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Westport Reports Third Quarter 2024 Financial Results
Westport Fuel Systems Inc. (" Westport ") (TSX:WPRT Nasdaq:WPRT), a leading supplier of advanced alternative fuel systems and components for the global transportation industry, reported financial results for the third quarter ended September 30, 2024, and provided an update on operations. All figures are in U.S. dollars unless otherwise stated.
"Westport delivered solid results in the third quarter of 2024. Although revenue was down, this decrease was more than outweighed by the revenue earned at Cespira and we delivered significant improvement in Adjusted EBITDA. We continue to execute against our three strategic pillars - harnessing the potential of our HPDI joint venture, enhancing operational excellence, and driving continuous innovation to shape the world's alternative fueled future. The third quarter represented the first full quarter with Cespira, our HPDI joint venture with Volvo Group, being operational. This, along with the steps we have taken with respect to various cost cutting measures, has enabled Westport to decrease our costs including research and development as well as sales, general and administrative expenses by approximately 40 percent as compared to the same period last year.
We remain confident in the role that alternative fuels will play in driving sustainability in the future of the transportation and industrial application space. Regarding hydrogen, we acknowledge the slowdown in infrastructure development in the global market, which has tapered the adoption of automotive and industrial applications powered by hydrogen. The success of this market depends on the installation of infrastructure and the production of clean hydrogen, both of which have been slow to materialize. However, we are steadfast in our belief that hydrogen as a fuel will prevail – although gradual as opposed to immediate – and become a clean fuel source that is adopted worldwide. In the meantime, Westport currently delivers a suite of proven and innovative components and systems for a wide range of affordable alternative low-carbon fuels such as natural gas, renewable natural gas, propane, and hydrogen. We are driving cleaner performance by addressing lower emissions regulations with practical applications using innovation available today.
As we navigate the next quarter, and the next year, Westport is strongly committed to driving operational excellence, nurturing innovation, and supporting Cespira, all to position the Company for sustainable growth in an evolving landscape. We are focused and dedicated to the present and our future."
Dan Sceli, Chief Executive Officer, Westport Fuel Systems
Q3 2024 Highlights
- Revenues decreased by 14% to $66.2 million compared to $77.4 million in the same quarter last year, primarily driven by the transition of the Heavy-Duty OEM revenues now being reflected in the results of Cespira, of which Westport accounts for as an equity investment.
- Net loss of $3.9 million for the quarter, an improvement over the net loss of $11.9 million for the same quarter last year. This was primarily the result of an improvement in gross margin by $1.3 million compared to the prior year quarter, a significant decrease in operating expenditures and depreciation and amortization as costs previously associated with our HPDI business are now accrued by Cespira, cost reductions in Westport and a net foreign exchange gain of $1.1 million.
- Continued improvement in Adjusted EBITDA [2] achieving negative $0.8 million compared to negative $3.0 million for the same period in 2023.
- Cash and cash equivalents were $33.3 million at the end of the third quarter of 2024. Cash used in operating activities was $9.9 million primarily from an increase in working capital of $11.4 million. Cash provided by investing activities included the sale of investments for $9.6 million related to the collection of $8.4 million from the formation of the HPDI JV and sale of our ownership interest in Westport Weichai Inc. ("Weichai"), partially offset by the purchase of capital assets of $2.1 million. Cash used in financing activities represented debt repayments of $7.0 million in the quarter.
- In September 2024, HPDI Technology, the joint venture between Volvo Group and Westport, launched as Cespira.
| CONSOLIDATED RESULTS | ||||||||||||||||||
| ($ in millions, except per share amounts) | 3Q24 | 3Q23 | Over / (Under) % | 9M24 | 9M23 | Over / (Under) % | ||||||||||||
| Revenues | $ | 66.2 | $ | 77.4 | (14 | )% | $ | 227.2 | $ | 244.7 | (7 | )% | ||||||
| Gross Margin (2) | 14.5 | 13.2 | 10 | % | 43.3 | 40.9 | 6 | % | ||||||||||
| Gross Margin % (2) | 22 | % | 17 | % | 19 | % | 17 | % | ||||||||||
| Income (loss) from Investments Accounted for by the Equity Method (1) | (2.8 | ) | 0.4 | (800 | )% | (3.4 | ) | 0.6 | (670 | )% | ||||||||
| Net Loss | $ | (3.9 | ) | $ | (11.9 | ) | 68 | % | $ | (11.7 | ) | $ | (35.8 | ) | 67 | % | ||
| Net Loss per Share - Basic | $ | (0.22 | ) | $ | (0.70 | ) | 69 | % | $ | (0.68 | ) | $ | (2.08 | ) | 67 | % | ||
| Net Loss per Share - Diluted | $ | (0.22 | ) | $ | (0.70 | ) | 69 | % | $ | (0.68 | ) | $ | (2.08 | ) | 67 | % | ||
| EBITDA (2) | $ | (0.3 | ) | $ | (8.6 | ) | 97 | % | $ | (0.5 | ) | $ | (25.0 | ) | 98 | % | ||
| Adjusted EBITDA (2) | $ | (0.8 | ) | $ | (3.0 | ) | 73 | % | $ | (9.4 | ) | $ | (11.5 | ) | 18 | % | ||
(1) This includes income (loss) from Minda Westport Technologies Limited and Cespira.
(2) Gross margin, EBITDA and Adjusted EBITDA are non-GAAP measures. Please refer to GAAP and NON-GAAP FINANCIAL MEASURES for the reconciliation to equivalent GAAP measures and limitations on the use of such measures.
Segment Information
Light-Duty Segment
Revenue for the three and nine months ended September 30, 2024 was $61.5 million and $194.2 million, respectively, compared with $60.2 million and $200.4 million for the three and nine months ended September 30, 2023.
Light-Duty revenue increased by $1.3 million for the three months ended September 30, 2024 compared to the prior year quarter, primarily a result of an increase in sales in our light-duty OEM and IAM businesses and partially offset by decreased sales in our fuel storage, DOEM, and electronics businesses. For the nine months ended September 30, 2024, Light-Duty revenue decreased by $6.2 million compared to the prior year period, primarily driven by a decrease in sales in our DOEM, and fuel storage businesses and partially offset by an increase in sales in our light-duty OEM, electronics, and IAM businesses.
Gross margin increased by $1.9 million to $13.9 million, or 23% of revenue, for the three months ended September 30, 2024 compared to $12.0 million, or 20% of revenue, for the three months ended September 30, 2023. This was primarily driven by a slight increase in sales volumes, a change in sales mix with increases in sales to European customers and reduction in sales to developing regions.
Gross margin increased by $4.3 million to $41.4 million, or 21% of revenue, for the nine months ended September 30, 2024 compared to $37.1 million, or 19% of revenue, for the nine months ended September 30, 2023. 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.
Westport began supplying its Euro 6 LPG fuel system to its global OEM customer in early 2024. Despite a slower start to production than anticipated, Westport expects to exceed planned Euro 6 LPG fuel system deliveries in 2024. This production supply agreement has been instrumental in improving revenue and delivering higher margins, which more than offset the decline in revenue as a result of a key delayed OEM customer continuing to work through their inventory. Production for the Euro 7 LPG fuel system for the same global OEM customer is anticipated to begin mid-to-late 2025.
The Light-Duty segment continues to evolve our LPG fuel system solution, providing more customers with a cost-competitive alternative fuel solution. Recently, two new product platforms were announced utilizing our systems. Westport was excited to be part of the first-ever OEM hybrid vehicle powered by HEV and LPG technologies - the Kia Niro Tri-Fuel in Italy. This revolutionary product, born from Westport's historic partnership with Kia Italia, offers three fuel sources—petrol, electric, and LPG—delivering over 1,600 km on full tanks with reduced emissions and uncompromised performance. Westport also announced the global availability of a LPG fuel system for the RAM 1500 Hurricane 3.0 DI Twin Turbo engine, enabling customers to benefit from lower emissions and lower fuel costs.
High-Pressure Controls & Systems Segment
Revenue for the three and nine months ended September 30, 2024, was $1.6 million and $7.4 million, respectively, compared with $3.7 million and $9.4 million for the three and nine months ended September 30, 2023. The decrease in revenue for the three months ended September 30, 2024 compared to the prior year quarter was primarily driven by the general slowdown in the hydrogen infrastructure development leading to a slower adoption of automotive and industrial applications powered by hydrogen.
Gross margin decreased by $0.6 million to $0.4 million, or 25% of revenue, for the three months ended September 30, 2024 compared to $1.0 million or 27% of revenue, for the three months ended September 30, 2023. Gross margin decreased by $0.9 million to $1.5 million, or 20% of revenue, for the nine months ended September 30, 2024 compared to $2.4 million, or 26% of revenue, for the nine months ended September 30, 2023. This was primarily driven by lower sales volume in the quarter.
Heavy-Duty OEM Segment
Revenue for the three and nine months ended September 30, 2024 includes revenue from the HPDI business from January 1 to June 3, the closing date of the transaction to form Cespira plus revenue earned under a transitional services agreement. Revenue for the three and nine months ended September 30, 2024 was $3.1 million and $25.6 million, respectively, compared with $13.5 million and $34.9 million for the three and nine months ended September 30, 2023.
The decrease in revenue for the three months ended September 30, 2024 is a result of the transition of this business to Cespira and the resulting change in accounting treatment. We continue to earn service revenue from Cespira under the transitional services agreement for the quarter, which is represented in this segment.
Gross margin was $0.2 million, or 6% of revenue, for the three months ended September 30, 2024 compared to $0.2 million or 1% of revenue, for the three months ended September 30, 2023. Gross margin decreased by $1.0 million to $0.4 million, or 2% of revenue, for the nine months ended September 30, 2024 compared to $1.4 million, or 4% of revenue, for the nine months ended September 30, 2023.
Selected Cespira Statements of Operations Data
We account for Cespira using the equity method of accounting for investments.
The following table sets forth a summary of the financial results of Cespira for the three months ended September 30, 2024 and the period between June 3, 2024 to September 30, 2024:
| Three months ended September 30, | Change | Period ended September 30, | Change | ||||||||||||||||||||||||||||
| (in millions of U.S. dollars) | 2024 | 2023 | $ | % | 2024 | 2023 | $ | % | |||||||||||||||||||||||
| Revenue | $ | 16.2 | $ | — | $ | 16.2 | — | % | $ | 20.3 | $ | — | $ | 20.3 | — | % | |||||||||||||||
| Gross margin 1 | $ | (1.1 | ) | $ | — | $ | (1.1 | ) | — | % | $ | (0.9 | ) | $ | — | $ | (0.9 | ) | — | % | |||||||||||
| Gross margin % 1 | (7 | )% | — | % | (4 | )% | — | % | |||||||||||||||||||||||
| Operating loss | $ | (5.3 | ) | $ | — | $ | (5.3 | ) | — | % | $ | (7.3 | ) | $ | — | $ | (7.3 | ) | — | % | |||||||||||
| Net loss attributable to the Company | $ | (3.0 | ) | $ | — | $ | (3.0 | ) | — | % | $ | (4.1 | ) | $ | — | $ | (4.1 | ) | — | % | |||||||||||
(1) Gross margin is a non-GAAP measure. Please refer to GAAP and NON-GAAP FINANCIAL MEASURES for the reconciliation to equivalent GAAP measures and limitations on the use of such measures.
Cespira earned revenue of $16.2 million for three months ended September 30, 2024. For the prior year quarter, the Heavy-Duty OEM segment included our HPDI business which earned $13.5 million. The revenue increase is largely driven by an increase in HPDI systems sold.
Cespira lost $1.1 million on gross margin for three months ended September 30, 2024. For the prior year quarter, the Heavy-Duty OEM segment earned $0.2 million.
Cespira had operating losses of $5.3 million for the three months ended September 30, 2024. For the prior year quarter, Heavy-Duty OEM had incurred operating losses of $3.7 million.
As previously announced, Westport and Weichai are parties to a technology development and supply agreement which contains an obligation for Weichai to order, and Westport to supply, certain volumes of HPDI fuel system components prior to December 31, 2024. Significant orders for HPDI fuel system components against this agreement have not been received to date and we do not currently anticipate that orders for any significant additional volumes will be received prior to year end. Westport and Cespira continue to collaborate with Weichai Power Co. Ltd ("Weichai Power") on an HPDI fuel system equipped version of the Weichai Power engine platforms. The parties are currently discussing the next stages of this work and the obligations of each party going forward.
| SEGMENT RESULTS | Three months ended September 30, 2024 | ||||||||||||||
| Revenue | Operating income (loss) | Depreciation & amortization | Equity income (loss) | ||||||||||||
| Light-Duty | $ | 61.5 | $ | 2.4 | $ | 1.6 | $ | 0.2 | |||||||
| High-Pressure Controls & Systems | 1.6 | (1.2 | ) | 0.1 | — | ||||||||||
| Heavy-Duty OEM | 3.1 | 0.9 | — | — | |||||||||||
| Corporate | — | (1.0 | ) | 0.1 | (3.0 | ) | |||||||||
| Cespira | 16.2 | (5.3 | ) | 0.9 | — | ||||||||||
| Total segment | 82.4 | (4.2 | ) | 2.7 | (2.8 | ) | |||||||||
| Less: Cespira | 16.2 | (5.3 | ) | 0.9 | — | ||||||||||
| Total consolidated | $ | 66.2 | $ | 1.1 | $ | 1.8 | $ | (2.8 | ) | ||||||
| SEGMENT RESULTS | Three months ended September 30, 2023 | ||||||||||||||
| Revenue | Operating loss | Depreciation & amortization | Equity income | ||||||||||||
| Light-Duty | $ | 60.2 | $ | (3.0 | ) | $ | 1.7 | $ | 0.4 | ||||||
| High-Pressure Controls & Systems | 3.7 | (0.4 | ) | 0.1 | — | ||||||||||
| Heavy-Duty OEM | 13.5 | (3.7 | ) | 1.3 | — | ||||||||||
| Corporate | — | (5.0 | ) | 0.1 | — | ||||||||||
| Total Consolidated | $ | 77.4 | $ | (12.1 | ) | $ | 3.2 | $ | 0.4 | ||||||
Q3 2024 Conference Call
Westport has scheduled a conference call on November 13, 2024, at 7:00 am Pacific Time (10:00 am Eastern Time) to discuss these results. To access the conference call please register at https://register.vevent.com/register/BI0e453d34cd1c4f7da856b4eec14f0d4c . The live webcast of the conference call can be accessed through the Westport website at https://investors.wfsinc.com/ .
The webcast will be archived on Westport's website at https://investors.wfsinc.com.
Financial Statements and Management's Discussion and Analysis
To view Westport financials for the second quarter ended September 30th, 2024, please visit https://investors.wfsinc.com/financials/
About Westport Fuel Systems
At Westport Fuel Systems, we are driving innovation to power a cleaner tomorrow. We are a leading supplier of advanced fuel delivery components and systems for clean, low-carbon fuels such as natural gas, renewable natural gas, propane, and hydrogen to the global transportation industry. Our technology delivers the performance and fuel efficiency required by transportation applications and the environmental benefits that address climate change and urban air quality challenges. Headquartered in Vancouver, Canada, with operations in Europe, Asia, North America, and South America, we serve our customers in more than 70 countries with leading global transportation brands. At Westport Fuel Systems, we think ahead. For more information, visit www.wfsinc.com.
Cautionary Note Regarding Forward Looking Statements
This press release contains forward-looking statements, including statements regarding revenue and cash usage expectations, future strategic initiatives and future growth, future of our development programs (including those relating to HPDI and hydrogen), the demand for our products, the future success of our business and technology strategies, intentions of partners and potential customers, the performance and competitiveness of Westport's products and expansion of product coverage, future market opportunities, speed of adoption of natural gas and hydrogen for transportation and terms and timing of current and future agreements as well as Westport's management's response to any of the aforementioned factors. These statements are neither promises nor guarantees, but involve known and unknown risks and uncertainties and are based on both the views of management and assumptions that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activities, performance or achievements expressed in or implied by these forward looking statements. These risks, uncertainties and assumptions include those related to our revenue growth, operating results, industry and products, the general economy, conditions of and access to the capital and debt markets, solvency, governmental policies and regulation, technology innovations, fluctuations in foreign exchange rates, operating expenses, continued reduction in expenses, ability to successfully commercialize new products, the performance of our joint ventures, the availability and price of natural gas and hydrogen, global government stimulus packages and new environmental regulations, the acceptance of and shift to natural gas and hydrogen vehicles, the relaxation or waiver of fuel emission standards, the inability of fleets to access capital or government funding to purchase natural gas and hydrogen vehicles, the development of competing technologies, our ability to adequately develop and deploy our technology, the actions and determinations of our joint venture and development partners, ongoing supply chain challenges as well as other risk factors and assumptions that may affect our actual results, performance or achievements or financial position discussed in our most recent Annual Information Form and other filings with securities regulators. Readers should not place undue reliance on any such forward-looking statements, which speak only as of the date they were made. We disclaim any obligation to publicly update or revise such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in these forward looking statements except as required by National Instrument 51-102. The contents of any website, RSS feed or twitter account referenced in this press release are not incorporated by reference herein.
Contact Information
Investor Relations
Westport Fuel Systems
T: +1 604-718-2046
GAAP and NON-GAAP FINANCIAL MEASURES
Management reviews the operational progress of its business units and investment programs over successive periods through the analysis of gross margin, gross margin as a percentage of revenue, net income, EBITDA and Adjusted EBITDA. The Company defines gross margin as revenue less cost of revenue. The Company defines EBITDA as net income or loss from continuing operations before income taxes adjusted for interest expense (net), depreciation and amortization. Westport Fuel Systems defines Adjusted EBITDA as EBITDA from continuing operations excluding expenses for stock-based compensation, unrealized foreign exchange gain or loss, and non-cash and other adjustments. Management uses Adjusted EBITDA as a long-term indicator of operational performance since it ties closely to the business units' ability to generate sustained cash flow and such information may not be appropriate for other purposes. Adjusted EBITDA includes the company's share of income from joint ventures.
The terms gross margin, gross margin as a percentage of revenue, EBITDA and Adjusted EBITDA are not defined under U.S. generally accepted accounting principles (" U.S. GAAP ") and are not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. EBITDA and Adjusted EBITDA have limitations as an analytical tool, and when assessing the company's operating performance, investors should not consider EBITDA and Adjusted EBITDA in isolation, or as a substitute for net loss or other consolidated statement of operations data prepared in accordance with U.S. GAAP. Among other things, EBITDA and Adjusted EBITDA do not reflect the company's actual cash expenditures. Other companies may calculate similar measures differently than Westport Fuel Systems, limiting their usefulness as comparative tools. The company compensates for these limitations by relying primarily on its U.S. GAAP results and using EBITDA and Adjusted EBITDA as supplemental information.
| Gross margin and Gross margin as percentage of Revenue | |||||||||||||||||||
| (expressed in millions of U.S. dollars) | |||||||||||||||||||
| Three months ended | 3Q23 | 4Q23 | 1Q24 | 2Q24 | 3Q24 | ||||||||||||||
| Revenue | $ | 77.4 | $ | 87.2 | $ | 77.6 | $ | 83.4 | $ | 66.2 | |||||||||
| Less: Cost of revenue | 64.2 | 79.2 | 65.9 | 66.3 | 51.7 | ||||||||||||||
| Gross margin | 13.2 | 8.0 | 11.7 | 17.1 | 14.5 | ||||||||||||||
| Gross margin % | 17.1 | % | 9.2 | % | 15.1 | % | 20.5 | % | 21.9 | % | |||||||||
| EBITDA and Adjusted EBITDA | |||||||||||||||||||
| (expressed in millions of U.S. dollars) | |||||||||||||||||||
| Three months ended | 3Q23 | 4Q23 | 1Q24 | 2Q24 | 3Q24 | ||||||||||||||
| Income (Loss) before income taxes | $ | (12.0 | ) | $ | (14.0 | ) | $ | (12.9 | ) | $ | 6.8 | $ | (2.5 | ) | |||||
| Interest expense (income), net | 0.2 | (0.2 | ) | 0.5 | 0.5 | 0.4 | |||||||||||||
| Depreciation and amortization | 3.2 | 3.3 | 3.2 | 1.7 | 1.8 | ||||||||||||||
| EBITDA | (8.6 | ) | (10.9 | ) | (9.2 | ) | 9.0 | (0.3 | ) | ||||||||||
| Stock based compensation (recovery) | (0.3 | ) | 1.4 | 0.3 | 1.2 | (0.1 | ) | ||||||||||||
| Unrealized foreign exchange (gain) loss | 1.4 | (0.9 | ) | 1.8 | 0.1 | (1.1 | ) | ||||||||||||
| Severance costs | 4.5 | — | 0.5 | 0.2 | 0.1 | ||||||||||||||
| Gain on deconsolidation | — | — | — | (13.3 | ) | — | |||||||||||||
| Loss on sale of investment | — | — | — | — | 0.4 | ||||||||||||||
| Restructuring costs | — | — | — | 0.8 | 0.2 | ||||||||||||||
| Impairment of long-term investments | — | 0.4 | — | — | — | ||||||||||||||
| Adjusted EBITDA | $ | (3.0 | ) | $ | (10.0 | ) | $ | (6.6 | ) | $ | (2.0 | ) | $ | (0.8 | ) | ||||
| Westport Fuel Systems INC. Condensed Consolidated Interim Balance Sheets (unaudited) (Expressed in thousands of United States dollars, except share amounts) September 30, 2024 and December 31, 2023 | |||||||
| September 30, 2024 | December 31, 2023 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents (including restricted cash) | $ | 33,257 | $ | 54,853 | |||
| Accounts receivable | 70,344 | 88,077 | |||||
| Inventories | 66,322 | 67,530 | |||||
| Prepaid expenses | 7,165 | 6,323 | |||||
| Total current assets | 177,088 | 216,783 | |||||
| Long-term investments | 41,322 | 4,792 | |||||
| Property, plant and equipment | 42,665 | 69,489 | |||||
| Operating lease right-of-use assets | 20,433 | 22,877 | |||||
| Intangible assets | 5,953 | 6,822 | |||||
| Deferred income tax assets | 11,696 | 11,554 | |||||
| Goodwill | 3,088 | 3,066 | |||||
| Other long-term assets | 9,389 | 20,365 | |||||
| Total assets | $ | 311,634 | $ | 355,748 | |||
| Liabilities and shareholders' equity | |||||||
| Current liabilities: | |||||||
| Accounts payable and accrued liabilities | $ | 88,760 | $ | 95,374 | |||
| Current portion of operating lease liabilities | 2,656 | 3,307 | |||||
| Short-term debt | — | 15,156 | |||||
| Current portion of long-term debt | 15,260 | 14,108 | |||||
| Current portion of warranty liability | 4,045 | 6,892 | |||||
| Total current liabilities | 110,721 | 134,837 | |||||
| Long-term operating lease liabilities | 17,781 | 19,300 | |||||
| Long-term debt | 23,483 | 30,957 | |||||
| Warranty liability | 1,350 | 1,614 | |||||
| Deferred income tax liabilities | 4,138 | 3,477 | |||||
| Other long-term liabilities | 4,869 | 5,115 | |||||
| Total liabilities | 162,342 | 195,300 | |||||
| Shareholders' equity: | |||||||
| Share capital: | |||||||
| Unlimited common and preferred shares, no par value | |||||||
| 17,264,864 (2023 - 17,174,502) common shares issued and outstanding | 1,245,712 | 1,244,539 | |||||
| Other equity instruments | 9,399 | 9,672 | |||||
| Additional paid in capital | 11,516 | 11,516 | |||||
| Accumulated deficit | (1,086,133 | ) | (1,074,434 | ) | |||
| Accumulated other comprehensive loss | (31,202 | ) | (30,845 | ) | |||
| Total shareholders' equity | 149,292 | 160,448 | |||||
| Total liabilities and shareholders' equity | $ | 311,634 | $ | 355,748 | |||
| Westport Fuel Systems INC. Condensed Consolidated Interim Statements of Operations and Comprehensive Loss (unaudited) (Expressed in thousands of United States dollars, except share and per share amounts) Three and nine months ended September 30, 2024 and 2023 | |||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Revenue | $ | 66,251 | $ | 77,391 | $ | 227,211 | $ | 244,653 | |||||||
| Cost of revenue and expenses: | |||||||||||||||
| Cost of revenue | 51,785 | 64,163 | 183,900 | 203,695 | |||||||||||
| Research and development | 3,266 | 5,748 | 17,519 | 18,796 | |||||||||||
| General and administrative | 7,706 | 12,993 | 29,662 | 33,307 | |||||||||||
| Sales and marketing | 2,770 | 4,088 | 9,497 | 12,557 | |||||||||||
| Foreign exchange (gain) loss | (1,069 | ) | 1,430 | 808 | 4,926 | ||||||||||
| Depreciation and amortization | 751 | 1,100 | 2,514 | 3,158 | |||||||||||
| 65,209 | 89,522 | 243,900 | 276,439 | ||||||||||||
| Income (loss) from operations | 1,042 | (12,131 | ) | (16,689 | ) | (31,786 | ) | ||||||||
| Income (loss) from investments accounted for by the equity method | (2,781 | ) | 448 | (3,438 | ) | 633 | |||||||||
| Gain on deconsolidation | — | — | 13,266 | — | |||||||||||
| Loss on sale of investment | (352 | ) | — | (352 | ) | — | |||||||||
| Interest on long-term debt and accretion on royalty payable | (919 | ) | (568 | ) | (2,125 | ) | (2,058 | ) | |||||||
| Loss on extinguishment of royalty payable | — | — | — | (2,909 | ) | ||||||||||
| Interest and other income, net of bank charges | 569 | 238 | 761 | 1,437 | |||||||||||
| Loss before income taxes | (2,441 | ) | (12,013 | ) | (8,577 | ) | (34,683 | ) | |||||||
| Income tax expense (recovery) | 1,427 | (76 | ) | 3,122 | 1,089 | ||||||||||
| Net loss for the period | (3,868 | ) | (11,937 | ) | (11,699 | ) | (35,772 | ) | |||||||
| Changes in foreign currency translation adjustment | 2,177 | (3,427 | ) | 535 | 1,925 | ||||||||||
| Ownership share of equity method investments' other comprehensive loss | (809 | ) | — | (892 | ) | — | |||||||||
| Other comprehensive income (loss) | 1,368 | (3,427 | ) | (357 | ) | 1,925 | |||||||||
| Comprehensive loss | $ | (2,500 | ) | $ | (15,364 | ) | $ | (12,056 | ) | $ | (33,847 | ) | |||
| Net loss per share: | |||||||||||||||
| Net loss per share - basic | $ | (0.22 | ) | $ | (0.70 | ) | $ | (0.68 | ) | $ | (2.08 | ) | |||
| Net loss per share - diluted | $ | (0.22 | ) | $ | (0.70 | ) | $ | (0.68 | ) | $ | (2.08 | ) | |||
| Weighted average common shares outstanding: | |||||||||||||||
| Basic | 17,264,157 | 17,174,972 | 17,241,469 | 17,172,429 | |||||||||||
| Diluted | 17,264,157 | 17,174,972 | 17,241,469 | 17,172,429 | |||||||||||
| Westport Fuel Systems INC. Condensed Consolidated Interim Statements of Cash Flows (unaudited) (Expressed in thousands of United States dollars) Three and nine months ended September 30, 2024 and 2023 | |||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Operating activities: | |||||||||||||||
| Net loss for the period | $ | (3,868 | ) | $ | (11,937 | ) | $ | (11,699 | ) | $ | (35,772 | ) | |||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||||||
| Depreciation and amortization | 1,790 | 3,250 | 6,753 | 9,270 | |||||||||||
| Stock-based compensation expense | 267 | (310 | ) | 900 | 1,065 | ||||||||||
| Unrealized foreign exchange (gain) loss | (1,069 | ) | 1,430 | 808 | 4,926 | ||||||||||
| Deferred income tax expense (recovery) | 333 | (324 | ) | 678 | (347 | ) | |||||||||
| Loss (income) from investments accounted for by the equity method | 2,781 | (448 | ) | 3,438 | (633 | ) | |||||||||
| Interest on long-term debt and accretion on royalty payable | 18 | 22 | 53 | 316 | |||||||||||
| Change in inventory write-downs | 594 | 500 | 2,030 | 2,078 | |||||||||||
| Loss on extinguishment of royalty payable | — | — | — | 2,909 | |||||||||||
| Change in bad debt expense | 271 | 304 | 122 | 676 | |||||||||||
| Gain on deconsolidation | — | — | (13,266 | ) | — | ||||||||||
| Loss on sale of investments | 352 | — | 352 | — | |||||||||||
| Other | 14 | 144 | 46 | 123 | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||
| Accounts receivable | 13,977 | 2,877 | 23,760 | 2,305 | |||||||||||
| Inventories | (7,788 | ) | 3,359 | (14,242 | ) | 2,231 | |||||||||
| Prepaid expenses | (77 | ) | 1,889 | (665 | ) | 3,296 | |||||||||
| Accounts payable and accrued liabilities | (15,746 | ) | 844 | (3,551 | ) | 1,894 | |||||||||
| Warranty liability | (1,782 | ) | (1,061 | ) | (3,809 | ) | (3,622 | ) | |||||||
| Net cash provided by (used in) operating activities | (9,933 | ) | 539 | (8,292 | ) | (9,285 | ) | ||||||||
| Investing activities: | |||||||||||||||
| Purchase of property, plant and equipment | (2,140 | ) | (4,081 | ) | (12,470 | ) | (11,993 | ) | |||||||
| Proceeds from sale of investments | 9,564 | — | 29,994 | — | |||||||||||
| Proceeds on sale of assets | 38 | — | 607 | 133 | |||||||||||
| Dividends received from investments accounted for by the equity method | — | — | 297 | — | |||||||||||
| Capital contributions to investments accounted for by the equity method | — | — | (9,900 | ) | — | ||||||||||
| Net cash provided by (used in) investing activities | 7,462 | (4,081 | ) | 8,528 | (11,860 | ) | |||||||||
| Financing activities: | |||||||||||||||
| Repayments of operating lines of credit and long-term facilities | (6,965 | ) | (11,397 | ) | (41,042 | ) | (33,077 | ) | |||||||
| Drawings on operating lines of credit and long-term facilities | — | 7,497 | 19,336 | 20,593 | |||||||||||
| Payment of royalty payable | — | — | — | (8,687 | ) | ||||||||||
| Net cash used in financing activities | (6,965 | ) | (3,900 | ) | (21,706 | ) | (21,171 | ) | |||||||
| Effect of foreign exchange on cash and cash equivalents | 1,171 | (856 | ) | (126 | ) | 99 | |||||||||
| Net decrease in cash and cash equivalents | (8,265 | ) | (8,298 | ) | (21,596 | ) | (42,217 | ) | |||||||
| Cash and cash equivalents, beginning of period (including restricted cash) | 41,522 | 52,265 | 54,853 | 86,184 | |||||||||||
| Cash and cash equivalents, end of period (including restricted cash) | $ | 33,257 | $ | 43,967 | $ | 33,257 | $ | 43,967 | |||||||
News Provided by GlobeNewswire via QuoteMedia
Cleantech Market Update: Q3 2024 in Review
AI continues to fuel clean energy demand
As AI continued to gain traction in Q3, awareness grew about the massive amounts of energy it requires.
In a September 3 note, BlackRock analysts Jean Boivin, Beata Harasim and Carolina Martinez Arevalo outline a three-phase roadmap for AI, stating that it's currently in the first stage.
This phase consists of data center buildouts, and the firm identifies economic opportunities for companies providing essential resources such as energy and utilities to support the transition.
Wind and solar have been the leading solutions to meet rising renewable energy demand.
Aaron Halimi, founder and president of California solar developer Renewable Properties, told PV Tech in September that there is greater demand for community solar projects — which are photovoltaic systems that generate power for multiple homes or businesses connected to the electric grid — than there are projects.
“The reason why large tech companies and data centers are participating in community solar is that they are seeing substantial delays in the large utility-scale projects that they have historically procured power from,” he said during an interview at RE+, North America’s largest renewable energy event.
The Gemini Solar + Storage project is one such example. The project, which is run by Quinbrook Infrastructure Partners and its portfolio company Primergy Solar, is one of the largest of its kind in the country. The operation's primary customer is NV Energy, the state’s main power utility. In Q2, Microsoft (NASDAQ:MSFT) signed a US$588 million financing and power purchase agreement with Primergy to purchase energy from the plant when it is operational.
The plant reached commercial operation in Q3, with Primergy reporting that it can generate up to 690 megawatts of renewable clean energy. That’s enough to power about 10 percent of Nevada’s peak power demand. This is significant because major tech companies like Switch, Google, Apple (NASDAQ:AAPL), Meta Platforms (NASDAQ:META) and Block (NYSE:SQ) are expanding their data center operations in the state, driving a surge in energy demand.
In contrast to the solar energy sector, private investment in wind energy appears to be slowing.
A quarterly market report from Oceantic Network on the US offshore wind market indicates that federal and state contributions have been more instrumental in driving its continued expansion.
New England, New Jersey, New York and Maryland signed new offtake agreements and opened new procurement rounds in Q3 as offshore wind farm construction progressed along the east coast.
In addition, the Bureau of Ocean Energy Management approved proposed construction plans for the Maryland Offshore Wind Project, the country’s 10th commercial-scale offshore wind energy project.
With Trump due to take the helm in the US once again in 2025, the future of the solar and wind industry may be subject to uncertainty given the potential energy policy changes under the new administration.
However, Q3 also witnessed a renewed interest in nuclear energy, a sector Trump has shown support for.
"We have to produce massive electricity," Trump said, referencing the power demands of AI during an interview with Shawn Ryan, a former Navy SEAL and host of “The Shawn Ryan Show," in August.
“If I’m president,” he continued, “we’ll do it through natural gas and nuclear."
On September 20, Microsoft signed a power purchase agreement with carbon-free energy producer Constellation Energy (NASDAQ:CEG) to supply the company with carbon-free nuclear energy from Unit 1 on Three Mile Island.
In terms of legislation, the House Appropriations Committee passed House Bill 8997 in July, which would funnel US$9 billion into two nuclear reactor demonstration projects and fund the deployment of one small modular reactor.
Carbon removal solutions key as green energy ramps up
Despite the push toward greener energy, renewable solutions haven't yet reached the scale needed to meet increasing demand, making carbon offset projects a crucial interim measure.
The US Department of Energy (DOE) has incentivized this market by pledging US$35 million to buy carbon removal credits. The DOE’s Office of Clean Energy Demonstrations built on this initiative on September 20, announcing an award of up to US$1.8 billion for commercial direct air capture facilities and infrastructure scaling platforms.
This strong governmental push toward carbon removal solutions appears to have encouraged investment in the sector in 2024. According to data from Crunchbase, businesses focusing on carbon capture, storage and transformation received the largest share of equity and debt financing this year, as well as ample seed funding.
Equity and debt funding to carbon capture-focused companies.
Chart via Crunchbase.
Likewise, major tech companies have given financial support to large-scale carbon offset projects.
Frontier, a buyer of carbon removal credits founded by Alphabet (NASDAQ:GOOGL), McKinsey, Meta, Shopify (NYSE:SHOP) and Stripe in 2022, enabled its fourth round of carbon removal pre-purchases in Q3.
Meta also entered into a carbon offset agreement with BTG Pactual Timberland Investment Group, the forestry arm of Brazilian investment bank BTG Pactual. Under the terms of the deal, which is Meta’s largest carbon removal initiative from a single project to date, the company will purchase up to US$3.9 million in carbon credits from Timberland through 2038. This follows a similar agreement struck between Microsoft and BTG Pactual in Q2.
Meta has pledged to contract a further US$35 million for carbon removal projects in the next year.
EVs gain market share, outlook uncertain post-US election
According to estimates from Kelley Blue Book, the US electric vehicle (EV) market expanded by 11 percent year-on-year in the third quarter of the year, reaching a record-high market share of 8.9 percent.
Tesla (NASDAQ:TSLA) led EV sales in the US with 166,923; however, its market share slipped from 49.7 percent in Q2 to 48.2 percent, challenged by legacy automakers Ford Motor (NYSE:F), General Motors (NYSE:GM) and Honda Motor (NYSE:HMC). Honda's growth was partly driven by sales of the Honda Prologue, a collaborative effort with GM.
Tesla’s sales growth also slowed in Q3, with the Elon Musk-led company selling only 1.7 percent more cars than it in the second quarter. Comparatively, sales grew by over 17 percent from Q1 to Q2. Nevertheless, the company’s share price has grown nearly 40 percent since releasing its Q3 results, which show that energy generation and storage and services drove revenue, while its profit margins benefited from US$739 million in regulatory credit.
An EV study from JD Power that explores consumer attitudes and behaviors toward EVs, shows that the slow expansion of public charging infrastructure continues to be a barrier to mass adoption. According to the US Department of Energy, there are 192,086 publicly available EV charging ports in the US out of a planned 500,000 by 2030.
With Trump’s election, the future growth rate of charging infrastructure is uncertain. Musk’s support of Trump during his campaign could dissuade Trump from implementing policies that would negatively impact Tesla; however, this is just speculation, and it remains to be seen how Tesla and the EV industry as a whole will be impacted.
Investor takeaway
The cleantech sector's future is promising, but faces challenges.
The growth of AI and renewable energy presents opportunities, but policy uncertainty under the Trump administration and infrastructure limitations will need to be addressed. Investors will have to monitor public policy decisions closely to navigate the evolving landscape and identify emerging opportunities in this dynamic sector.
Don’t forget to follow us @INN_Technology or real time updates!
Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.
Troy Minerals
Investor Insight
Troy Minerals' clear strategy for growth, driven by two potentially near-term high-purity silica projects and a diversified exploration portfolio for critical minerals, makes the company an investment opportunity worth keeping a close eye on.
Overview
Troy Minerals (CSE:TROY;OTCQB:TROYF;FSE:VJ3) is a rapidly emerging player in the critical minerals space, focusing on the development of high-purity silica and other essential materials for the clean energy transition.
The company’s diverse portfolio is designed to capitalize on the increasing demand for raw materials needed in high-growth industries such as renewable energy and semiconductors. At the forefront of its portfolio are two high-purity silica projects: Table Mountain in British Columbia and the Tsagaan Zalaa project in Mongolia. These projects were acquired through the strategic purchase of CBGB Ventures in September 2024. Both projects are being targeted for near term production, with Tsagaan Zalaa targeted to come online in 2025 and Table Mountain in 2026. These acquisitions align with Troy Minerals' strategic goal of becoming a key player in supplying critical minerals for the global energy transition.
Sample high-purity silica
In addition to its high-purity silica assets, Troy Minerals is also making significant strides in vanadium and rare earths exploration, with two additional projects located in Wyoming, USA, and Quebec, Canada. These projects provide further diversification and enhance the company’s exposure to critical minerals that are vital to high-growth industries, ranging from aerospace to energy storage.
The company’s assets are strategically positioned in regions with favorable access to infrastructure and proximity to large consuming markets like the United States and China. Troy Minerals is committed to leveraging these assets to unlock significant shareholder value through the successful exploration, development, and eventual production of critical minerals.
High-purity silica is a crucial mineral for the clean energy transition, particularly in the production of solar panels, semiconductors and high-performance glass. The purity and quality of the silica deposits at Troy’s assets make them ideal for these high-tech applications. By 2030, the high-purity silica market is projected to grow to US$104.34 billion, driven by increasing demand for photovoltaic cells used in solar panels, as well as advancements in electronics and fiber optics.
The global shortage of high-purity silica, exacerbated by supply chain disruptions and geopolitical tensions, has created an urgent need for new suppliers. Troy Minerals is well-positioned to advance and develop its projects to help meet this demand by targeting near-term production on both of its silica projects which have high-grade silica
In addition to its focus on high-purity silica, Troy Minerals maintains a diversified portfolio through its vanadium and rare earth elements (REE) assets. These minerals are essential for various industries, including electric vehicles (EVs), renewable energy storage and advanced electronics. The company’s Lake Owen project in Wyoming is prospective for vanadium, while the Lac St. Jacques project in Quebec is focused on REE, particularly neodymium and praseodymium.
Vanadium is critical to produce vanadium redox flow batteries (VRFBs), a promising energy storage technology that offers long-term stability and scalability for renewable energy systems. REEs, on the other hand, are used in the production of permanent magnets, which are integral to wind turbines, EV motors and various electronic devices.
Company Highlights
- Troy Minerals acquired CBGB Ventures in September 2024, securing two flagship high-purity silica projects in British Columbia and Mongolia.
- The Tsagaan Zalaa project in Mongolia is being targeted to commence high-purity silica production by 2025, thereby positioning the company as a key supplier for solar and semiconductor industries.
- The Table Mountain project in British Columbia is being targeted to begin high-purity silica production by 2026, with a 24-month development timeline.
- High-purity silica, similar to the company’s projects, is critical for solar panel production, semiconductors, fiber optics and high-performance glass.
- The company also maintains an exploration portfolio of critical mineral assets, including vanadium and REE, in tier 1 jurisdictions.
Key Projects
Tsagaan Zalaa Project (Mongolia)
The Tsagaan Zalaa project, located near the China-Mongolia border, is a near-term high-purity silica asset that is being targeted to commence production by 2025. The project’s proximity to key consuming markets, such as China, Japan and Korea, provides significant logistical advantages for the transportation of silica.
Tsagaan Zalaa’s silica deposits boast purity levels above 99 percent, making them suitable for advanced technological applications such as solar panels, semiconductors and fiber optics. The project’s minimal overburden and low strip ratio make extraction cost-effective, further enhancing its economic potential. Given the global demand for high-purity silica, this project has the potential to generate significant revenue for Troy Minerals.
Table Mountain Project (British Columbia)
The Table Mountain project, located in British Columbia, Canada, is another high-purity silica asset with near-term production potential. Covering 1,698 hectares, the project is strategically positioned with access to key infrastructure, including roads, power and natural gas, making it a logistically attractive asset for North American markets.
The high-grade silica at Table Mountain is ideal for applications such as solar panels, high-performance glass and electronics. The project is being targeted to begin production by 2026, following a 24-month development timeline. Given the increasing demand for high-purity silica in North America, the Table Mountain project could play a critical role in reducing reliance on imports and enhancing the region’s supply chain resilience.
Lake Owen Project (Wyoming)
The Lake Owen project, located 50 km southwest of Laramie, Wyoming, is an exploration-stage asset focused on vanadium and titanium. The project spans 1,932 acres (782 hectares) and is part of the Proterozoic Lake Owen mafic to ultramafic layered intrusive complex, which is known for its rich vanadium and titanium deposits.
Lake Owen is benefiting from the US Geological Survey’s “Large-scale Earth MRI” program, which provides valuable geological insights and cost savings for exploration. The project has significant potential for semi-massive to massive titanomagnetite deposits with high concentrations of vanadium pentoxide and titanium dioxide. The exploration potential for platinum group elements and gold further adds to the project’s attractiveness.
Lac St. Jacques Project (Quebec)
The Lac St. Jacques project, located 250 km north of Montreal, Quebec, is an REE exploration asset. The project spans 2,889 acres (1,169 hectares) and is easily accessible via roads and proximity to hydro power lines, offering cost-effective logistics and sustainable energy options for future operations.
The rare earth mineralization at Lac St. Jacques is associated with pegmatitic syenite and granite intrusives. The project’s carbonatite deposit is rich in light rare earth elements, particularly neodymium and praseodymium, which are essential to produce permanent magnets used in EV motors and wind turbines. Samples from recent drilling have shown promising concentrations of REEs, with results indicating between 500 and 2,000 parts per million of neodymium and praseodymium.
Management Team
Yannis Tsitos - President
Yannis Tsitos has over 35 years of experience in the mining industry, having spent 19 years with the BHP Billiton group. He has worked on projects in 32 countries including Mongolia, lived and worked in South Africa, Ecuador, Greece and the United Kingdom, and has been working in Canada since 2000. Originally a physicist-geophysicist, he left BHP in 2008, where he had the title of new business manager for Global Minerals Exploration. He has been instrumental in the identification, negotiation and execution of more than 50 exploration, joint venture, royalty, mining and commodity trading agreements over 11 different commodities with juniors, majors, as well as with state exploration and mining companies. He was the president of Goldsource Mines till its recent acquisition (July 2024) by the precious metals' producer, Mako Mining. Tsitos sits on several companies' boards as an Independent Director, has published articles in exploration and mining magazines on relevant topics and has been a strong advocate of anti-corruption policies in the mining industry.
Tsitos has also been part of two discovery teams with BHP Billiton in porphyry-copper and nickel-sulphide deposits. He holds a B.Sc. degree in Physics from the University of Athens and a master's degree in Applied Geophysics and Geology from the University of Birmingham, UK. In addition, he completed management and finance studies as part of an MBA program with Herriot Watt University, Edinburgh.
Rana Vig - CEO
Rana Vig has more than 30 years of business experience, helping launch five business ventures in the private sector. He has been involved in publicly traded companies since 2010, and from 2011 to 2016 he was the president of Musgrove Minerals, an Idaho-focused gold and copper mining exploration company. From 2013 to 2016, he was the chairman and CEO of Continental Precious Minerals, a TSX senior board listed mining exploration company with a focus on advancing one of the largest uranium deposits in the world located in Sweden.
In November 2017, he received the the Senate 150th Anniversary Medal, awarded to top Canadians actively involved in their communities who, through generosity, dedication and hard work, make their hometowns and communities, a better place to live.
Norman Brewster - Director
Norman Brewster’s mineral industry career includes serving on various company boards, financing and developing the Aguas Tenidas Mine in Spain, and negotiating the purchase of the Condestable Mine in Peru. He also led the committee in reviewing the successful acquisition of Iberian Minerals by the Trafigura Group in an all-cash takeover valued at around $497.8 million.
Gurdeep Bains - Director
Gurdeep Bains is a chartered professional accountant. He received his chartered accountant designation from the Institute of Chartered Accountants of BC in 2003 and in 2004 graduated from Simon Fraser University with a Bachelor of Business Administration. From 2000 to 2005, he was a senior auditor, assurance services at KPMG.
From 2005 to 2014, Bains was with Canaccord Genuity as vice-president, internal audit and financial analysis where he was involved in the company’s global expansion by performing the due diligence and integration of $850 million in acquisitions in Canada, US, UK, Australia and China. From June 2014 to October 2017, he was the CFO at OK Tire Stores, an automotive company with over 330 locations across Canada. From October 2017 to March 2019, Bains was CFO at Zenabis, contributing in both finance and business development roles.
Regina Lara Yunes - CFO
Lara Yunes is a chartered professional accountant with a Bachelor of Technology in accounting from the British Columbia Institute of Technology. She is currently a financial reporting manager at Treewalk, providing accounting, financial reporting and compliance services to publicly listed firms. Prior to this, she worked at Smythe LLP as an accountant, offering audit and tax services to both private and public companies.
Carbonxt Group
Investor Insight
In an increasingly eco-conscious global market, Carbonxt makes a compelling investment case leveraging a current, approximate US$900 million addressable market, driven by a strategic joint venture that presents strong revenue and growth potential. This addressable market is anticipated to grow three to five fold to more than US$2 billion following the introduction of new rules to capture forever chemicals.
Overview
Activated carbon is typically derived from sources such as coconut husks and coal, and is among the most common ways to filter contaminants from both water and air.
Activated carbon is so named because the process by which it's produced oxidizes the carbon, 'activating’ a series of small, low-volume pores that considerably increase its surface area. There are a few different methods for producing the material, including carbonization, gas treatment and chemical treatment. It is also invaluable for a wide range of use cases across multiple industries, including healthcare, chemistry, agriculture, oil & gas and even food preparation.
For large-scale industrial use cases, activated carbon typically comes in one of three forms: powdered, pellet and granular. Depending on how the material is treated post-oxidation, activated carbon can be tailored to a multitude of individual use cases. For large-scale use, material cost can range from US$2,000 per tonne to as high as US$6,000 per tonne, presenting a considerable opportunity in activated carbon.
Carbonxt Group (ASX:CG1) is positioned to take full advantage of that opportunity. An innovative manufacturer of custom activated carbon, Carbonxt has locked in a joint venture with US-based partner Kentucky Carbon Processing, forming the joint venture NewCarbon, and effectively expanding Carbonxt’s addressable market and gross margin.
Much of this growth will be courtesy of a new Kentucky facility focused primarily on water treatment. This facility will leverage two pieces of legislation recently announced in the United States — the Environmental Protection Agency's (EPA’s) Clean Water Act and the Bipartisan Infrastructure Deal. The former aims to reduce pollution caused by polyfluoroalkyl substances (PFAS), while the latter provides a total of $10 billion in funding to help companies reduce PFAS contamination.
PFAS are a set of widely-used chemicals that take an incredibly long time to break down. Found in soil, water, air, fish and humans, multiple studies have linked PFAS to severe health problems, which include birth defects, developmental delays, thyroid disease, high blood pressure and increased risk of several types of cancer.
It’s why the EPA is cracking down hard on these chemicals, with additional regulations being proposed to further protect communities from the serious effects of PFAS. These regulations, which are set to begin enforcement between 2024 and 2028, will require the majority of companies in the water industry to upgrade their filtration systems.
Carbonxt provides products specifically targeting PFAS removal. Through the NewCarbon joint venture, the company intends to convert a waste-to-energy plant into an activated carbon plant, considerably increasing its production capacity and allowing it to directly serve the roughly 50,000 water utilities in the United States, which together account for roughly 50 percent of the granular activated carbon market.
If all goes as planned for Carbonxt, it will fully disrupt that market, unseating the current leader.
Company Highlights
- Carbonxt Group is a manufacturer of patented activated carbon products designed to treat toxic pollutants in both air and water. For example, Carbonxt Group has been awarded a US$159,000 (AU$240,000) research grant by the Florida state government to advance a groundbreaking water remediation study to combat the negative impacts of algae growth on coastal communities.
- Carbonxt currently has an addressable US market of US$290 million with a 5 percent market share. Its joint partnership with Kentucky Carbon Processing has the potential to increase this addressable market to more than $900 million.
- Together, Kentucky Carbon Processing and Carbonxt will form the joint venture company NewCarbon, affording Carbonxt several advantages:
- Increased US-based production capacity to over 20,000 tons per annum with the potential for further expansion.
- Control over input costs, considerably improving base margins.
- High-quality raw materials.
- In the near future, much of Carbonxt's growth will be driven by the United States Environmental Protection Agency's increasing regulation of PFAS.
- There are currently 50,000 water utility companies in the United States, 4,000 of which serve 10,000 or more customers. Collectively, they account for roughly 50 percent of the granular activated carbon market with annual expenditures of over US$300 million.
- Carbonxt is well-positioned to serve these companies, providing activated carbon pellets that offer improved filtration with a lower pressure drop as a replacement for granular activated carbon.
- In addition to a highly experienced leadership team, Carbonxt’s strong revenue and earnings growth potential from NewCarbon make the company an attractive investment prospect.
Core Product
High-performance Activated Carbon
Carbonxt designs specialized activated carbon products for its customers, which consist primarily of industrial sector organizations and power utilities. Available in pellet and powder form, the company's oxidizing, non-brominated activated carbons are non-corrosive and designed to remain efficient throughout their entire lifecycle. Although Carbonxt’s origin and listing is in Australia, its products are manufactured and distributed exclusively within the United States.
Carbonxt is currently focused on developing an activated carbon manufacturing facility in Kentucky, the result of a joint partnership with Kentucky Carbon Processing. Once this facility is operational, water utility companies are expected to form a much larger part of its customer base. The facility is also expected to re-invigorate the company's industrial pellet market sales.
Highlights:
- Strong Market Outlook: Industry demand for powdered and pelletized activated carbon remains strong. Prices have trended considerably upwards over the past year and will likely continue to do so for the foreseeable future.
- Pricing Trends: Carbonxt's primary competitors in the activated carbon market have both announced price increases ranging from 15 to 40 percent. The company's activated carbon products have the potential to offer better filtration at a considerably lower price point.
- Looking Up: Carbonxt has also recently improved its existing carbon manufacturing facilities. This has translated to a more than 20 percent increase in gross margins in the last financial year, with further double digit percentage gains expected in FY24.
- Making a Good First Impression: Carbonxt's high-specification sample products have been well-received by end customers. Management is currently in talks with numerous water utilities to purchase capacity from the company's new facility once it comes online.
- Use Cases: Carbonxt currently manufactures activated carbon products for the following:
- Powdered activated carbons for mercury and flue gas component removal. Customers for this use case include coal-fired power plants, cement plants and industrial boilers & incinerators. Carbonxt manufactures a specialized activated carbon for each type of customer.
- Pelletized activated carbon for the removal of VOCs and hydrogen sulphide from gas streams.
- High-quality pelletized activated carbons designed to remove drinking water contaminants as well as taste and odor compounds.
- Contract Agreements: Carbonxt has secured a $4.3 million purchase order for activated carbon (AC) products from US utility Wisconsin Public Service. The company also secured a four-year contract extension to supply premium PAC products to Reworld, a global leader in sustainable waste solutions. The deal will generate group revenues of approximately $6 million per annum for the duration of the contract.
Management Team
David Mazyck – President, NewCarbon (the Kentucky JV) and Director of Technology
Dr. David Mazyck is a world-leading expert on activated carbon (AC) and its applications including mercury capture. He has developed AC products for major multinational AC manufacturers and has regularly consulted them on technical issues. Mazyck is the former chairman of the Activated Carbon Standards Committee for the American Waterworks Association and has developed products for NASA.
He received his PhD in environmental engineering from Penn State University, where he also earned a PhD minor in fuel science.
Matthew Driscoll - Chairman
Matthew Driscoll has significant experience across several industries, including online technologies, financial services, fintech, cleantech, property and resources. He has more than 30 years’ experience in capital markets and the financial services industry and is an accomplished company director in roles across listed and private companies.
He has significant experience in international business growth, mergers and acquisitions, equity and debt raisings and building strategic alliances. His current directorships include NED Energy Technologies, NED Blina Minerals, NED Eco Systems, and NED Smoke Alarms Holdings.
Warren Murphy - Managing Director
Warren Murphy has led a large number of acquisitions and financings across the energy, resources and infrastructure sectors. This includes the development of over 2,000 MW of Greenfields power stations and the acquisition of over 3,000 MW of generation assets.
He was co-head of the Australian Infrastructure & Project Finance Group and Head of Energy at Babcock & Brown based in the Sydney office and led the development of Babcock & Brown’s energy sector capability in Australia and New Zealand, including the founding of Infigen Energy and its unlisted predecessor, Global Wind Partner, where he served as a director from inception until June 2009.
Murphy was also a director of the ASX-listed Alinta and Sydney Gas, as well as the unlisted Coogee Resources.
Dr. Regina Rodriguez - Senior Executive
Dr. Regina Rodriguez has a PhD from the University of Florida, where she received the prestigious National Science Foundation Graduate Student Fellowship. She was the chairperson of the Activated Carbon Standards Committee for the American Waterworks Association.
Rodriguez holds nine patents. Her leadership has resulted in one-of-a-kind sorbents and systems for power stations and water treatment.
Imtiaz Kathawalla – Independent Director
Imtiaz Kathawalla was a vice-president at NYSE-listed Cabot Corporation, a global specialty chemical company where he had a 27-year career. Kathawalla's most recent position with Cabot Corporation was as general manager of Cabot's purification solutions division. He ran the group's US$300-million global activated carbon business where he oversaw a material increase in EBITDA before managing the sale of the business to a large private equity group.
Nicholas Andrews – Independent Director
Nicholas Andrews has held the role of executive chairman and CEO at Magontec (ASX:MGL), an established business in the global magnesium sector. He is a member of the executive committee and serves on the board of the International Magnesium Association. Prior to his executive career, Andrews held several senior roles in the financial services sector across both investment management and investment banking.
