets with similar risk characteristics
by evaluating historical levels of credit losses, current economic conditions that may affect a
customer's ability to pay, and creditworthiness of significant customers. When specific customers are
identified as no longer sharing the same risk profile as their current pool, they are removed from the
pool and evaluated separately. The Company, in the normal course of business, monitors the financial
condition of its customers and reviews the credit history of each new customer. When the Company
becomes aware of a specific customer's inability to meet its financial obligations to the Company
(such as in the case of bankruptcy filings or material deterioration in the customer's operating results
or financial position, and payment experiences), the Company records a specific credit loss provision
to reduce the customer's related accounts receivable to its estimated net realizable value. If
circumstances related to specific customers change, the Company's estimates of the recoverability of
accounts receivable balances could be further adjusted.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
48
3.
Significant accounting policies (continued):
(e)
Inventories:
The Company’s inventories consist of the Company’s fuel system products (finished goods), work-in-
progress, purchased parts and materials. Inventories are recorded at the lower of cost and net
realizable value. Cost is determined based on the lower of weighted average cost or first in, first out.
The cost of fuel system product inventories, assembled parts and work-in-progress includes materials,
labour and production overhead, including depreciation. The Company records inventory write-downs
based on an analysis of excess and obsolete inventories determined primarily by future demand
forecasts. In addition, the Company records a liability for firm, noncancellable, and unconditional
purchase commitments with manufacturers for quantities in excess of the Company’s future demand
forecast consistent with its valuation of excess and obsolete inventory.
(f)
Property, plant and equipment:
Property, plant and equipment are stated at cost. Depreciation is provided for as follows:
Assets
Basis
Rate
Buildings
Straight-line
10 years
Computer equipment and software
Straight-line
3 years
Furniture and fixtures
Straight-line
5 years
Machinery and equipment
Straight-line
5 - 10 years
Leasehold improvements
Straight-line
Shorter of lease
term or
estimated
useful life
Depreciation expense on machinery and equipment used in the production and manufacturing
process is included in cost of revenue. All other depreciation is included in depreciation and
amortization expense in the consolidated statements of operations and comprehensive loss.
(g)
Long-term investments:
The Company accounts for investments in which it has significant influence, including variable
interest entities ("VIEs") for which the Company is not the primary beneficiary, using the equity
method of accounting. Under the equity method, the Company recognizes its share of income or loss
from equity accounted investees in the statement of operations with a corresponding change in long-
term investments. Any additional capital contributions to investees are capitalized and any dividends
paid or payable are credited against long-term investments.
The Company identified HPDI Technology LP and HPDI Technology AB as VIEs, as the entities are
dependent on funding from their owners. The funding and ownership interests of the entities are split
on a 55/45 basis between the owners of the VIEs. The voting rights and power to exercise control is
shared equally on a 50/50 basis between the owners of the VIEs. Therefore, the Company has
determined that it is not the primary beneficiary of the VIEs. The Company's maximum exposure to
loss are its investments in HPDI Technology LP and HPDI Technology AB and the current outstanding
accounts receivables balances.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
49
3.
Significant accounting policies (continued):
(h)
Financial liabilities:
Accounts payable and accrued liabilities, short-term debt, long-term debt and long-term royalty
payable are measured at amortized cost. Transaction costs relating to long-term debt are netted
against long-term debt and are amortized using the effective interest rate method.
(i)
Research and development costs:
Research and development costs are expensed as incurred and are recorded net of funding received
or receivable.
(j)
Intangible assets:
Intangible assets consist primarily of the estimated value of intellectual property, trademarks,
technology, customer contracts and non-compete agreements acquired through acquisitions.
Intangible assets are amortized over their estimated useful lives, which range from 5 to 20 years.
(k)
Impairment of long-lived assets:
The Company reviews its long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be recoverable. If such
conditions exist, assets are considered impaired if the sum of the undiscounted expected future cash
flows expected to result from the use and eventual disposition of an asset is less than its carrying
amount. An impairment loss is measured at the amount by which the carrying amount of the asset
exceeds its fair value. When quoted market prices are not available, the Company uses the expected
future cash flows discounted at a rate commensurate with the risks associated with the recovery of
the asset as an estimate of fair value.
(l)
Goodwill:
Goodwill is recorded at the time of purchase for the excess of the amount of the purchase price over
the fair values of the identifiable assets acquired and liabilities assumed. The fair value is determined
using the estimated discounted future cash flows of the reporting unit. Goodwill is not amortized and
instead is tested at least annually for impairment, or more frequently when events or changes in
circumstances indicate that goodwill might be impaired. This impairment test is performed annually
at December 31. Future adverse changes in market conditions or poor operating results of underlying
assets could result in an inability to recover the carrying value of the goodwill, thereby possibly
requiring an impairment charge.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
50
3.
Significant accounting policies (continued):
(m)
Warranty liability:
Estimated warranty costs are recognized at the time the Company sells its products and are included
in cost of revenue. The Company provides warranty coverage on products sold from the date the
products are put into service by customers. Warranty liability represents the Company’s best estimate
of warranty costs expected to be incurred during the warranty period. Furthermore, the current
portion of warranty liability represents the Company’s best estimate of the costs to be incurred in the
next twelve-month period. The Company uses historical failure rates and costs to repair defective
products to estimate the warranty liability. New product launches require a greater use of judgment
in developing estimates until claims experience becomes available. Product specific experience is
typically available four or five quarters after product launch, with a clear experience trend not evident
until eight to twelve quarters after launch. The Company records warranty expense for new products
using historical experience from previous generations in the first year, a blend of actual product and
historical experience in the second year and product specific experience thereafter. The amount
payable by the Company and the timing will depend on actual failure rates and cost to repair failures
of its products.
(n)
Revenue recognition:
The Company generates revenues primarily from product sales. Product revenues are derived from
standard product sales contracts and from long-term fixed price contracts. The Company recognizes
revenue when a customer obtains control of the goods. Determining the timing of the transfer of
control, at a point in time or over time, requires judgment. On standard product sales contracts,
revenues are recognized when customers obtain control of the product, that is when transfer of title
and risks and rewards of ownership of goods have passed and when obligation to pay is considered
certain. Invoices are generated and revenue is recognized at that point in time. Provisions for
warranties are made at the time of sale. Service revenue is recognized over time as performance
obligations are satisfied.
(o)
Income taxes:
The Company accounts for income taxes using the asset and liability method. Under this method,
deferred income tax assets and liabilities are determined based on the temporary differences
between the accounting basis and tax basis of the assets and liabilities and for loss carry-forwards, tax
credits and other tax attributes, using the enacted tax rates in effect for the years in which the
differences are expected to reverse. The effect of a change in tax rates on deferred income tax assets
and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes deferred income tax assets to the extent the assets are more-likely-than-not
to be realized. In making such a determination, the Company considers all available positive and
negative evidence including future reversals of existing taxable temporary differences, projected
future taxable income, tax-planning strategies and results of recent operations. If it is determined that,
based on all available evidence, it is more-likely-than-not that some or all of the deferred income tax
assets will not be realized, a valuation allowance is provided to reduce the deferred income tax assets.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
51
3.
Significant accounting policies (continued):
The Company uses a two-step process to recognize and measure the income tax benefit of uncertain
tax positions taken or expected to be taken in a tax return. The tax benefit from an uncertain tax
position is recognized if it is more-likely-than-not that the position will be sustained upon examination
by a tax authority based solely on the technical merits of the position. A tax benefit that meets the
more-likely-than-not recognition threshold is measured as the largest amount that is greater than
50% likely to be realized upon settlement with the tax authority. To the extent a full benefit is not
expected to be realized, an income tax liability is established. Any change in judgment related to the
expected resolution of an uncertain tax position is recognized in the year of such a change.
Interest and penalties related to income taxes are included as a component of income tax expense.
(p)
Leases:
The Company determines if an arrangement is a lease or contains a lease at inception. Operating
leases with lease terms greater than 12 months are included in current and non-current assets,
current and non-current liabilities in the consolidated balance sheet. Assets under finance leases are
included in property, plant and equipment and the related lease liabilities in current and non-current
liabilities in the consolidated balance sheets.
Operating lease and finance lease right-of-use (“ROU”) assets and operating lease liabilities are
recognized based on the present value of the future lease payments over the lease term at the
commencement date. As the rate implicit in the lease is not readily determinable for the Company’s
operating leases, an incremental borrowing rate is generally used to determine the present value of
future lease payments. The incremental borrowing rate for each lease is based on the Company’s
estimated borrowing rate over a similar term to that of the lease payments, adjusted for various
factors including collateralization, location and currency.
The operating lease expenses are recognized on a straight-line basis over the lease term and included
in cost of revenue and operating expenses. Short-term leases, which have an initial term of 12 months
or less, are not recorded in the consolidated balance sheets.
(q)
Stock-based compensation:
The Company measures stock-based awards at fair value on the date of the grant and expense the
awards over the requisite service period of employees or consultants. The fair value of stock options is
determined using the fair market value at the time of grant. The fair value of restricted stock units
(“RSUs") and Deferred Share Units (“DSUs") are determined using the share price of the Company at
the date of grant. The fair value of performance based restricted stock units (“PSUs”) is determined
using the Monte Carlo Simulation Model. Stock-based compensation expense related to stock option
awards is recognized over the requisite service period on a graded vesting basis. Forfeitures are
accounted for as they occur. Stock-based awards are either equity settled or cash settled. Cash-settled
awards are recorded as a liability based on the Company's share price on the date of grant and
remeasured at the end of each reporting period over the vesting term.
The Company’s estimates may be impacted by certain variables including, but not limited to, stock
price volatility, employee stock option exercise behaviors, additional stock option grants, the
Company’s performance and related tax impacts.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
52
3.
Significant accounting policies (continued):
(r)
Earnings (loss) per common share:
Basic earnings or loss per share includes no potential dilution and is computed by dividing the
earnings or loss attributable to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings or loss per share reflect the potential dilution of
securities that could share in the earnings or loss of our Company. Dilutive securities are excluded
from the calculation of our diluted weighted average common shares outstanding if their effect
would be anti-dilutive based on the treasury stock method or due to a net loss from continuing
operations. Common Shares that have not been released under the Company’s stock based plan or
are being held in trust for purposes of the Company’s restricted stock unit program have been
excluded from the calculation of basic earnings per share.
(s)
Contingent consideration:
The Company may enter into contingent consideration arrangements whereby a buyer pays the seller
additional consideration after transaction close upon the achievement of certain milestones,
performance-based metrics, or other objectives as agreed to per the terms of the related agreement.
The Company elected to account for contingent considerations that are not identified as derivatives
using the loss recovery approach. The Company does not recognize any contingent receivable at
inception and will recognize a contingent gain when such gain is realized or realizable.
4.
New accounting pronouncements
New accounting standard adopted in 2024:
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards
Update ("ASU") 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures." It requires incremental disclosures related to an entity's reportable segments, including:
(i) significant segment expense categories and amounts for each reportable segment that are
provided to the Chief Operating Decision Maker ("CODM"),
(ii) an aggregate amount and description of other segment items included in each reported
measure,
(iii) all annual disclosures about a reportable segment's profit or loss and assets required by
Topic 280 to be disclosed in interim periods,
(iv) the title and position of the individual or name of the group identified as the CODM, and
(v) an explanation of how the CODM uses the reported measures of segment profit or loss to
assess performance and allocate resources to the segment.
The standard improves transparency by providing disaggregated expense information about an
entity's reportable segments. The standard does not change the definition of a segment, the method
for determining segments or the criteria for aggregating operating segments into reportable
segments. The Company has adopted this guidance in the current year reported and recast the
comparative disclosures as required. Refer to Note 22 "Segment Information" of the consolidated
financial statements for more information.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
53
4.
New accounting pronouncements (continued):
Upcoming accounting standards not yet adopted in 2024:
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements in Income
Tax Disclosures" to enhance the transparency and decision usefulness of income tax disclosures. This
amendment requires public companies to disclose specific categories in the rate reconciliation and
provide additional information for reconciling items that meet a quantitative threshold. Additionally,
under the amendment entities are required to disclose the amount of income taxes paid
disaggregated by federal, state and foreign taxes, as well as disaggregated by material individual
jurisdictions. Finally, the amendment requires entities to disclose income from continuing operations
before income tax expense disaggregated between domestic and foreign and income tax expense
from continuing operations disaggregated by federal, state and foreign. This guidance is effective for
annual reporting periods beginning after December 15, 2024. While this guidance may have an impact
on the disclosures, the Company does not expect this guidance to have a material impact on its
financial position, operations, and cash flows.
In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive
Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income
Statement Expenses." It requires entities to disclose, in the notes to the financial statements, specified
information related to certain costs and expenses disaggregated by type. The standard improves
transparency by providing more detailed information about the component of costs and expenses
that would enable users to better understand the major components of an entity's income statement
by referencing disclosures in the notes to financial statements. This guidance is effective for annual
reporting periods beginning after December 15, 2026. While this guidance may have an impact on the
disclosures, the Company does not expect this guidance to have a material impact on its financial
position, operations, and cash flows.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
54
5.
Formation of joint venture
Cespira
On June 3, 2024, the Company entered into a joint venture agreement with Volvo Group ("Volvo") and
contributed certain net assets of its former HPDI business to a newly formed joint venture ("Cespira"
formerly the "HPDI Joint Venture"), consisting of two legal entities, HPDI Technology LP and HPDI
Technology AB, in which the Company retained a 55% non-controlling interest. Volvo acquired the
remaining 45% interest in Cespira for cash consideration of $27,328 plus up to an additional $45,000 in
contingent consideration, or earnout, depending on the subsequent performance of the joint venture.
The Company did not recognize any contingent consideration receivable at inception. Cespira is
jointly controlled by both parties. The Company's former HPDI business continues to operate through
the joint venture.
The Company deconsolidated the HPDI business and accounted for the Company's investment in
Cespira under the equity method as it is now jointly controlled. Under this accounting method, the
Company's initial investment in Cespira was recognized at the fair value of the Company's non-
controlling interest. The Company used the income approach to estimate the fair value of the
Company's non-controlling interest in Cespira of $35,621. Subsequently, this cost basis will be adjusted
for the Company's share of Cespira's net income or loss and other comprehensive income or loss, net
of any dividends or distributions received from Cespira.
This table summarizes the fair values of the proceeds received, net assets transferred at carrying value
to Cespira, estimated liabilities including working capital adjustment payment owed to Volvo and
indirect taxes incurred in certain jurisdictions for the fixed assets transferred, and gain on
deconsolidation:
June 3, 2024
Cash proceeds
$
27,328
Ownership interest in HPDI Technology LP
25,944
Ownership interest in HPDI Technology AB
9,677
Total proceeds
62,949
Net assets contributed to Cespira
45,687
Other liabilities
2,064
Gain on deconsolidation
$
15,198
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
55
6.
Accounts receivable:
December 31,
2024
2023
Customer trade receivables
$
52,058 $
83,175
Holdback receivable
10,737
—
Other receivables
6,347
6,709
Income tax receivable
613
1,369
Due from related parties (note 20)
7,523
1,671
Allowance for credit losses
(4,224)
(4,847)
$
73,054 $
88,077
In 2022, a holdback receivable was recorded as part of the sale of the Company's interest in Cummins
Westport Inc. to Cummins Inc. ("Cummins"). The holdback will be retained by Cummins for a term of
three years to satisfy any extended warranty obligations in excess of the recorded extended warranty
obligation. Any unused amounts will be repaid to the Company at the end of three years term and, in
the event that the holdback is not sufficient to cover the extended warranty obligations, the Company
may also be required to supplement this holdback amount to cover valid extended warranty claims. In
March 2025, the Company collected $11,365 from Cummins related to the holdback receivable,
including interest accrued.
7.
Inventories:
December 31,
2024
2023
Purchased parts & materials
$
37,055 $
50,770
Work-in-progress
1,250
2,801
Finished goods
15,221
13,959
$
53,526 $
67,530
During the year ended December 31, 2024, the Company recorded write-downs to net realizable value
of $3,283 (year ended December 31, 2023 - $7,066) due to slow-moving and obsolete inventory. For the
year ended December 31, 2024, inventory write-downs allocated to purchased parts & materials and
finished goods were $2,272 and $1,011, respectively.
For the year ended December 31, 2023, the Company recognized a $4,461 inventory write-down as a
result of an engine development contract which will not be commercialized. In addition, the Company
recognized $2,605 of inventory write-downs allocated to purchased parts & materials, and finished
goods inventory.
As part of the formation of Cespira on June 3, 2024, the Company transferred $13,649 of inventory.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
56
8.
Long-term investments:
December 31,
2024
2023
HPDI Technology LP (a)
$
25,494 $
—
HPDI Technology AB (a)
11,225
—
Weichai Westport Inc. (b)
—
1,411
Minda Westport Technologies Limited (c)
2,866
3,234
Other equity accounted investees
147
147
$
39,732 $
4,792
(a)
HPDI Technology ("Cespira"):
The Company entered into a joint venture agreement with Volvo Group ("Volvo") and contributed
certain net assets of its former HPDI business to a newly formed joint venture ("Cespira" formerly the
"HPDI Joint Venture"), consisting of two legal entities, HPDI Technology LP and HPDI Technology AB,
in which the Company retained a 55% non-controlling interest. Volvo acquired the remaining 45%
interest in Cespira for cash consideration of $27,328. Cespira is jointly controlled by both parties. The
Company's former HPDI business continues to operate through the joint venture. The Company made
an initial capital contribution of $9,900 in Cespira to fund its operations. For the year ended
December 31, 2024, the Company recognized its share of Cespira’s losses of $6,715, as a loss from
investments accounted for by the equity method.
The Company acknowledges that during the initial phase of Cespira's business plan, it may require
additional funding from its owners from time to time. If either owner is unable to fund Cespira when
funding is requested in accordance with the joint venture agreement, a convertible loan may be
extended from the other owner to fund all or a part of the funding requested. The convertible loan
may settle in ownership interest in Cespira in the event that the borrowing party is unable to fulfill the
repayment terms.
The carrying amount and maximum exposure to losses relating to Cespira were as follows:
Balance at December 31, 2024
Carrying amount
Maximum
exposure to loss
Equity method investment in Cespira
$
36,719 $
36,719
Accounts receivable due from Cespira
4,973
4,973
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
57
8.
Long-term investments (continued):
Combined assets, liabilities, revenue and expenses of Cespira, are as follows:
December 31,
2024
Current assets:
Cash and cash equivalents
$
10,305
Accounts receivable
21,000
Inventory
7,414
Prepaids
1,471
40,190
Property, plant and equipment
40,901
Intangible assets
7,087
Goodwill
563
Total assets
$
88,742
Current liabilities:
Accounts payable
$
16,527
Current portion of provisions
2,128
Other current liabilities
1,910
20,565
Long-term portion of provisions
532
Other long-term liabilities
569
Total liabilities
$
21,666
Net assets
$
67,075
Period from June 3
to December 31,
2024
Product revenue
$
32,919
Service revenue
10,166
Total revenue
43,085
Cost of revenue and expenses:
Cost of revenue
42,634
Research and development
4,715
General and administrative
5,555
Sales and marketing
973
Depreciation and amortization
1,720
Foreign exchange gain
(421)
55,176
Loss from operations
(12,091)
Interest income, net of bank charges
202
Loss before income taxes
(11,889)
Income tax expense
342
Net loss
$
(12,231)
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
58
8.
Long-term investments (continued):
(b)
Weichai Westport Inc. ("WWI"):
The Company, indirectly through its wholly-owned subsidiary, Westport Innovations (Hong Kong)
Limited (“Westport HK”), was the registered holder of a 23.33% equity interest in Weichai Westport Inc.
("WWI"). In April 2016, the Company sold to Cartesian Capital Group (“Cartesian”) a derivative economic
interest granting it the right to receive an amount of future income received by Westport HK from
WWI equivalent to having an 18.78% equity interest in WWI and concurrently granted a Cartesian
entity an option to acquire all of the equity securities of Westport HK for a nominal amount. The
Company retained the right to transfer any equity interest held by Westport HK in WWI that was in
excess of an 18.78% interest in the event that such option was exercised. As a result of such
transactions, the Company’s residual 23.33% equity interest in WWI currently corresponds to an
economic interest in WWI equivalent to 4.55%.
On July 8, 2024, the Company sold its remaining interest in WWI to Weichai Holding Group Co. Ltd
("Weichai") for net proceeds of $1,124 and recognized a loss on sale of investment of $352. This sale was
pursuant to an equity transfer agreement signed with WWI in December 2023. The Company
previously recognized a related impairment loss of $413 for the year ended December 31, 2023.
(c)
Minda Westport Technologies Limited ("MWTL"):
The Company, indirectly through its wholly owned subsidiary, Westport Fuel Systems Italia S.R.L., was
the registered holder of a 50% equity interest in MWTL. In September 2023, the Company entered into
an amended and restated joint venture agreement with Uno Minda Limited ("Minda").
On April 18, 2024, the Company completed a share purchase agreement with Uno Minda Limited
("Minda") and sold 26% of MWTL's shares to Minda for net proceeds of $1,542. As at December 31, 2024,
the Company has assessed the carrying amount to be equal to the fair value of the investment.
For the year ended December 31, 2024, the Company recognized its share of MWTL's earnings of $1,313
(2023 - $780) as income from investments accounted for by the equity method and received a
dividend of $297.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
59
9.
Property, plant and equipment:
Accumulated
Net Book
December 31, 2024
Cost
Depreciation
Value
Land and buildings
$
9,067 $
2,977 $
6,090
Computer equipment and software
7,596
5,599
1,997
Furniture and fixtures
6,196
4,779
1,417
Machinery and equipment
68,104
38,088
30,016
Leasehold improvements
10,973
8,537
2,436
$
101,936 $
59,980 $
41,956
Accumulated
Net Book
December 31, 2023
Cost
Depreciation
Value
Land and buildings
$
9,206 $
2,635 $
6,571
Computer equipment and software
9,386
6,773
2,613
Furniture and fixtures
8,326
6,103
2,223
Machinery and equipment
129,642
75,111
54,531
Leasehold improvements
13,221
9,670
3,551
$
169,781 $
100,292 $
69,489
As part of the formation of Cespira, the Company transferred $33,244 of property, plant, and
equipment.
During the year ended December 31, 2024, the Company disposed of property, plant, and equipment
for proceeds of $998 and recorded a gain on the sale of $76 included in Interest and other income, net
of bank charges in the consolidated statement of operations and comprehensive loss.
Total depreciation expense for the year ended December 31, 2024 was $7,511 (year ended December 31,
2023 - $11,586). The amount of depreciation expense included in cost of revenue for the year ended
December 31, 2024 was $5,029 (year ended December 31, 2023 - $8,191).
10.
Intangible assets:
Accumulated
Intangible
December 31, 2024
Cost
Amortization
Assets, net
Patents and trademarks
$
19,136 $
13,899 $
5,237
Technology
3,840
3,800
40
Customer contracts
10,926
10,926
—
Total
$
33,902 $
28,625 $
5,277
Accumulated
Intangible
December 31, 2023
Cost
Amortization
Assets, net
Patents and trademarks
$
20,417 $
13,724 $
6,693
Technology
4,094
3,965
129
Customer contracts
11,646
11,646
—
Total
$
36,157 $
29,335 $
6,822
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
60
10.
Intangible assets (continued):
During the year ended December 31, 2024, amortization expense of $1,150 (year ended December 31,
2023 - $904) was recognized in the consolidated statement of operations and comprehensive loss. The
Company currently estimates annual amortization expense to be:
2025
$
1,136
2026
916
2027
757
2028
736
2029 and thereafter
1,732
Total amortization expense remaining
$
5,277
11.
Goodwill:
Changes in the carrying amount of goodwill are as follows:
December 31,
2024
2023
Balance, beginning of year
$
3,066 $
2,958
Impact of foreign exchange changes
(190)
108
Balance, end of year
$
2,876 $
3,066
Goodwill of $2,876 (December 31, 2023 - $3,066), relates to the acquisition of Westport Fuel Systems
Netherlands Holding B.V. (formerly known as Prins Autogassystemen Holding B.V.) in 2014. The
Company completed its annual assessment of impairment and concluded that goodwill of $2,876
related to the Light-Duty segment was not impaired as at December 31, 2024.
12.
Other long-term assets:
December 31,
2024
2023
Other assets
$
2,583 $
9,083
Prepaid capital asset deposits
242
—
Property lease deposits
65
310
Holdback receivable (note 6)
—
10,363
Other investments
290
609
Total
$
3,180 $
20,365
In December 2024, the Company sold its 2020 to 2022 Italian value-added tax receivables of $5,859 to
an Italian bank for cash proceeds of $5,156, recognizing a loss on sale of assets of $703. The value-add
tax receivables were included in Other assets in 2023.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
61
13.
Accounts payable and accrued liabilities:
December 31,
2024
2023
Trade accounts payable
$
61,691 $
70,567
Accrued payroll
16,096
18,129
Taxes payable
6,146
4,302
Deferred revenue
4,190
2,376
$
88,123 $
95,374
During the year ended December 31, 2024, the Company recognized $2,141 of deferred revenue as at
the end of the prior year as revenue in the consolidated statement of operations and comprehensive
loss (December 31, 2023 - $2,062).
14.
Operating leases right-of-use assets and lease liabilities:
The Company has entered into various non-cancellable operating lease agreements primarily for its
manufacturing facilities and offices. The Company's leases have lease terms expiring between 2025
and 2038. Many leases include one or more options to renew. The Company does not assume
renewals in its determination of the lease term unless the renewals are deemed to be reasonably
assured at lease commencement. The average remaining lease term is approximately six years and
the present value of the outstanding operating lease liability was determined by applying a weighted
average discount rate of 3.0% based on incremental borrowing rates applicable in each location.
During the year ended December 31, 2024, the Company recognized additional right-of-use assets of
$1,004 in exchange for operating lease liabilities (December 31, 2023 - $1,657).
The components of lease cost are as follows:
Years ended December 31,
2024
2023
Amortization of right-of-use assets
$
2,691 $
3,041
Interest
579
666
Total lease cost
$
3,270 $
3,707
The maturities of lease liabilities as of December 31, 2024 are as follows:
2025
$
2,624
2026
2,549
2027
2,489
2028
2,235
2029
668
Thereafter
11,052
Total undiscounted cash flows
21,617
Less: imputed interest
2,560
Present value of operating lease liabilities
19,057
Less: current portion
2,624
Long-term operating lease liabilities
$
16,433
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
62
15.
Short-term debt:
December 31,
2024
2023
Revolving financing facilities
$
— $
15,156
The Company previously had a revolving financing facility with Royal Bank of Canada ("RBC") that was
secured by certain receivables of the Company, with a maximum draw of $20,000, This facility was
closed in November 2024.
16.
Long-term debt:
December 31,
2024
2023
Term loan facilities, net of debt issuance costs
$
31,740 $
42,879
Other bank financing
374
531
Capital lease obligations
1,613
1,655
Balance, end of year
33,727
45,065
Current portion
14,660
14,108
Long-term portion
$
19,067 $
30,957
Term loan
Maturity date
Interest rate
December 31, 2024
December 31, 2023
EDC
September 15,
2026
U.S. Prime Rate
plus 2.01%
$
6,836 $
10,763
UniCredit - May 2020
May 31, 2025
3-month Euribor
plus 1.60%
534
1,693
UniCredit - July 2020
July 31, 2026
3-month Euribor
plus 1.75%
4,663
8,313
Deutsche Bank - August
2020
August 31, 2026
3-month Euribor
plus 1.70%
2,172
3,867
UniCredit - April 2021
March 31, 2027
3-month Euribor
plus 1.65%
4,399
6,793
Banca de Credito
Cooperativo - November
2023
December 31,
2028
3-month Euribor
plus 1.75%
2,058
2,192
Deutsche Bank - November
2023
September 30,
2029
3-month Euribor
plus 1.90%
6,352
7,710
Rabobank - December 2023
December 31,
2028
4.70%
1,012
1,548
UniCredit - January 2024
December 31,
2028
3-month Euribor
plus 1.52%
3,714
—
Term loan facilities, net of debt issuance costs
$
31,740 $
42,879
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
63
16.
Long-term debt (continued):
On December 13, 2021, the credit facility and non-revolving term facility with EDC were refinanced into
one $20,000 term loan, with quarterly principal and interest payments. On May 31, 2024, the Company
amended the loan agreement with EDC to permit the asset transfer of certain property, plant, and
equipment previously pledged to the loan into Cespira, removal of Fuel System Solutions Inc. as a
borrower, added Westport Fuel Systems Canada Inc. as a borrower and modified the securities
pledged to the loan. The loan is secured by share pledges in the Company's equity interest in Cespira.
On May 20, 2020, and July 17, 2020, the Company entered into two Euro denominated loan
agreements with UniCredit. There are no securities provided on the loans as the loans were made as
part of the Italian government's COVID-19 Decreto Liquidità.
On August 11, 2020, the Company entered into a Euro denominated loan agreement with Deutsche
Bank. There is no security provided on the loan as the loan was made as part of the Italian
government’s COVID-19 Decreto Liquidità.
On October 9, 2018, and November 28, 2019, the Company entered into two Euro denominated loan
agreements with UniCredit S.p.A. (“UniCredit”). On April 29, 2021, the Company and UniCredit
amended the terms of these Euro denominated loan agreements to combine the facilities into one
$8,803 loan facility, with quarterly principal and interest payments.
On November 28, 2023, the Company entered into a Euro denominated loan agreement with Banca
de Credito Cooperativo with quarterly principal and interest payments. There is no security provided
on the loan as the loan was made as part of the Italian government's guarantee program
administered by the Servizi Assicurativi del Commercio Estero ("SACE").
On November 29, 2023, the Company entered into a Euro denominated loan agreement with
Deutsche Bank with quarterly principal and interest payments. There is no security provided on the
loan as the loan was made as part of the Italian government's SACE guarantee program.
On December 4, 2023, the Company entered into a Euro denominated loan agreement with
Rabobank and principal and interest are paid monthly. The loan is secured by certain property owned
by the Company.
On January 10, 2024, the Company entered into a Euro denominated loan agreement with UniCredit
with quarterly principal and interest payments, and the first payment is due in 2025. There is no
security provided on the loan as the loan was made as part of the Italian government's SACE
guarantee program.
The Company has entered into interest rate swaps with Unicredit and Deutsche Bank, which are
directly associated with the Unicredit (2020 and 2021), Deutsche Bank (2020), Deutsche Bank (2023)
and UniCredit (2024) term loans. These interest rate swaps serve as a hedging mechanism against
potential fluctuations in future interest rates ensuring stability in loan repayments. As of December 31,
2024, the Unicredit interest rate swaps have maturity dates ranging from 2025 to 2028 and a total
notional value of $13,211. Additionally, the Deutsche Bank interest rate swaps have a maturity dates
ranging from 2026 and 2029, with a notional value of $8,451. The notional value of these interest rate
swaps is adjusted concurrently with scheduled principal payments on the corresponding loans. These
interest rate swaps have been designated as cash flow hedges and have been structured to be highly
effective. As of December 31, 2024, the fair value of the interest rate swaps amounted to $150, which is
included in other long-term assets (December 31, 2023 - $822).
Throughout the term of certain of these financing arrangements, the Company is required to meet
certain financial and non-financial covenants. As of December 31, 2024, the Company is in compliance
with all covenants under the financing arrangements.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
64
16.
Long-term debt (continued):
The principal repayment schedule of long-term debt is as follows as at December 31, 2024:
Term loan
facilities
Other bank
financing
Capital lease
obligations
Total
2025
$
14,141 $
126 $
398 $
14,665
2026
10,196
124
359
10,679
2027
3,543
124
362
4,029
2028
2,875
—
304
3,179
2029 and thereafter
985
—
190
1,175
$
31,740 $
374 $
1,613 $
33,727
17.
Warranty liability:
A continuity of the warranty liability is as follows:
Years ended December 31,
2024
2023
Balance, beginning of year
$
8,506 $
14,299
Warranty claims
(3,778)
(6,826)
Warranty accruals
2,127
5,152
Change in estimate
883
(2,204)
Impact of foreign exchange changes
(583)
(1,915)
Transfer to Cespira
(1,838)
—
Balance, end of year
5,317
8,506
Less: current portion
3,861
6,892
Long-term portion
$
1,456 $
1,614
For the year ended December 31, 2024, the Company recorded a reduction in warranty expense
related to insurance recoveries and credit notes received from suppliers of $1,457 included in Change
in estimate.
As at December 31, 2024, the Company had a remaining balance of $994 in other long-term assets
(note 12) related to insurance recoveries.
18.
Share capital, stock options and other stock-based plans:
On June 1, 2023, the Company completed a consolidation of its issued and outstanding common
shares on the basis of one new post-consolidation common share for every ten existing pre-
consolidation common shares (the "Consolidation"). No fractional common shares were issued and
any fractional shares were rounded down to the nearest whole common shares. The number of
outstanding common shares and share units issued have been retroactively adjusted for all periods
presented.
During the year ended December 31, 2024, the Company issued 108,432 common shares, net of
cancellations, upon exercises of share units (year ended December 31, 2023 – 44,186 common shares).
The Company issues shares from treasury to satisfy share unit exercises.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
65
18.
Share capital, stock options and other stock-based plans (continued):
(a)
Share Units ("Units"):
The value assigned to issued Units and the amounts accrued are recorded as other equity
instruments. As Units are exercised or vested and the underlying shares are issued from treasury of
the Company, the value is reclassified to share capital.
During the year ended December 31, 2024, the Company recognized $1,357 (year ended December 31,
2023 - $1,727) of stock-based compensation associated with the Westport Omnibus Plan. The
Westport Omnibus Plan aims to advance the Company's interests by encouraging employees,
consultants and non-employee directors to receive equity-based compensation and incentives. The
plan outlines the stock-based options types, eligibility and vesting terms.
A continuity of the Units issued under the Westport Omnibus Plan are as follows:
December 31
December 31
2024
2023
Number of
Units
Weighted
average
grant
date fair
value
(CDN $)
Number of
Units
Weighted
average
grant
date fair
value
(CDN $)
Outstanding, beginning of year
478,643 $
15.68
317,432 $
24.15
Granted
224,050
8.23
435,128
13.78
Vested and exercised
(108,432)
15.85
(44,186)
38.76
Forfeited/expired
(69,939)
20.95
(229,731)
19.26
Outstanding, end of year
524,322 $
11.75
478,643 $
15.68
Units outstanding and
exercisable, end of year
310 $
37.21
— $
—
During the year ended December 31, 2024, 224,050 share units were granted to directors, executives
and employees (year ended December 31, 2023 - 435,128). This included 104,215 Restricted Share Units
("RSUs") (year ended December 31, 2023 - 147,557) and nil Performance Share Units ("PSUs") (year
ended December 31, 2023 - 185,365) and 119,835 Deferred Share Units ("DSUs") (year ended
December 31, 2023 - 102,206 DSUs) to be cash-settled when vesting conditions are met.
Values of PSUs are determined using the Monte–Carlo Simulation Model. RSUs typically vest over a
three-year period so the actual value received by the individual depends on the share price on the day
such RSUs are settled for common shares, not the date of grant. Vesting of DSUs shall occur
immediately prior to the resignation, retirement or termination of directorship, in accordance with the
terms of Westport's Omnibus Plan.
As at December 31, 2024, $950 of compensation expense related to Units has yet to be recognized in
results from operations and will be recognized ratably over one year.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
66
18.
Share capital, stock options and other stock-based plans (continued):
(b)
Aggregate intrinsic values:
The aggregate intrinsic value of the Company’s share units are as follows:
December 31,
2024
2023
CDN$
CDN$
Share units:
Outstanding
$
2,693 $
3,283
Exercisable
—
—
Exercised
555
386
(c)
Stock-based compensation:
Stock-based compensation associated with the Unit plans is included in operating expenses as
follows:
Years ended December 31,
2024
2023
Cost of revenue
$
63 $
26
Research and development
229
570
General and administrative
895
1,806
Sales and marketing
170
228
$
1,357 $
2,630
For the year ended December 31, 2024 the Company recognized stock-based compensation of $1,066
(December 31, 2023 - $1,727) for stock-based awards settled in shares and stock-based compensation
of $291 for stock-based awards settled in cash for the year ended (year ended December 31, 2023 -
$903).
19.
Income taxes:
(a)
The Company’s income tax provision differs from that calculated by applying the combined
enacted Canadian federal and provincial statutory income tax rate of 27% for the year ended
December 31, 2024 (year ended December 31, 2023 – 27%) as follows:
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
67
19.
Income taxes (continued):
Years ended December 31,
2024
2023
Expected income tax expense (recovery)
$
(4,552) $
(13,153)
Non-deductible stock-based compensation
158
301
Other permanent differences
1,320
86
Withholding taxes and other foreign taxes
2,304
709
Change in enacted tax rates
—
221
Foreign tax rate differences, foreign exchange and other adjustments
2,525
103
Change in valuation allowance
5,951
9,505
Expired losses
(880)
1,445
Foreign-derived income inclusion
1,783
1,785
Non-taxable portion of capital gains
(3,629)
—
Income tax expense (recovery)
$
4,980
$
1,002
(b)
The significant components of the deferred income tax assets and liabilities are as follows:
December 31,
2024
2023
Deferred income tax assets:
Net loss carry forwards
$
216,296 $
224,058
Intangible assets
3,693
3,854
Property, plant and equipment
15,376
20,292
Warranty liability
1,661
2,017
Foreign tax credits
6,481
6,481
Inventory
2,149
3,271
Research and development
4,698
5,074
Tax realignment due to Italian tax law changes
6,585
7,291
Financing and share issuance cost
373
767
Restricted interest and financing expense
3,805
2,206
Other
2,936
4,820
Total gross deferred income tax assets
264,053
280,131
Valuation allowance
(254,358)
(268,577)
Total deferred income tax assets
$
9,695 $
11,554
Deferred income tax liabilities:
Intangible assets
$
(430) $
(430)
Property, plant and equipment
(541)
(306)
Other
(3,058)
(2,741)
Total deferred income tax liabilities
$
(4,029) $
(3,477)
Total net deferred income tax assets
$
5,666 $
8,077
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
68
19.
Income taxes (continued):
The valuation allowance is reviewed on a quarterly basis to determine if, based on all available
evidence, it is more-likely-than-not that some or all of the deferred income tax assets will not be
realized. The ultimate realization of deferred income tax assets is dependent on the generation of
sufficient taxable income during the future periods in which those temporary differences are
expected to reverse. If the evidence does not exist that the deferred income tax assets will be fully
realized, a valuation allowance has been provided. The deferred income tax assets have been reduced
by the uncertain tax position presented in note 19(f).
(c)
The components of the Company’s income tax expense (recovery) are as follows:
Income tax expense (recovery)
Income (loss)
before income
taxes
Current
Deferred
Total
Year ended December 31, 2024
Italy
$
10,833 $
823 $
1,631 $
2,454
United States
72
(690)
—
(690)
Canada
(32,993)
655
—
655
Netherlands
5,987
1,449
37
1,486
Poland
1,320
242
(17)
225
Other
(2,080)
704
146
850
$
(16,861) $
3,183 $
1,797 $
4,980
Year ended December 31, 2023
Italy
$
4,531 $
84 $
(828) $
(744)
United States
(4,088)
14
—
14
Canada
(40,934)
590
—
590
Netherlands
3,391
744
(25)
719
Poland
2,228
253
69
322
Other
(13,844)
101
—
101
$
(48,716) $
1,786 $
(784) $
1,002
(d)
The Company has loss carry-forwards in various tax jurisdictions available to offset future
taxable income that expire in the following years, as follows:
2025
2026
2027
2028 and later
Total
Canada
$
— $
— $
4,263 $
641,894 $
646,157
Italy
—
—
—
10,480
10,480
United States
—
—
—
85,612
85,612
Sweden
—
—
—
10,129
10,129
China
2,143
—
2,287
4,705
9,135
India
—
—
—
5,203
5,203
Australia and Other
—
—
247
6,218
6,465
Total
$
2,143 $
— $
6,797 $
764,241 $
773,181
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
69
19.
Income taxes (continued):
Certain tax attributes are subject to an annual limitation as a result of the acquisition of Fuel Systems
which constitutes a change of ownership as defined under Internal Revenue Code Section 382.
(e)
The Company has not recognized a deferred income tax liability for certain undistributed
earnings of foreign subsidiaries which are essentially investments in those foreign subsidiaries and are
permanent in duration.
(f)
The Company records uncertain tax positions in accordance with ASC No. 740, Income Taxes.
As at December 31, 2024, the total amount of the Company’s uncertain tax benefits was $5,752
(December 31, 2023 - $5,552). If recognized in future periods, the uncertain tax benefits would affect
our effective tax rate. The Company files income tax returns in Canada, the U.S., Italy, and various other
foreign jurisdictions. All taxation years remain open to examination by the Canada Revenue Agency,
the 2021 to 2024 taxation years remain open to examination by the Internal Revenue Service, the 2019
to 2024 taxation years remain open to examination by the Italian Revenue Agency, and various years
remain open in the other foreign jurisdictions.
20.
Related party transactions:
The Company's related parties are Cespira, MWTL, directors, officers and shareholders that own
greater than 10% of the Company's shares.
The Company engages in transactions with Cespira primarily through providing services and sale of
inventory under the transitional services agreement and cross-charges.
The Company engages in transactions with MWTL primarily through sales of inventory.
Sales of goods, services and
other income
Inventory purchased, services
and other expenses
Years ended December 31,
2024
2023
2024
2023
Cespira
$
9,598 $
— $
1,320 $
—
MWTL
9,529
7,200
285
64
Receivables (note 6)
Payables
December 31,
December 31,
2024
2023
2024
2023
Cespira
$
4,973 $
— $
1,137 $
—
MWTL
2,550
1,671
48
47
Total
$
7,523 $
1,671 $
1,185 $
47
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
70
21.
Commitments and contingencies:
(a)
Contractual commitments
The Company is a party to a variety of agreements in the ordinary course of business under which it is
obligated to indemnify a third party with respect to certain matters. Typically, these obligations arise
as a result of contracts for sale of the Company’s product to customers where the Company provides
indemnification against losses arising from matters such as product liabilities. The potential impact on
the Company’s financial results is not subject to reasonable estimation because considerable
uncertainty exists as to whether claims will be made and the final outcome of potential claims. To
date, the Company has not incurred significant costs related to these types of indemnifications.
(b)
Contingencies
The Company is engaged in certain legal actions and tax audits in the ordinary course of business and
believes that, based on the information currently available, the ultimate outcome of these actions will
not have a material adverse effect on our operating results, liquidity or financial position.
22.
Segment information:
The Company discloses segment information under four reportable segments, consistent with the
manner in which its Chief Operating Decision Maker ("CODM") evaluates its businesses. The
Company's CODM is its Chief Executive Officer. These segments are the strategic pillars of the
Company and are managed separately as each represents a specific grouping of related automotive
components and systems. The reportable segments are further described below. In prior years, the
Company presented its results under two reportable segments: Independent aftermarket and
Original equipment manufacturer.
Effective June 3, 2024, the Company changed how it evaluates and manages its businesses as a result
of the deconsolidation of its former HPDI business and formation of the joint venture (note 5). The
Company now reports its results in the following four reportable segments: Light-Duty, High-Pressure
Controls & Systems, Heavy-Duty OEM, and Cespira. The prior year comparatives were recast to reflect
this change in reportable segments.
•
Light-Duty: This segment's products include LPG and CNG fuel system solutions and
components including fuel storage tanks and electronic control modules.
•
High-Pressure Controls and Systems: This segment's products include fuel cell and hydrogen
fuel system solutions and components.
•
Heavy-Duty OEM: Prior to June 3, 2024, this segment's products include HPDI related fuel
system solutions and components. Subsequently, this segment's operations are related to the
transitional services agreement between the Company and Cespira.
•
Cespira: This segment's products include HPDI related fuel system solutions and components
after June 3, 2024.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
71
22.
Segment information (continued):
Segment earnings or losses before income taxes, interest, depreciation, and amortization ("Segment
EBITDA") is the measure of segment profitability used by the Company. The accounting policies of our
reportable segments are the same as those applied in our consolidated financial statements.
Management prepared the financial results of the Company's reportable segments on basis that is
consistent with the manner in which Management internally disaggregates financial information to
assist in making internal operating decisions. Certain common costs and expenses were allocated
among segments and presented differently than the Company would for stand-alone financial
information prepared in accordance with GAAP. These include certain costs and expenses of shared
services, such as IT, human resources, legal, finance and supply chain management. Segment EBITDA
is not defined under US GAAP and may not be comparable to similarly titled measures used by other
companies and should not be considered a substitute for net earnings or other results reported in
accordance with GAAP.
The Company's CODM uses segment EBITDA disclosed below to evaluate the performance of its
reportable segments. The Company believes Segment EBITDA is most reflective of the operational
profitability or loss of its reportable segments. The CODM uses this information to drive decisions and
resource allocations. Segment EBITDA is used as the key profitability measure when we set our annual
budget.
Financial information by reportable segment as follows:
Year ended December 31, 2024
Light-Duty
High-
Pressure
Controls &
Systems
Heavy-Duty
OEM
Cespira
Total
Segment
Revenue
$
262,180 $
8,804 $
31,315 $
43,085 $
345,384
Cost of revenue
206,781
7,264
30,663
42,634
287,342
Gross profit
55,399
1,540
652
451
58,042
Operating expenses:
Research & development
12,997
4,394
4,196
4,715
26,302
General & administrative
19,198
1,033
3,068
5,555
28,854
Sales & marketing
9,926
724
856
973
12,479
Depreciation & amortization
2,605
254
131
1,720
4,710
Equity income (note 8)
1,313
—
—
—
1,313
Add back: Depreciation & amortization1
6,377
502
1,405
3,845
12,129
Segment EBITDA
$
18,363 $
(4,363) $
(6,194) $
(8,667) $
(861)
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
72
22.
Segment information (continued):
Year ended December 31, 2023
Light-Duty
High-
Pressure
Controls &
Systems
Heavy-Duty
OEM
Total
Segment
Revenue
$
263,594 $
11,958 $
56,247 $
331,799
Cost of revenue
214,516
9,135
59,211
282,862
Gross profit
49,078
2,823
(2,964)
48,937
Operating expenses:
Research & development
13,121
3,630
9,252
26,003
General & administrative
21,647
1,322
6,444
29,413
Sales & marketing
10,552
653
2,907
14,112
Depreciation & amortization
3,157
193
408
3,758
Equity income (note 8)
780
—
—
780
Add back: Depreciation & amortization1
6,670
356
4,923
11,949
Segment EBITDA
$
8,051 $
(2,619) $
(17,052) $
(11,620)
Reconciliations of reportable segment financial information to consolidated statement of operations:
Year ended December 31, 2024
Total Segment
Less: Cespira
Add:
Corporate &
unallocated
Total
Consolidated
Revenue
$
345,384 $
43,085 $
— $
302,299
Cost of revenue
287,342
42,634
—
244,708
Gross profit
58,042
451
—
57,591
Operating expenses:
Research & development
26,302
4,715
—
21,587
General & administrative
28,854
5,555
14,380
37,679
Sales & marketing
12,479
973
1,170
12,676
Depreciation & amortization
4,710
1,720
377
3,367
Equity income (loss) (note 8)
1,313
—
(6,715)
(5,402)
Year ended December 31, 2023
Total Segment
Add:
Corporate &
unallocated
Total
Consolidated
Revenue
$
331,799 $
— $
331,799
Cost of revenue
282,862
—
282,862
Gross profit
48,937
—
48,937
Operating expenses:
Research & development
26,003
—
26,003
General & administrative
29,413
14,821
44,234
Sales & marketing
14,112
2,166
16,278
Depreciation & amortization
3,758
541
4,299
Equity income (note 8)
780
—
780
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
73
22.
Segment information (continued):
Reconciliation of Segment EBITDA to Loss before income taxes
Years ended December 31,
2024
2023
Total Segment EBITDA
$
(861) $
(11,620)
Adjustments:
Depreciation & amortization1
8,661
12,490
Cespira's Segment EBITDA
(8,667)
—
Cespira's equity loss (note 8)
6,715
—
Corporate and unallocated operating expenses
15,550
16,987
Foreign exchange loss
6,248
3,974
Loss on sale of assets (note 12)
703
32
Gain on deconsolidation (note 5)
(15,198)
—
Loss on sale of investment (note 8)
352
—
Impairment of long-term investment (note 8)
—
413
Loss on extinguishment of royalty payable
—
2,909
Interest on long-term debt and accretion of royalty payable
2,797
2,981
Interest and other income, net of bank charges
(1,161)
(2,690)
Loss before income taxes
$
(16,861) $
(48,716)
1Depreciation and amortization expenses used in computation for Segment EBITDA and reconciliation to consolidated loss
before income taxes are included in cost of revenue and operating expenses on our statement of operations and
comprehensive loss.
Years ended December 31,
Total additions to long-lived assets, excluding business combinations
2024
2023
Light-Duty
$
13,110 $
9,093
High-Pressure Controls & Systems
3,142
649
Heavy-Duty OEM
510
5,156
Corporate and unallocated
161
676
Total consolidated
$
16,923 $
15,574
Cespira's total additions to long-lived assets, excluding business combinations for the period between
June 3, 2024 to December 31, 2024 was $723.
Revenues are attributable to geographical regions based on the location of the Company’s customers
and are presented as a percentage of the Company's revenues, as follows:
% of total revenue
Years ended December 31,
2024
2023
Europe
68 %
70 %
Americas
14 %
13 %
Asia
10 %
10 %
Africa
3 %
3 %
Other
5 %
4 %
During the year ended December 31, 2024, total revenue of $16,427 or 5% (year ended December 31,
2023 - $53,671 or 16%) of consolidated revenue, was earned from the Company's OEM launch partner
reported under its Heavy-Duty OEM segment. No other single customer accounted for more than 10%
of consolidated revenue in 2024 and 2023.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
74
22.
Segment information (continued):
As at December 31, 2024, total goodwill of $2,876 (December 31, 2023 - $3,066) was allocated to the
Light-Duty segment.
As at December 31, 2024, total long-term investments of $36,866 (December 31, 2023 - $1,558) were
allocated to the Corporate segment and $2,866 (December 31, 2023 - $3,234) to the Light-Duty
segment.
The measure of segment assets evaluated by the CODM are total assets as reported on the
consolidated balance sheet. Total assets are allocated by segment as follows:
Years ended December 31,
2024
2023
Light-Duty
$
202,820
$
234,740
High-Pressure Controls & Systems
8,411
9,382
Heavy-Duty OEM
9,138
84,808
Corporate and unallocated
71,252
26,818
Total consolidated assets
$
291,621
$
355,748
Cespira's total assets as at December 31, 2024 were $88,742 (December 31, 2023 - nil).
23.
Financial instruments:
Financial risk management
The Company has exposure to liquidity risk, credit risk, foreign currency risk and interest rate risk.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they are
due. The Company has a history of losses and mostly negative cash flows from operations since
inception. At December 31, 2024, the Company has $37,646 of cash, cash equivalents including $406 in
restricted cash (see note 3(c)).
The following are the contractual maturities of financial obligations as at December 31, 2024:
Carrying
amount
Contractual
cash flows
< 1 year
1-3 years
4-5 years
>5 years
Accounts payable and accrued liabilities
(note 13)
$
88,123
$
88,123
$
88,123
$
—
$
—
$
—
Term loan facilities (note 16)
31,740
33,047
14,729
14,220
4,098
—
Other bank financing (note 16)
374
375
126
249
—
—
Capital lease obligations (note 16)
1,613
1,715
501
720
494
—
Operating lease obligations (note 14)
19,057
21,616
2,624
5,037
2,903
11,052
$ 140,907
$
144,876
$ 106,103
$ 20,226
$
7,495
$
11,052
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
75
23.
Financial instruments (continued):
Credit risk
Credit risk arises from the potential that a counterparty to a financial instrument fails to meet its
contractual obligations and arises principally from the Company’s accounts receivable.
The Company is exposed to credit risk with respect to uncertainties as to timing and amount of
collectability of accounts receivable. As at December 31, 2024, 65% (December 31, 2023 - 88%) of
accounts receivable relate to customer receivables, and 35% (December 31, 2023 - 12%) relates to
amounts due from related parties and income tax authorities for value added taxes and other tax
related refunds. In order to minimize the risk of loss for customer receivables, the Company’s
extension of credit to customers involves review and approval by senior management as well as
progress payments as contracts are executed. Most sales are invoiced with payment terms in the
range of 30 days to 90 days. Refer to note 3(d) for the Company's policy with respect to an allowance
for credit losses.
Foreign currency risk
Foreign currency risk is the risk that the fair value of future cash flows of financial instruments will
fluctuate because of changes in foreign currency exchange rates. The Company conducts a significant
portion of its business activities in foreign currencies, primarily the U.S. dollar and the Euro. The
Company are subject to foreign currency exchange rate risk to the extent that our costs are
denominated in currencies other than those in which the Company earn revenues. In addition, since
the Company's consolidated financial statements are reported in U.S. dollars, changes in foreign
currency exchange rates between the U.S. dollar and other currencies have had, and will continue to
have, an impact on the Company's results of operations, financial condition and cash flows.
Cash and cash equivalents, accounts receivable, accounts payable, and long-term debt that are
denominated in foreign currencies will be affected by changes in the exchange rate between the
Canadian dollar and these foreign currencies. The Company’s functional currency is the Canadian
dollar.
A 5% increase/decrease in the relative value of the U.S. dollar against the Canadian dollar and Euro
compared to the exchange rates in effect for the year ended December 31, 2024 would have resulted
in lower/higher income from operations of approximately $1,200. This assumes a consistent 5%
appreciation in the U.S. dollar against the Canadian dollar and the Euro throughout the fiscal year. The
timing of changes in the relative value of the U.S. dollar can affect the magnitude of the impact that
fluctuations in foreign exchange rates have on our income from operations.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. The Company is subject to interest rate risk on
certain long-term debt with variable rates of interest. The Company limits its exposure to interest rate
risk by entering into interest rate swaps that serve as a hedging mechanism against potential
fluctuations in future interest rates on certain financial instruments and continually monitoring and
adjusting portfolio duration to align to forecasted cash requirements and anticipated changes in
interest rates.
If interest rates for the year ended December 31, 2024 had increased or decreased by 200 basis points,
with all other variables held constant, net loss for the year ended December 31, 2024 would have
increased or decreased by $305.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
76
23.
Financial instruments (continued):
Fair value of financial instruments
As at December 31, 2024, cash and cash equivalents are measured at fair value on a recurring basis
and are included in Level 1.
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities approximate their fair values due to the
short-term period to maturity of these instruments.
The long-term investments represent the Company's interests in Cespira, MWTL, and other
investments. Cespira and MWTL are accounted for using the equity method. Other investments are
accounted for at fair value.
The carrying values reported in the consolidated balance sheets for obligations under capital and
operating leases, which are based upon discounted cash flows, approximate their fair values.
The carrying values of the term loan facilities, and other bank financing included in the long-term
debt (note 16) are carried at amortized costs, which approximate their respective fair values as at
December 31, 2024. The interest rate swaps (note 16) are accounted for at fair value using the quoted
market prices.
The Company categorizes its fair value measurements for items measured at fair value on a recurring
basis into three categories as follows:
Level 1 –
Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 –
Observable inputs other than Level 1 prices such as quoted prices for similar assets
or liabilities; quoted prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for substantially the
full term of the assets or liabilities.
Level 3 –
Inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
When available, the Company uses quoted market prices to determine fair value and classify such
items in Level 1. When necessary, Level 2 valuations are performed based on quoted market prices for
similar instruments in active markets and/or model–derived valuations with inputs that are observable
in active markets. Level 3 valuations are undertaken in the absence of reliable Level 1 or Level 2
information.
WESTPORT FUEL SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in thousands of United States dollars except share and per share amounts)
Years ended December 31, 2024 and 2023
77