Westport Fuel Systems, Inc. Stock

Thank you. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ashley Nuell. Please go ahead.

Thank you. Good morning, everyone. Welcome to Westport Fuel Systems' conference call regarding its second quarter 2026 financial and operational results. This call is being held to coincide with the press release containing Westport's financial results issued yesterday after markets closed. On today's call, speaking on behalf of Westport, will be Chief Executive Officer, Dan Sceli, and Chief Financial Officer, [ Elizabeth Owens ]. Attendance on this call is open to the public, but questions will be restricted to the investment community.

You are reminded that certain statements made on this conference call and our responses to certain questions may constitute forward-looking statements within the meaning of U.S. and applicable Canadian securities laws. Forward-looking statements are based on current expectations and involve risks and uncertainties that could cause actual results to differ materially. Please refer to Westport's filings for a more complete discussion of these risks.

Before I turn the call over to Dan, I wanted to highlight that since our first quarter release in May, Westport has continued to advance several important corporate and commercial priorities, including Cespira's hydrogen development agreement with Volvo and the completion of the US$10 million offering and concurrent private placement. With that, I will turn the call over to you, Dan.

Thanks, Ashley, and good morning, everyone. Q2 was an important quarter for Westport. We continue to execute against our strategy of focusing the business around high-impact, scalable clean transportation solutions, where our technology can deliver meaningful economic and emissions benefits without compromising performance. The quarter was also marked by important developments platform for future growth. First, Cespira, our joint venture with Volvo Group, signed an agreement with Volvo Group to complete development of a hydrogen fuel engine.

This is an important milestone because it reinforces the relevance of HPDI technology across multiple low-carbon fuels, including hydrogen, natural gas, and renewable natural gas. It also further validates the role of internal combustion engine technology as part of the practical pathway to decarbonizing heavy-duty transport. Second, we completed a US$10 million offering in June. This financing provided additional working capital to support our ongoing operations and strategic priorities as we continue to advance the business. We recognize the importance of managing capital carefully, and we remain focused on balancing investment and growth opportunities with continued financial discipline.

Operationally, the quarter continued to reinforce the strategic value of our core platforms. At Cespira, we remain encouraged by the commercial momentum we are seeing in LNG-powered heavy-duty trucks and by the broader market context supporting adoption. Q1 results showed strong year-over-year revenue growth, and in Q2, we continued building on that foundation through development work, customer engagement, and the hydrogen engine development agreement with Volvo. We have consistently indicated that 2027 would be the break-even year for Cespira, and the results we are seeing continue to build credibility behind that expectation.

Since inception, Cespira has delivered quarter-over-quarter revenue growth, with growth delivered in Q2 being particularly significant. That momentum, combined with continued leverage as volumes scale, reinforces our confidence that Cespira is progressing toward the financial profile we have been targeting for next year. The message is clear. Cespira is not a single-fuel opportunity. It is a platform that can support multiple lower-carbon pathways for heavy-duty transport while preserving the power, range, and reliability fleets require.

The volume growth we are seeing is being supported by a more resilient commercial backdrop for LNG heavy-duty trucking. Despite ongoing geopolitical tensions, the price differential between LNG and diesel has continued to show consistency, reinforcing the economic case for fleets evaluating lower-carbon alternatives that can also support operating cost discipline. At the same time, recent regulatory developments in the European Union are increasing the strategic value of emissions-reducing technologies. OEMs are now able to generate additional CO2 credits in the years leading up to 2030, which may help with compliance from 2030 onward.

That creates a stronger incentive for earlier deployment of lower-emission heavy-duty technologies such as HPDI, where reduced emissions can translate into avoided compliance costs and potential emission credit value. In North America, our high-pressure CNG fuel system remains an important area of focus. Following our ACT Expo showcase, we continued to build awareness around a solution designed to deliver diesel-like performance with lower fuel cost potential and reduced emissions. Over the last couple of months, we have had the opportunity to demonstrate our truck to several fleets at our Vancouver facility, giving them the opportunity to put a driver into the truck.

The level of engagement we are seeing and the feedback we are receiving reinforce that fleets are looking for practical alternatives that can work within existing operating realities rather than requiring a wholesale change in how they run the business. Our high-pressure controls business also remains a key part of Westport's value proposition. With production underway at our expanded Cambridge, Ontario facility and at GFI's China Hydrogen Innovation Centre and manufacturing facility in Jiangsu, China, we continue to believe this business is well-positioned to serve growing demand across hydrogen, natural gas, and industrial applications. With that, I'll ask [ Elizabeth ] to walk through the financial results in more detail. [ Elizabeth ], over to you.

Thank you, Dan. Our second quarter financial results have demonstrated meaningful progress. From a capital perspective, the June financing strengthened our near-term liquidity profile. Westport closed the sale of 1.6 million common shares and 3.3 million pre-funded warrants in a registered direct offering, together with private placement warrants to purchase up to 4.8 million common shares. The combined effective purchase price was US$2.06 per common share or pre-funded warrant and associated private placement warrant, generating gross proceeds of approximately $10 million before fees and expenses.

The offering proceeds are intended for working capital and general corporate purposes. In addition, if the private placement warrants are exercised in full for cash, Westport would receive additional gross proceeds of approximately US$10 million, although the timing and likelihood of any exercise cannot be predicted. From an accounting perspective, the warrants contain settlement features that require us to account for these warrants as liabilities rather than equity. These liabilities will be re-measured to fair value at each reporting date, with changes recorded through earnings, until the warrants are exercised or expire.

As at the end of June, our cash and cash equivalents position stood at $23.9 million compared to $24.5 million at March 31, 2026. A slight net decrease in cash was primarily driven by our operating losses, including certain one-time costs relating to the financing activities and to our cyber incident in Q1, and by the funding of the Cespira JV and debt repayment. This was offset by proceeds from the financing transaction. In the quarter, our capital contributions to Cespira decreased to $3.5 million in the current quarter compared to Q2 2025, reflecting the improvement of Cespira's financial performance.

We anticipate this number will continue to decrease in the coming year as Cespira continues to drive volume growth. We also paid $1.0 million in debt repayments to EDC and will make our final debt repayment in Q3. Turning to our operating segments, Q2 2026 revenue for our high-pressure controls business was $2.7 million compared with $2.9 million for Q2 2025. The decrease in revenue was primarily driven by lower sales volume in the quarter. That said, at the end of the quarter, we did see a backlog of demand from customers that are waiting to be fulfilled as we continue to improve the production output from our two main manufacturing plants in Canada and China.

Gross profit was $0.1 million or 5% of revenue, similar to what we saw in Q2 2025. We anticipate that as the manufacturing plants in Canada and China continue to work on localizing its supply chain and improving its manufacturing processes and output, gross profit and margin will improve. Since Cespira's beginning, we have driven quarter-over-quarter revenue growth, with Q2 2026 being the strongest at 125% as compared to Q2 2025. The broader strategic direction remains consistent with what we outlined in Q1. Cespira is benefiting from demand for practical lower-carbon heavy-duty solutions.

The hydrogen development agreement signed during the quarter, along with the work completed by the second OEM, all add important technology pathways to the existing LNG and renewable natural gas opportunity. Product revenue was up 127% to $18.9 million compared to $8.3 million in Q2 2025. As Dan mentioned, Cespira's growth is influenced by the favorable price differential between diesel and natural gas and government regulation support in markets like Europe. Aftermarket revenue was $5.5 million compared to $2.6 million, also driven by the increase in sales volumes.

Service revenue was $2.6 million compared to $1.0 million in Q2 of 2025, primarily driven by the milestones achieved. Service revenue allocated to project milestones are weighted differently across the phases of an engineering service revenue project. One of Cespira's significant long-term engineering service revenue projects is expected to complete in Q4 2026, in advance of the anticipated launch of their Euro 7 product. Gross profit was $3.8 million compared to a gross loss of $1.9 million in Q2 2025.

Cespira had a net loss of $2.4 million, a 65% improvement over the $6.7 million in Q2 2025, as they meaningfully increased product revenue and lowered their cost base, and continued to grow and scale the business. Year to date, we have seen our capital contributions to Cespira decrease, a trend that we see continuing as Dan mentioned, as they move towards an expected break-even next year. With that, I'll pass the call back to Dan.

Thank you, [ Elizabeth ]. As we look ahead, Westport is focused on disciplined execution. The developments since our Q1 release reinforce the progress we are making across the business. Cespira continues to advance the use of HPDI technology to perform heavy decarbonization. The hydrogen engine development agreement with Volvo Group of HPDI technology. Our high-pressure CNG solution is gaining visibility in North America, and the June financing provided additional flexibility to continue advancing our priorities.

We are operating in a market where customers are not looking for theory; they are looking for solutions that can reduce emissions, lower operating costs, and maintain the performance they need today. That is where Westport is focused. We believe our technologies are well aligned with the realities of commercial transportation and industrial applications, and we are committed to translating that alignment into commercial traction, improved financial performance, and long-term shareholder value. Thank you for your time today, and we appreciate your continued interest in Westport, and we will now open the call for questions.

Thank you. [Operator Instructions] We'll pause for a moment while we compile our Q&A roster. Our first question comes from Amit Dayal with H.C. Wainwright.

Good to see Cespira coming through in a strong way for you guys. Can you maybe give us a little bit more color on some of the tactical drivers? I know it's a practical solution, you know, it's available, but in terms of any specific sales efforts or customer wins, is there anything that is supporting this trend and how should we think about future growth?

Sure. So I'll break the market for the current LNG system into two chunks. You've got the European Union and then you've got the other countries around the world. The European market is moving forward with its emission credit system with their new mandates. So the trucking companies, OEMs, and the fleets are all looking for ways to meet the new requirements that are coming up. Euro 7 is a big part of that for the new engine from Volvo with our HPDI 3.0. I think that we're going to see more and more of this increased growth.

The market is finding that it's no longer a question of the technology. The technology is proven, it's reliable, and the market's accepting the benefits that come with that. And now what we're seeing is the economic solutions are also becoming very prevalent and giving us the growth that we've been looking for and we knew would come. And so we think it's going to continue. Then outside of the European Union, Volvo is moving and creating beachheads in South America and India. We're in 37 countries now, over 12,000 trucks on the road.

So that adoption is going to continue to grow rapidly, not just in Europe, but in those other global countries. Of course, our plan to bring HPDI to North America is mission-critical as well. We're bringing a new storage system, a CNG system that will allow HPDI to run in North America. For us, it's very exciting to see this significant growth.

Yes, I understand. Thank you for that, Dan. And then just to follow up on the HPDI hydrogen efforts between Cespira and Volvo. There is no sort of requirement for Westport to maybe fund any of this, right? This is just going to be between Cespira and Volvo, and they are going to figure out how to fund this effort, how to bring that to market.

Well, it's a development contract that Volvo is funding the development of the HPDI system hydrogen. So it is a customer-funded development program.

Okay, understood. Yes, that's all I have. I'll get back in queue, guys. Thanks so much.

All right, great. Thanks, Amit.

One moment for our next question. Our next question comes from Eric Stine with Craig-Hallum Capital Group. Your line is open.

So maybe I'll just start with the high-pressure segment. You alluded to some, I guess, unfulfilled demand as your two locations, Canada and China, ramp up. I'm just curious, I mean, is this kind of just the typical ramp-up now that your equipment has been moved to both locations? Or is there something else that's maybe limiting that in visibility that that's a near-term impact?

Yes, it's a bit of a combination. So, you know, the time we had to shut down, pick up the equipment, move it from Europe to both Canada and China, install the equipment, get the facilities certified, and then up and running, that's the primary issue. It's typical transferring of capital equipment and then obviously launching it, training people on this equipment, and getting them hitting volume. So, you know, we're seeing a very typical changeover impact that has left us a bit behind on volume.

And is this something, I mean, once that is rectified in both locations that, you know, some upside to these numbers? I mean, this quarter is the highest high-pressure revenue you've had in, I guess, four. So just curious, do you view that Q2 was limited in a big way on the top line, or how should we think about that?

Well, yes, I think Q1, Q2 were the transition periods as we go into Q2. Q3 and Q4, it's just ramping up volume, meeting the various customer demands. And so I don't think we have any more roadblocks or bottlenecks that would end up hitting the volumes that are in the plan.

Got it. Okay, and then just on Cespira, you mentioned that 2027 is when you're targeting break-even. I know you've now had two consecutive quarters of positive gross margin in that joint venture. You know, just curious how we should think about that. And once you do get to break-even, curious what that does or could you remind us what that does in terms of reducing your capital contribution to the joint venture?

Yes, I mean, the moment they flip over to break-even and don't need cash contributions, that's a huge step in the right direction for both Westport and Volvo. As we said in the talk, you know, volumes are up 125% over the same period last year. It's fantastic, and we see that continued strong growth in all 37 countries that are buying the system today. And with Volvo launching the new Euro 7 engine, which is a much, much improved engine—they've done a fantastic job on that engine from all aspects—combined with our new HPDI 3.0, we think that the market pull is going to be even stronger.

So, we're very excited that we're crossing over that period. We figured it would be, you know, three or four years before we could get there. And with the volumes, we're getting there sooner than we thought. So we're pretty happy about it. We think it's going to continue. Now it's a question of getting the HPDI system into North America and adding volume to that.

Yep. And so just to be clear, the contributions to the joint venture, those are not necessarily dictated over a period of time. That's really dictated by getting to that break-even mark. And then once that is done, by and large, those contributions end?

Yes, it's really a cash need. It was not any fixed numbers that were written into the agreement. It was a case of year by year, quarter by quarter, evaluating the cash needs of the business. Recall that to start the business up back in '24, to be a certified Tier 1, we needed a fully built-out company, all disciplines, all certifications. And so from day one, we had the full overhead cost. And as volumes go up, we're not adding—I mean, that's in place. We don't have to add more of that. And so we're going to continue to take advantage of that volume, and we will not have the cash calls as we have seen for the last two and a half years.

Okay. Thank you very much.

All right. Take care.

And I'm not showing any further questions at this time. I turn the call back to Dan for any further remarks.

Well, I'd like to thank everybody for joining today. I hope you find it helpful.

Pardon me, Dan. I'm sorry, I didn't mean to interrupt. We just did have someone queue up. Did you want to go and take the question?

Sure, absolutely.

Sure, one moment. Our next question comes from Chris Dendrinos with RBC Capital Markets. Your line is open.

Maybe just to start here and follow up on a couple of the prior questions, but following on the Cespira commentary here, and you mentioned some additional work with that second potential OEM customer. Could you just expand on that a little bit, where you all are at with them and possible timing related to, I guess call it, additional milestones or additional advances?

So, we did the original, I think it was a 200-truck trial. And we're at the stage now where they're planning out the second phase of their field trials, which would be much larger than the original field trial. And we're eminently awaiting to hear their planning for that. And so it's probably going to be, you know, another month at least before we hear what their next phase is. But, you know, what we've heard so far is that phase one, the initial field trials went extremely well.

Got it. Thank you. Maybe just to follow up on Eric's question in regards to the high-pressure systems, I'm trying to nail you down on something here. So if you all weren't, kind of call it, bottlenecked on the manufacturing side of things, would you anticipate revenue growth in the back half of this year? Thanks.

I think that the revenue growth is going to come. As I said, we lost about six months in picking up the equipment, moving it, installing it, getting the facilities recertified to the industrial and automotive standards. And so there's still a bit of backlog that we're filling. So, the market itself, the hydrogen market itself is not growing at the rate we thought it would a year ago. I think we've all acknowledged that.

But I think that we're going to see specifically in China, as the government continues to push for the rapid growth of hydrogen across their markets, their mobility markets, we're going to see some volume increases. And in North America and Europe, I think we're going to get right back to plan, and we expect to beat our plan this year on volume.

Got it. Thank you very much. And that was our last question. Back to you, Dan.

All right, well, thank you, everybody, for joining the call. I hope you leave as excited as we are about the growing business for Cespira. It's finally coming to where we all thought it would.

Thank you. Ladies and gentlemen, this concludes today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.

Hello, and welcome to the Annual General and Special Meeting of Shareholders of Westport Fuel Systems, Inc. Please note that today's meeting is being recorded. If you participate in today's meeting and disclose personal information, you will be deemed to consent to the recording, transfer and use of same. If you disclose personal information of another person in today's meeting, you will be deemed to represent and warrant to Computershare and the corporation that you first obtained all required consents for the disclosure, recording transfer and use of such personal information from all appropriate persons before your disclosure. [Operator Instructions]

I would now like to turn the conference over to Mr. Anthony Guglielmin, Chair of the Board of Westport Fuel Systems, Inc. Please go ahead, Mr. Guglielmin.

Good day, ladies and gentlemen, and [Audio Gap]

The first item of formal business is the election of directors. The Board has fixed the number of directors to be elected at 6. The following individuals have been nominated for election as directors to serve until the next annual meeting or until the successors are elected or appointed: Anthony Guglielmin, Michele Buchignani, Bradley Kotush, Daniel Sceli, Karl-Viktor Schaller and Eileen Wheatman. Is there a motion?

This is Elizabeth Owens, and I move that the persons nominated be elected as directors.

This is Lance Follett, and I second the motion. .

The motion is now open for discussion, if any, by registered shareholders, proxy holders on the webcast. To submit a question for discussion on the motion of electing the directors please use the Q&A function on your screen. We will pause a few moments while we wait for any questions on this motion.

Larry, there is no questions in the queue. We can continue.

You have heard the motion, and as there is no further discussion, we will proceed with the vote for the directors. As previously noted, due to conducting this meeting by webcast voting and the requirement to determine the individual votes cast for each director we will need to receive your votes for each director individually. Voting can be completed using the voting button on your screen.

[Voting]

Thank you. We will move on. While we wait final figures in respect of the voting for nominated directors, I can advise that based on the size of the management proxy vote received, the nominated individuals have been duly elected as directors of Westport Fuel Systems, Inc. The final voting totals for each director will be available in the report of voting results to be issued by the corporation after this meeting.

The next item of business is the appointment of auditors. Management has nominated Deloitte LLP, chartered professional accountants, to be appointed as the auditors of Westport Fuel Systems, Inc. to hold office until the close of the next Annual Meeting of Shareholders and the Board of Directors has been authorized to fix their remuneration.

Is there a motion?

I move that Deloitte be appointed as auditors.

I second the motion.

The motion is now open for discussion, if any, by registered shareholders and proxy holders on the webcast. To submit a question for discussion, please use the Q&A function on your screen now. We will pause a few moments while we wait for any questions on this motion.

Thanks, Larry. There's no questions in the queue. You can continue.

Thanks, Ashley. Computershare will now open the poll for votes. Please vote using the voting function on your screen.

[Voting]

Voting has closed. While we wait for the final voting figures to be tabulated, I can confirm that based on the size of the management proxy vote received, Deloitte has been duly appointed as auditors and the motion is carried.

We also have before us an advisory resolution on Westport's approach to executive compensation as described in the information circular. This resolution is advisory only and is not binding. It does not diminish the role and responsibilities of the Board of Directors of the corporation. Rather, it is intended to provide the Board with guidance on whether shareholders support the corporation's approach to executive compensation as disclosed in the information circular.

Can I have a motion, please?

I move that the advisory resolution accepting Westport's approach to executive compensation as described in the information circular be approved.

I second the motion.

The motion is now open for discussion, if any, by registered shareholders and proxy holders on the webcast. To submit a question for discussion, please use the Q&A function on your screen now. We'll pause a few moments while we wait for any questions on this motion.

There are no questions in the queue. You can continue.

You have heard the motion, and as there is no further discussion, we will proceed with the advisory vote. Please use the voting function on your screen to submit your vote.

[Voting]

Voting has closed. Based on the proxies previously received by the management nominees, I can advise that the advisory vote is carried. We also have before us a special resolution approving the name change resolution as described in the information circular. Can I have a motion, please?

I move that the special resolution approving the name change resolution as described in the information circular be approved.

I second the motion.

The motion is now open for discussion, if any, by registered shareholders and proxy holders on the webcast. To submit a question for discussion, please use the Q&A function on your screen now. We will pause a few moments while we wait for any questions on this motion.

There are no questions in the queue. We can continue.

You have heard the motion, and as there is no further discussion, we will proceed with the vote. Please use the voting function on your screen to submit your vote.

[Voting]

Voting has closed. While we wait for the final voting figures to be tabulated, I can confirm that based on the size of the management proxy vote received, the special resolution approving the name change resolution is carried. We will now take questions from the webcast. Any registered shareholder or proxy holder who preregistered and wishes to ask a question may submit a question through the Q&A function on your screen.

There are no questions from registered shareholders or proxy holders on the phone line.

Well, thank you, everyone. Seeing no questions, all formal items of the business on today's agenda have now been considered. There being no other formal business, I declare the formal portion of this annual general and special meeting officially closed and adjourned. On behalf of the Board of Directors and management, we thank you for your participation today.

Thanks, Tony. With the Annual General and Special Meeting now concluded, we invite you all to stay with us for our informal management presentation, following which we will have a question-and-answer session with management.

Dan, over to you.

Thanks, Larry. Good day, and thank you for joining us today. Before I begin, I would like to remind everyone that today's presentation includes forward-looking statements. Please refer to the forward-looking statements caution shown on this slide and the risk factors and other disclosures in Westport's public filings.

Since we reported our first quarter results in May, we have seen meaningful progress across several areas of the business. Most importantly, we have seen even stronger evidence that the market is beginning to understand the strategic value of our portfolio: Cespira's proven HPDI platform, our high-pressure controls capabilities and the opportunity to extend those technologies into the North American heavy-duty transportation market with our CNG storage solution paired with Cespira's HPDI fuel system. We are seeing growing recognition that these are not stand-alone opportunities, but interconnected assets that can create value across multiple pathways and applications.

Cespira remains central to Westport's strategy. The joint venture with Volvo Group is demonstrating the commercial relevance of HPDI fuel system technology in the market today, particularly in LNG applications where fleet economics, emissions reduction and performance all matter. The growth we saw in Q1 reinforces several important points. Customers are adopting the technology at a rapidly increasing pace. Cespira is gaining commercial traction and the platform has the potential to scale across multiple fuel pathways. That is important not only for Cespira but also for Westport because Cespira validates the core HPDI technology that underpins our broader strategy.

As adoption expands and the technology platform evolves, we see opportunities to extend its relevance across additional lower carbon and zero-carbon fuel pathways, creating new avenues for growth over time. A recent example of that growth potential is the development agreement announced earlier this month between Cespira and Volvo Group to finalize the integration and commercialization of HPDI technology for Volvo Group's 13-liter hydrogen engine platform. This milestone represents a natural evolution of the HPDI platform beyond LNG applications and demonstrates the flexibility of the technology to support multiple fuel pathways.

Just as importantly, it reflects a continuing confidence from Volvo Group in both Cespira and HPDI technology. For Westport, this serves as an important proof point that the platform can expand into new markets and applications while maintaining the performance characteristics that heavy-duty customers require. As the industry evaluates practical pathways towards decarbonization, hydrogen internal combustion may become an attractive option in applications where infrastructure cost or operational realities challenge other alternatives.

Since unveiling our new integrated high-pressure CNG storage solution, we have had the opportunity to engage directly with a broad range of industry participants, including some of North America's largest commercial fleets during meetings and demonstrations in Vancouver. The level of interest and quality of feedback have been encouraging and have reinforced our belief that the market is actively searching for practical, commercially viable decarbonization solutions. The conversations we are having increasingly focused on deployment pathways, operating economics and fleet requirements rather than technology feasibility.

Our focus remains on disciplined execution, continuing engagement with fleet and infrastructure partners, advancing demonstrations, validating the value proposition in real-world operating environments and positioning the platform for future commercial opportunities. We recognize that none of this progress matters without the capital required to execute. Since Q1, we have continued to evaluate financing alternatives and engage with the market to support the next phase of Westport strategy. Our recent equity offering was an important step in strengthening our balance sheet and supporting the company's near-term priorities. We are mindful of dilution and the need to be disciplined in how we access capital, but we also believe the market now has a clear understanding of the value we are building through Cespira, our North American market opportunity and our broader high-pressure technology portfolio.

Going forward, our objective is to align financing with milestones. We want to use our market catalysts, partner validation and demonstrated execution to improve our access to capital and support long-term shareholder value.

Thank you again for your support and for your continued confidence in Westport.

Thanks, Dan. I will now take the opportunity to answer any questions. [Operator Instructions]

It looks like there's no further questions on the phone lines. Dan, I'll pass it over to you.

Thank you all for your interest and investment in Westport. You can always reach us at (604) 718-2046 or at [email protected]. Thank you again, and have a wonderful rest of your day. Goodbye.

This concludes today's conference call. Thank you for participating, and have a pleasant day.

Good day, and thank you for standing by. Welcome to the Westport's Q1 2026 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Ashley Nuell. Please go ahead.

Good morning, everyone. Welcome to Westport's conference call regarding the first quarter 2026 financial and operational results. This call is being held to coincide with the press release containing our financial results that was issued yesterday after market close. On today's call, speaking on behalf of Westport will be our Chief Executive Officer and Director, Daniel Sceli; and our Chief Financial Officer, Elizabeth Owens.

Attendance on this call is open to the public, but questions will be restricted to the analyst community. You are reminded that certain statements made on the conference call and our responses to certain -- may constitute forward-looking statements within the meaning of U.S. and applicable Canadian securities laws, and as such, forward-looking statements are made based on our current expectations and involve certain risks and uncertainties.

With that, I will turn the call over to you, Dan.

Thank you, Ashley, and good morning, everyone. I'll turn to our financial results. Cespira's momentum continues to build with revenue up 33% year-over-year in the first quarter that growth is increasingly material to Westport reflecting stronger volumes, broader market adoption of HPDI and progress with the a second OEM. Importantly, we expect this momentum to continue through 2026, supported by favorable fuel economics, tightening emissions regulations and growing OEM and fleet interest in practical low-carbon solutions.

The significance for our investors is not only top line growth, but the financial read-through, as Cespira continues to scale and improve operating performance, we expect our funding requirements for the joint venture to continue to decline. That creates a more direct link between commercial execution at Cespira and improved capital efficiency at Westport. The broader market backdrop also remains supportive Volvo Trucks recently announced it has delivered more than 10,000 gas-powered trucks globally highlighting growing adoption in key European markets. While cognitive market research projects the European LNG heavy truck market to grow at 12.5%, growth rate through [ 2031 ]. Together, those indicators reinforce our view that Cespira is participating in a market with both near-term momentum and multiyear growth potential.

Our high-pressure controls business has also reflected improved results in Q1 2026 with a 21% increase in revenue compared with the same period last year. What makes it truly meaningful is how we delivered it. Our brand GFI Control Systems provides critical components that make this system viable, while AFS ensures that the technologies come together as a complete real-world solution, enabling the performance, reliability and control our customers expect.

Adding to this result, we commenced production at the expanded product development and manufacturing facility in Cambridge, Ontario and GFI's new China Hydrogen Innovation Center and manufacturing facility in Zhangzhou, China. With production underway at all facilities, combined with strong demand from large industrial companies, we remain optimistic about its performance this year, building off this strong start.

Moving on to some recent excitement at the ACT Conference in Las Vegas. I believe it provides some key insights into our experience. Getting this truck to Las Vegas on time, show ready and performing was a complex, high-pressure effort and the fact that we delivered speaks volumes. At ACT, from the moment the show floor opened, we saw strong interest, other exhibitors, fleets and OEMs stopping to take a closer look and excited by what they saw because this is not a concept.

It's a fully integrated platform that proves we can deliver diesel performance with cleaner, more cost-effective fuel today. A focus team brought this to life, but their success reflects something bigger, our ability to execute, to integrate and to lead. As we showcased this platform, we demonstrated what sets us apart, not just innovation but the ability to bring it to market where it matters most and fleets and OEMs are starting to notice. It was clear from the volume of interactions this year compared to previous years that this is an exciting time for Westport. We are making clear steps forward in expanding our technology reach.

What we see growing demand for high-performance, lower emission alternatives. The conference success was a clear signal that we are advancing our high-pressure CNG storage solution into a North American market with real momentum, positioning Westport to capture long-term growth opportunities in the global heavy-duty transportation market.

Now I'll have Elizabeth run through some financial details, and then we'll come back. Elizabeth?

Thank you, Dan, and good morning, everyone. I'll highlight a few key milestones that Westport has achieved the first of which remains our strong cash position through the first quarter of 2026. As of March 31, 2026, our cash and cash equivalents position stood at $24.5 million compared to $27.2 million at December 31, 2025. Net cash used in operating activities from continuing operations was $3.4 million for the quarter ended March 31, 2026 compared to $8.6 million in the prior year an improvement of $5.2 million as a result of changes in working capital.

Our capital contributions to the Cespira joint venture decreased from $4.7 million in the first quarter of 2025 to $2.9 million in Q1 of 2026, reflective of the improvement of Cespira's financial performance. Our total outstanding debt sits at $1.9 million, a reduction of $1 million from the $2.9 million reported at year-end 2025. This debt will be retired in the third quarter of 2026. Our High-Pressure Controls business segment saw meaningful growth with revenue for Q1 2026, increasing 21% to $2.3 million from $1.9 million reported in Q1 2025. Higher year-over-year sales volumes drove the revenue increase with gross profit of $0.5 million, consistent with the prior period.

As Dan highlighted, Cespira's revenue growth is accelerating as we enter 2026. In Q1 2026, total revenue generated was $22.2 million compared to $16.7 million in the same period last year, representing an increase of 33%, driven by higher sales volumes. Cespira product revenue of $19.5 million increased 48%, compared to $13.2 million in Q1 2025. Cespira gross profit improved to $1.6 million compared to $0.4 million one year ago. Gross margin improved in Q1 2026 to 7% from 3% in Q1 2025. Cespira also significantly improved the bottom line with a net loss in Q1 2026 of $2.5 million, a 65% reduction from the $7.1 million net loss reported in the prior year quarter.

This progress is supported by strong market adoption, including Volvo, reaching the milestone of more than 10,000 natural gas trucks on the road equipped with Cespira's HPDI fuel system. We are also encouraged by the continued progress of a second OEM that is currently conducting truck trials, and we're excited about the opportunities ahead as we target an improvement in Cespira's capital requirements.

With that, I'll pass the call back to Dan.

Thank you, Elizabeth. We are operating [indiscernible] continues to strengthen. We are seeing solid year-over-year growth in our Cespira joint venture with Volvo Group supported by increasing demand for LNG-powered heavy-duty trucks in Europe and other parts of the world and favorable fuel economics that are driving adoption.

At the same time, tightening emissions regulations and the need for practical lower emission solutions are reinforcing the role of technologies like ours in the transition of the Heavy-Duty sector. Against this backdrop, Westport is well positioned to capitalize on these trends. Cespira's HPDI fuel system technology [indiscernible] performance with lower emissions, and we are seeing growing validation through increased volumes with both Volvo and an additional OEM undergoing testing as we speak.

The momentum we demonstrated at ACT Expo highlights our ability to bring fully integrated solutions to market, and we are now focused on execution, scaling commercial volumes, advancing our high-pressure CNG solutions into North America and expanding into new regions and applications. Together, these efforts position us to build meaningful scale and capture long-term growth opportunities across the global heavy-duty transportation market.

Thank you. That concludes the discussion.

[Operator Instructions] And our first question will come from the line of Eric Stine of Craig-Hallum Capital Group.

Maybe just starting with Cespira. So the second truck trial, I mean, it does -- I know we just connected, what, a couple of weeks ago but it does feel like you're given a more optimistic tone about that trial. So curious, am I reading that right? And with that in mind, can you remind us of next steps for that or the time line we should look for over the remainder of '26 and into '27?

Sure. Yes. I do feel more optimistic. I mean the truck trial is going really well. So discussions and negotiations continue for the next phase of this, which is a higher volume. The initial truck trial, I think, was around 200 trucks. But moving on to larger volumes and commercializing this is the discussion that's ongoing right now.

Okay. And time line in terms of, I think, last time you said that you expected a decision and maybe it's a decision as part of the negotiations you mentioned later this year. Does that still hold?

It does. Yes, a determination on this project before year-end.

Okay. And then maybe anything -- you talked -- you gave a lot of detail about Q4 and the end of '25 in terms of some of the new markets that Volvo and Cespira seeing momentum on a global basis, obviously, North America, a big focus, but just curious, I mean, are there any other contributors to Q1 that are worth highlighting as awareness of that product expands?

We do see beachheads opening up in India and Brazil. There's already trucks in Peru and Chile. India and Brazil are 2 massive markets. And we're seeing strong interest in those markets to move to alternative fuel. So we're very excited about that opportunity coming to us.

Got it. All right. Maybe last one for me. Just because of how things are trending with the joint venture and expectations that, that momentum continues. Can you just update us on maybe current thoughts on contributions needed to the joint venture here going forward?

Yes. So obviously, you saw that we've been putting it, the contributions are going down [indiscernible] rate, simply because volumes are going up at a steady rate [indiscernible] product revenue alone [indiscernible]. And as we drove 2027 -- mid-2027, [indiscernible] contribution reduced a lot more.

Okay. You were cutting in and out there, but I guess I'll take that, clarify some stuff offline.

And our next question will be coming from the line of Chris Dendrinos of RBC Capital Markets.

I mean maybe just a follow up here a bit on Cespira here. A good quarter with some solid gross margin there. How are you thinking about gross margin for the remainder of the year? And I guess what I'm kind of curious about is you highlighted some deliveries to the test OEM. I'm curious what that volume looks like maybe for the rest of the year and how that's playing out in terms of gross margin?

Yes, sure. So I mean, as we've been talking about for the last few [ years ]. Cespira's margins are going to continue to grow just in volume. We built out this business completely to be a Tier 1 to an automotive OEM like Volvo, you need to have a completely built-out and certified business.

So that was day one, almost 2 years ago, all disciplines, all departments, full certifications in IATF, all of that. So the expense of building of the business was laid down. We're now [indiscernible] forward in time [indiscernible].

Got it. And then maybe just as a follow-up here, there is the service segment, and I think that project rolls off at the end of this year. Is there anything that would potentially come in and replace that?

Yes. I mean that service is -- this is really 2 [ major ] projects, HPDI 3.0, which is in conjunction with Volvo launching [indiscernible] at the end of this year. And it's an advanced HPDI system. It's an advanced Volvo engine. That's the first part that we'll be wrapping up. The second is we are still doing the development work for Volvo's hydrogen project and they've recently announced the [indiscernible] road we are doing that development work over the next couple of years.

So that service work is going to continue. We're looking at additional service work, which engineering development work on a couple of other projects that we're not allowed to talk about yet, as you can understand. And we can -- we hope that we can [indiscernible].

[Operator Instructions] Our next question will be coming from the line of Rob Brown of Lake Street Capital Markets.

Just kind of at a high level, what are the next steps in the North American market? You had good -- kind of a good showing at the ACT Expo and good interest. What's sort of the next steps in the North American market development?

Yes. Rob, I got to tell you, it was more than successful. It was overwhelming. The excitement, the interest that we got at the ACT show we built out a truck, Volvo got us a truck and an engine. We built it out and drove it down from Vancouver to Las Vegas. The funny thing was we had a Chase card.

The truck spent $280 on gas getting there more than the Chase -- or less than the Chase card. And the interest is overwhelming. So there's an awful lot of discussion right now between fleets, dealers and the OEM on what's next. And certainly, we are planning to do more demos, fleet driven demos. There is planning to be done for the EPA certification to launch this. So that's all activity that is picking up pace just coming out of the actual because of the interest from multiple fleets, multiple very large fleets. So we're very excited.

Okay. And then in the High-Pressure Controls business, you had a good step up in gross margin. I assume that has a lot to do with getting China production running. How is the gross margin trend in the controls business going forward?

Yes, we expect down the road is the volume. It is a volume [indiscernible] to move that manufacturing equipment out of Italy and move it to between Cambridge and China.

The China piece was really built out to focus on the China market only for localized cost, localized geopolitics. And of course, we're going to be localizing some of the components. So we expect the margins to grow there, but we need the volume to pick up. There is still the pause in hydrogen. We're hearing from the Chinese government that's going to get pushed forward again.

So the underlying product is a very, very [indiscernible] product that we can get good margins on what we need right now is volume, and that volume is starting to come. And we're seeing [indiscernible] already this year. And one of [indiscernible] call earlier this week are going to [indiscernible]. And as that volume goes [indiscernible].

And I'm showing no further questions. I would now like to turn the call to Dan for closing remarks.

Well, thank you for your time today. [indiscernible] We're excited about where we're headed [indiscernible].

And this concludes today's conference. Thank you for participating. You may now disconnect.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Westport's Fourth Quarter 2025 Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. At this time, I would like to turn the conference over to Ms. Ashley Nuell.

Thank you. Good morning, everyone. Welcome to Westport Fuel Systems' conference call regarding its fourth quarter and full year 2025 financial and operating results. This call is being held to coincide with the press release containing Westport's financial results that were issued yesterday after market close.

On today's call, speaking on behalf of Westport will be Chief Executive Officer and Director, Daniel Sceli; and Chief Financial Officer, Elizabeth Owens.

You are reminded that certain statements made on this conference call and our responses to certain questions may constitute forward-looking statements within the meaning of the U.S. and applicable Canadian securities laws, and as such, forward-looking statements are made based on our current expectations and involve certain risks and uncertainties. With that, I'll turn the call over to you, Dan.

Thank you, Ashley, and good morning, everyone. I want to begin by addressing recent events, and we appreciate the patience and support of our shareholders as we work through our recent cybersecurity incident. Our priority was to ensure the integrity of our IT systems, business continuity and financial reporting, and we are pleased to confirm that this review has been successfully completed. With this behind us, we're looking forward to executing on our strategy and delivering on the next phase of our business objectives.

Turning to our financial results. The past year has been a defining one for Westport, marked by the successful divestiture of our light-duty business, the recent receipt of a $6.5 million payment and further strengthened by Cespira's agreement with a leading OEM to manufacture and deliver HPDI components for a truck trial assessing the future commercialization. These accomplishments, combined with ending the year with over $27 million in cash and very low debt reflect the meaningful progress we have made in sharpening our strategic focus and building a stronger company.

The global heavy-duty transportation market is increasingly recognizing natural gas as a practical lower emission solution available today. This is evidenced by Volvo's recent milestone of delivering more than 10,000 natural gas trucks on the road, underscoring the accelerating adoption of Cespira's HPDI fuel system technology and validates the strategic direction we have taken.

From a market perspective, the U.K. leads to the adoption of HPDI powered LNG trucks, followed by Germany, Sweden, the Netherlands, Norway and France. Emerging gas markets such as India and Latin America are also gaining momentum with volumes seeing steady growth. When we introduced our proprietary CNG fuel storage and delivery system several months ago, we emphasized its potential to significantly expand our addressable market, particularly in North America. Development has progressed well, and our confidence in the commercial opportunity continues to build. We look forward to showcasing this solution at the upcoming Advanced Clean Transportation Expo, ACT, where we will have the opportunity to show up our technology to industry partners and customers.

By integrating advanced high-pressure CNG storage with Cespira's field-proven HPDI fuel system, we match or exceed the performance and efficiency expected from diesel engines with compelling economics in markets where CNG is the natural choice like North America. We believe this innovation meaningfully enables Westport and Cespira to capture new opportunities as we move into field testing.

Our GFI brand through our high-pressure controls business has also delivered important operational milestones. The opening of [ our China facility is one ] of the fastest growing hydrogen markets, and in Canada represents a step in localizing manufacturing, reducing costs and improving competitiveness.

As the transportation industry continues to balance economic realities with sustainability objectives, we are confident that alternative fuel systems, including Cespira's HPDI technology and our high-pressure components provide real-world solutions that deliver both performance and affordability. With the completion of our strategic transition and only a few milestones remaining, a growing market validation of Cespira's expansion, a path to address the North American market and a clear strategic focus. Westport is excited to drive into this next phase.

Now I'll have Elizabeth to run through some financial details and then come back afterwards. Over to you, Elizabeth.

Thank you, Dan. Before I dive into the details, I'll just touch on a few key milestones that has achieved. The first of which is our strong cash position, reflective of the successful divestiture of the Light-Duty segment.

As of December 31, 2025, our cash and cash equivalents position increased by $12.4 million to $27.2 million compared to $14.8 million at December 31, 2024. The increase in cash was primarily driven by the sale of our Light-Duty segment, as I mentioned, partially offset by cash used in our operating activities and debt repayments.

Exiting 2025 with the proceeds from the disposition of Westport's Light-Duty segment, our long-term debt, including the current portion, reflected a 57% reduction to $2.9 million as at December 31, 2025. This was compared to $6.8 million in the prior year period.

Including the long-term debt from discontinued operations, reduction was more than 90%. This improved financial position provides Westport with greater flexibility to concentrate on markets that are best suited to our current strategy.

Cespira continues to drive meaningful improvement in our results. In the fourth quarter of 2025, total revenue was $29.3 million, compared to $22.9 million in the same period last year, representing an increase of 28%. This progress is supported by strong market adoption, including Volvo reaching the milestone of more than 10,000 natural gas trucks on the road equipped with Cespira's HPDI fuel systems.

We are also encouraged by the continued progress of a second OEM that is currently conducting truck trials. We are excited about the opportunities ahead as we target an improvement in Cespira's capital requirements.

Turning to the details of our 2025 results. Westport reported revenue of $23.3 million for the year ended 2025. Compared to $40.7 million in 2024. The 43% decrease in revenue was primarily due to the end of the transitional service agreement for inventory and contract manufacturing between Westport and Cespira.

Our adjusted EBITDA for 2025 was negative $17.3 million in as compared to the negative $11.4 million reported for 2024. We reported a net loss from continuing operations in 2025 of $29.6 million compared to a net loss from continuing operations of $31.3 million for the prior year, with the decrease in net loss attributed to lower operating expenditures across R&D and SG&A and a favorable change in foreign exchange rates, partially offset by a full year pickup of Cespira's operating results in 2025 compared to the 7 months in 2024.

Looking at our specific business units. High-Pressure Controls revenue for the fourth quarter of 2025, increased 20% to $1.9 million compared with $1.6 million in the prior year quarter and decreased to $8.3 million for the year ended December 31, 2025, from $9.4 million for the prior year. The decrease in year-over-year revenue for the period ending December 31 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.

In Q3 2025, we kicked off the move of our manufacturing capacity from Italy to our new facilities in Canada and China, which required shutting down our operations. In late Q4 2025, we resumed selling products to our customers to meet the backlog demand from the aforementioned shutdown.

Gross profit for the year ended December 31, 2025, decreased by $1.3 million to $0.9 million or 11% of revenue, compared to $2.2 million or 23% of revenue for the prior year.

Moving on to Cespira. Total revenue generated in Q4 2024 -- or 2025 was $29.3 million compared to $22.9 million in the same period last year, an increase of 28%. Cespira product revenue of $23.4 million increased 30% compared to Q4 2024, driven by higher volumes.

Gross profit was negative $1.1 million for Q4 2025 compared to $0.5 million in Q4 2024, and with a negative variance, driven primarily by an obsolete inventory provision of $1.7 million and a recognized loss on one of our contracts valued at $2.8 million.

As I previously mentioned, we had a cash and cash equivalents balance of $27.2 million as at December 31, 2025. Net cash used in operating activities from continuing operations was $14.2 million for the year ended December 31, 2025, compared to $5.8 million in the prior year, an increase of $8.4 million.

The decrease in net cash provided by investing activities was mainly driven by $21.7 million in capital contributions to Cespira. And purchases of property, plant and equipment of $2.7 million, partially offset by proceeds from the sale of the Light-Duty segment.

As noted, we also strengthened our balance sheet with total outstanding debt of $2.9 million, down from $6.8 million while reducing the complexity of our corporate structure in 2025.

Our business is focused on the right markets for us, and we are continually looking at ways to streamline our operations.

With that, I'll pass it back to you, Dan.

Thank you, Elizabeth. As we look to 2026, we see a transportation market increasingly grounded in economic reality. Operators are seeking solutions that deliver measurable emission reductions without sacrificing durability or operating economics. Natural gas is playing a larger role in that equation, not as a transitional concept, but is a fuel that can compete on performance and cost today.

The HPDI platform delivered through Cespira is centric to that opportunity. By pairing compression ignition performance with the advantages of natural gas, including the potential to incorporate hydrogen blends over time, we are providing OEMs and fleets with a pathway that aligns emission reductions with commercial expectations.

As I mentioned earlier, Volvo's milestone of more than 10,000 natural gas trucks on the road in over 30 countries, featuring Cespira's HPDI fuel systems, highlights our combined success in helping drive this path of success. We are encouraged by the progress of a second OEM conducting a full truck trial throughout 2026, which we further believe validates additional commercial potential.

2026 will be a pivotal year as we advance demonstrations and fleet trials. Present this exciting new platform at the ACT conference this spring and follow with targeted show-and-tell sessions with Canadian fleets through the spring and summer. Together, these initiatives position us to build momentum across our portfolio and translate technology progress into tangible commercial interest.

I can appreciate the investment community's interest in our 2026 outlook. We are focused on delivering disciplined execution, continued advancement of OEM programs and converting technical validation into new commercial opportunities.

In our High-Pressure Control segment, we're optimistic that volumes can increase as customers facilities ramp up production, while we actively pursue cost reduction opportunities in China through greater total sourcing and supply chain optimization.

With a focused organization and technologies aligned with market demand, we believe 2026 represents an important step forward and we intend to deliver. Thank you.

[Operator Instructions] Our first question or comment comes from the line of Amit Dayal from H.C. Wainwright.

So Dan, just on the margin side of things, it looks like inventory issues and relocation issues were sort of pressuring margins in the fourth quarter. Do you think we see some bounce back in 1Q and the rest of 2026 on the margin side?

Yes, for sure. I think this transition, I'll start with the High-Pressure Controls transition from Italy to Canada and China, launching the two new production facilities, moving the equipment over, managing the inventory transfer starting up, getting the plant certified, which is quite an extensive process, that put a lot of pressure on margins, and we do expect margins to improve. And volumes as well. We're already seeing some pickup in volumes as we move through the year.

Understood. For the High-Pressure Control segment, can you talk a little bit about sort of how maybe the China market or the Indian market, et cetera, the international opportunities you highlighted could start ramping for you? Like what should we expect in terms of like go-to-market sort of strategy in these geographies?

Sure. So I'll start with China. I think everybody knows that China is the fastest-growing hydrogen market. The government goals that they set out are driving volume increases. We're in a bit of a lull right now where volumes globally have slowed down on hydrogen, but we expect them to begin to pick up again at some point here in China.

Having our plant there allowed us to compete locally. It allowed us to have local costs, source local suppliers. It's -- for us, it's the right strategy to compete in China for the Chinese market. shipping from Italy or from Canada just didn't make sense.

The comment on India. India is really a huge opportunity for Cespira in the long-haul trucking market. India has now put in a multistate highway system. They're investing in clean fuel stations. And we see that a number of trucking OEMs look at India as a beachhead for growth, and that market is going to pick up, we believe, pretty significantly.

Understood. Just last one for me. Any opportunities or possibilities in the power gen or backup power space for you guys?

Well, interesting you asked. So we've been looking into power gen. We currently supply into power gen today. We have a customer that used to be Kohler, Rehlko, that we supply out of our High-Pressure Controls business. we see that opportunity growing with the investments going into Power Gen across North America and, of course, globally, we think that there's an opportunity to build out that business. And are expected to grow there.

Next question comment comes from the line of Rob Brown from Lake Street Capital Markets.

First question is on the OEM trial at Cespira, the second OEM. I know you can't give a lot of detail, but I think you said this year is sort of when the trial is happening. What's sort of the decision point on that? Is it sort of work this year and then just make decisions and then start potentially ramping into a production model or just sort of the outlines of the process would be helpful.

Sure. Sure. I mean, I wish I could say who it was, but in this commercial truck world, they're very, very careful about their commercial information. But the trial is ongoing right now, right? There's trucks on the road running there's discussions about expanding it, but we believe decisions will be made in the second half of the year at some point. We don't know the exact timing. It depends when they get the miles on the trucks but our expectation is that in the second half of the year, we're going to start getting feedback. And of course, if it all goes well, we're hoping this is going to lead to a commercial launch.

Okay. Got it. And then back to the High-Pressure Control business run rate. to get a sense of what's the sort of revenue run rate now that you've gotten the production transition? Is it sort of growing off the Q4 run rate? Or is it I guess how much of the Q4 run rate was depressed from that, I guess, just a sense of the run rate in that business.

Sure. The Q4 run rate was depressed. Number one, the market has slowed down somewhat. But also with shutting down the equipment in Italy, moving it all to the two new plants. Obviously, we weren't producing for some time while that transition happened.

But yes, we do see that market starting to grow we see volumes increasing over what we expected for 2026 already. So it's on a good path, and we believe that the I think specifically the Chinese market is the one that will take off first as the Chinese government puts those goals in place for hydrogen transition in both automotive and in the industrial markets.

[Operator Instructions] Our next question or comment comes from the line of Mr. Eric Stine from Craig-Hallum Capital Group.

Dan, you touched on HPDI in India and in your prepared remarks, Latin America and some other markets. But in terms of in North America, I mean, I know that's a very high priority. You did mention some trials that you are planning or that the joint venture is planning.

In Canada. Could you maybe go into that a little bit? Anything you can share? And should we assume then that Canada is kind of the initial spot in North America that you would target?

I think if [Audio Gap] for CNG is a Westport product, not a Cespira product. Obviously, Cespira has the on-engine HPDI technology that will be part of the solution. But the -- in the back of cab, High-Pressure storage, smart storage system is a Westport product. We have already got the first truck, Volvo got us a truck, and we've already put the back of cab system on it. It's been running miles developing data. And the reason that is that we're not having to redevelop any of these systems. It's a matter of putting these systems together. And so it's not a huge development project. It's more of a market development that's required.

The truck, as I said, is on the road, the truck will be on its way shortly to Las Vegas for the ACT show. I hope you're going to be there, Eric, and see it. We have a booth right next to Volvo there. And as you know, this CNG storage system is primarily focused on the North American market. We will be doing the initial trials in Canada. And -- but we will, at some point, here, be moving to the U.S. for trials as well.

Got it. Okay. I misunderstood that. So then I guess the follow-up then would be just about bringing HPDI, the joint venture, since you just talked about back of cab, but HPDI to North America. And I would assume that, that would be Volvo, right?

Well, as a starting point, for sure, but this whole CNG, I mean, HPDI is growing fast globally. The difference is that all the growth of 10,000 trucks are on LNG because that's how those countries receive their natural gas.

Natural gas in North America is primarily delivered through compressed, right? It's a CNG market. So what our on-engine system really doesn't care whether it's compressed or liquid, the system adapts to that. the storage system is the big difference going from a liquid storage to a compressed storage. And that's what we're bringing. And the first truck on the road is a Volvo truck. It's their new truck, and we're very excited to have it showing up at ACT. And this is pretty exciting for us. We're finally getting to execute on this strategy. And any growth we have on this back-of-cab system obviously pulls through HPDI for Cespira.

Yes. No, absolutely. Okay. And just housekeeping for my last question or questions. Just I might have missed it, but did you quantify or estimate what you think the move did in terms of limiting Q4 for the High-Pressure segment?

Oh, sure. I mean we -- I think we lost probably a couple of months of production. And we had built up some inventory. But when you lose a couple of months production, you got to play catch up. And that coincides with a bit of the market pause that had happened.

But we've launched both plants, both plants are up and running and shipping products. So we've gotten through that transition hump through the launch hump, and we're pretty excited about where that's going to go. We have the control in our hands.

All right. Thanks, Eric. Well, that's all the questions we have for today. I want to thank you for your time, everyone, and have a great, wonderful weekend.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day. Speakers, stand by.

Good day, and welcome to Westport's Q3 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker, Mr. Ashley Nuell, Vice President of Investor Relations. Please go ahead.

Good morning, everyone. Welcome to Westport Fuel Systems conference call regarding its third quarter 2025 financial and operational results. This call is being held to coincide with the press release containing Westport's financial results that was issued yesterday after markets closed.

On today's call, speaking on behalf of Westport will be Chief Operating -- or Chief Executive Officer and Director, Dan Sceli; and Chief Financial Officer, Elizabeth Owens. Attendance on this call is open to the public, but questions will be restricted to the analyst and an institutional investor community. You are reminded that certain statements made on this call and our responses to certain questions may constitute forward-looking statements within the meaning of U.S. and applicable Canadian securities laws. And as such, forward-looking statements are made based on our current expectations and involve certain risks and uncertainties.

With that, I'll turn the call over to you, Dan.

Thank you, Ashley, and good morning, everyone. To start, I want to welcome Elizabeth Owens to her first conference call following her appointment as CFO at Westport. We are thrilled to have her at the helm. And for her first CFO conference call, I'm happy to have Elizabeth run through some financial details first, and then I'll cover some of our business and strategy updates afterwards.

Over to you, Elizabeth.

Thank you, Dan. First, I want to say thank you for welcoming me to my first conference call as CFO of Westport. It's an honor to serve shareholders in this new capacity.

Now getting into the details of our Q3 results. Westport reported revenue of $1.6 million for the quarter. Our reported revenue this quarter reflects the expected decline from the $4.9 million reported in the same quarter of last year based on some changes I'll address in a moment.

On an upward trend, however, it was great to see Cespira increased its revenue by 19% over the same period last year to $19.3 million in the quarter. As you know, our heavy-duty segment was utilized to capture revenue generated by a transitional service agreement, or TSA, in place to facilitate the transition of Cespira to a stand-alone organization. As intended, the TSA concluded in the second quarter of this year, and we, therefore, did not record any revenue related to it this quarter. Revenue this quarter was representative of our continuing High-Pressure Controls & Systems segment, which produced $1.6 million in comparison to $1.8 million in the same quarter last year.

Our adjusted EBITDA for the quarter was negative $5.9 million as compared to the negative $0.8 million reported for the same quarter of last year. The change was primarily driven by lower gross profit related to the divestiture of the light-duty business, partially offset by lower operating expenditures.

Our net loss from continuing operations included some extraneous items. The net loss from continuing operations of $10.4 million for the quarter is compared to a net loss from continuing operations of $6 million for the same quarter last year. This was primarily the result of an increase in operating expenditures in research and development and SG&A, a decrease in profit of $0.2 million compared to the prior year and a negative impact from a swing in foreign exchange impact by $3 million.

Further on this topic, for the 3 months ended September 30, 2025, we recognized foreign exchange losses of $1.3 million as compared to a foreign exchange gain of $1.7 million for the 3 months ended September 30, 2024. The loss recognized in the current period primarily relates to unrealized foreign exchange losses resulting from the translation of previous U.S. dollar-denominated debt in our Canadian legal entities. Additionally, this quarter, we incurred onetime costs of approximately $1 million for severance and restructuring.

Looking ahead, we expect more cost reductions on a relative basis in the near future as we adjust to become a smaller organization after the divestiture of the light-duty segment.

Looking at our specific business units, High-Pressure Control Systems -- High-Pressure Controls & Systems revenue for Q3 of 2025 was $1.6 million, a slight decrease over Q3 of 2024. As Dan mentioned, we are in the process of moving these production lines in the facility in Italy that was part of the divestiture of the light-duty business to sites in Canada and China.

Prior to the move, our team worked to increase inventories to ensure our customers experience minimal impact from the move. Construction at these facilities is ongoing through the fourth quarter with the majority of the capital spending to be wrapped up by the end of this year. The facilities in China as well as our Canadian site are anticipated to be producing initial product late this year. Gross profit for this business was largely unchanged, increasing slightly as a percent of revenue was driven by the higher margin with respect to engineering services revenue.

Moving on to Cespira. It generated $19.3 million in Q3 2025, up 19% from the same period last year, driven by higher volumes. Gross profit was negative $1.1 million for Q3 2025 as compared to negative $0.2 million in Q3 2024. Gross profit continues to be negative as Cespira needs higher volumes to achieve a positive margin on a per unit basis for its systems sold. Regarding liquidity, as of September 30, 2025, our cash and cash equivalents totaled $33.1 million with only the EDC term loan remaining and reflects a significant increase in cash from the sale of our light-duty business.

Net cash used in operating activities from continuing operations was $4.5 million, a significant improvement over $11.7 million used in operations in the same quarter last year. The improvement is primarily a result of decreases in working capital partially offset by an increase in operating losses.

Proceeds from the sale of the Light-Duty business drove improvements in net cash provided by investing activities of continuing operations. We recorded $14.5 million in Q3 2025 as compared to $9.4 million in Q3 2024.

Capital contributions to the Cespira joint venture of $11 million were also made in the quarter. As a reminder, in Q4 2024, we received proceeds of $9.6 million from the sale of shares to Volvo related to the formation of the Cespira joint venture and on the sale of our investment in Weichai Westport Inc.

Net cash used in financing activities of continuing operations was $1 million compared to $4.4 million in Q3 2024. Our outstanding debt currently sits at $3.9 million with a maturity date of September 2026. To date, in 2025, we have reduced our debt and have strengthened our balance sheet and helped to reduce the complexity of our corporate structure. Our business is focused on the right markets for us, and we are continually looking at ways to streamline our operations.

With that, I will pass the call back to Dan.

Thank you, Elizabeth. As our CFO noted, our third quarter results reflect the continued execution of the transformation we began earlier this year, anchored by our commitment to sharpen Westport's focus, strengthen our financial foundation and position the company for growth. The successful completion of the Light-Duty segment divestiture marked an important milestone in simplifying our business and concentrating on our core heavy-duty and alternative fuel systems.

Operationally, our third quarter performance highlights the early benefits of our disciplined approach. While revenue declined as an expected outcome to the Light-Duty divestiture, we achieved a stronger gross margin of 31% in Q3 2025 compared to 14% in Q3 2024, driven by higher margin engineering services revenue, and we demonstrated tighter cost management year-to-date versus the prior year.

As noted by Elizabeth, adjusted EBITDA results were impacted by the Light-Duty divestiture, partly offset by decreased operating expenditures, providing a more efficient and focused underlying business.

We also remain disciplined in strengthening our balance sheet, ending the quarter with $33.1 million in cash and less than $4 million in debt while keeping cost efficiency and operational agility at the forefront. This solid financial position enables us to execute our strategic priorities and engage more proactively with OEM and fleet partners who are increasingly seeking affordable, low-carbon solutions.

The Cespira joint venture continues to play a central role in Westport's growth strategy during the quarter. Deliveries increased year-over-year, supported by aftermarket sales growth as supply chain constraints continue to ease. This progress reinforces our belief that Cespira provides a scalable, high-impact platform to accelerate the adoption of the HPDI systems in the key markets worldwide. We continue to make progress on Westport's strategic transformation.

Westport is taking the necessary steps to execute on a new focused and integrated competitive strategy. The divestiture strengthened our balance sheet and provided liquidity to begin to fund our growth through new system and related market expansions, including North America and our recently announced CNG solution when combined with the on-engine HPDI fuel system.

We are in the process of evolving a new, more focused Westport that we can support and drive into more sustainable transportation industry. We recognize that we're operating within an evolving macroeconomic environment, which is enabling us to capitalize on renewed market momentum, especially as it relates to the use of natural gas as a transport fuel in the North American market. CNG has gained acceptance as an alternative to diesel fuel for long-haul trucking in North America, driven by its affordability and abundant supply. Westport's innovative and proprietary CNG solution hope to set a new standard for high-efficiency performance while delivering superior economics.

As I mentioned last quarter, Westport will be focused on the following key drivers. On-engine, Cespira is pursuing strategic market expansion via technological leadership in heavy-duty transportation and truck OEMs. Off-engine, high-pressure controls and systems complement the energy transition regardless of the powertrain and a variety of financial initiatives. Westport's goal for Cespira is to deliver demonstrated volume growth over the coming year, driven by expanding into new geographies and adding new OEM customers.

Cespira is seeing success here, delivering revenue growth of almost 20% in the third quarter and recently adding a second OEM customer in the form of a customer truck trial with a leading OEM utilizing Cespira's-HPDI components. The trial will include several hundred sets of key components and is designed to assess the [Technical Difficulty] is also expected to form the basis upon which the OEM will decide whether to make a further investment toward commercializing the system.

Regarding our High-Pressure Controls & Systems business, we are currently developing components that are critical to performance and reliability. As a reminder, we are selling into 3 primary markets: China, Europe and North America. Following the close of the Light-Duty transaction, we have focused on moving our manufacturing to Canada and China. Both facilities are in the final stages before start of production, and we anticipate both to be online at the end of the year.

The global truck market continues to expand and is expected to reach 1.95 million units in 2025. The long-haul truck market has historically struggled to decarbonize. Fleets around the world are focused beyond just reducing emissions and now prioritizing the total cost of ownership, natural gas is affordable, infrastructure is ample, and RNG production is growing at a fast pace. We are ideally positioned for this. What sets Westport apart from our competitors is our ability. We have solutions that can meet growing demand, delivering a total cost of ownership that is compelling to customers.

We are optimistic about the company's future as well as that of Cespira. We have strengthened our balance sheet through the sale of our light-duty business and made a strategic return to our roots by developing innovative new technology to transform the Heavy-Duty market.

In addition to new growth opportunities, we are making difficult economic decisions to enhance future shareholder value through planned reductions of 60% in CapEx and 15% in SG&A in 2026.

Regardless of the unknowns or uncertainties ahead, we are paving our own path in the transportation industry that we believe will truly make a difference. Thank you to everyone who joined the call today. Your continued support is important to us. We continue to move through 2025 with purpose to create value for our shareholders. Thank you again.

[Operator Instructions] And our first question will come from the line of Eric Stine with Craig Hallum.

Just wondering, can we start on the new OEM development with Cespira. I mean, just if you could provide a little more detail there? I know that, that OEM needs to go through a number of steps to make the decision about moving towards the development agreement and then beyond that, a commercial agreement. But what are kind of the signposts that we should look for over -- whether it's over 2026 and beyond? And how do you kind of envision this playing out as Volvo obviously wants more OEMs than just their use of HPDI?

Yes, absolutely. And I'll just remind everybody listening that in this industry, the OEMs are very, very protective of their commercial strategies. And so we are completely unable to talk about the who and any specifics and that's not going to change, unfortunately. We'd love to be able to talk about it, but that's the business we're in.

This is a typical development, not unlike what we went through with Volvo originally, trialing the technology on trucks. The development programs going forward, to be more [indiscernible] we're almost 10,000 trucks in 31 countries. But it is a development cycle that will follow their standard path in the industry. And -- so we think we're going to start to get some feedback from that OEM probably mid-'25. And we'll be talking about it at that point, I hope that we're in a position to communicate that we're moving to the next phase.

Got it. And yes, that's what I was getting at. Is this typical, but also because you've got Volvo in the market, is it something that potentially is shorter than what you've seen in the past? And it sounds like, yes.

Okay. Maybe sticking with the joint venture, any -- I mean, any thoughts on additional OEMs? And again, I know that the nature of this business is you can't give details, names, et cetera, but just maybe what that pipeline looks like. And I also know that Volvo is looking at growth with their HPDI truck in other markets? I think you mentioned India, South America last quarter. So maybe an update on that as well.

Sure. Well, we continue we continue to talk to all the OEMs about HPDI through Cespira. And clearly, volume is the key to getting this business to the place where we all want it to be. We've got the interest of many OEMs. I think we're at a point where we don't have to prove the technology anymore. And simply, when does the timing fit for the OEM in terms of their specific markets and their business cases.

So the technology is proven, the performance is proven and Volvo continues to expand its reach where they want these trucks. I did mention India and South America. Those are beachheads that are being opened up. And we expect continued volume increases, at least that's what we're hoping for. One of the big tickets will be in Europe, the legislative changes to the system. And biogas being credited for the emissions standards in Europe is a really big deal that we're hoping will come in the next year.

One moment for our next question. And that will come from the line of Rob Brown with Lake Street Capital Markets.

On the Cespira joint venture, you made a capital contribution in the quarter. Does that sort of set you for a while? Or what's the capital needs over the next sort of 12 months there?

Yes. So I think we've talked about this a number of times over the last at least 18 months here. There was -- there's always been a 3-year build-out setting this business up to be completely stand-alone. So the joint venture was always structured to have about a 3-year build-in of capital contributions to get it set to stand-alone. And obviously, we're in year 2 of that now. So yes, there's additional capital will be needed next year.

Okay. I guess -- and then on the High-Pressure Controls business, when do you expect to have that fully -- the manufacturing fully moved out of Italy and under your operations?

Sure. Well, it's all out of Italy now completely. We're in the process now of installing the equipment in both our Cambridge site and our Chinese plant site [Changzhou] and expect to have both those facilities up and running by year-end. .

Okay. Great. And will you have a, I guess, lower revenue run rate during that period? Or do you have a stock that can carry through?

No, it will be a bit lower revenue. And I mean there is some stock, but there's -- it will be a bit lower revenue. And then I mean the underlying theme here is that we want further -- the Chinese market is the biggest market for hydrogen components today. And it was very important for us to manufacture it locally for a couple of reasons. One, geopolitically, it's just a lot easier to make it there and for that market than it is to ship it in from Europe. Two, cost, right? We can be a lot more competitive out of a Chinese plant. And then of course, the North American market is starting to turn on natural gases, as we've talked about. It's a pendulum swing that we're very excited about. And we want to be in a position to take advantage of that market from a Canadian site.

Our next question will come from the line of Chris Dendrinos with RBC Capital Markets.

I wanted to ask on the CNG solution announcement here. I think it was last week at this point. What's the timing look like for potential deployment there? And does your partners, Cespira, need to, I guess, move trucks over to the United States? Or I guess, how does that sort of, I guess, time line look for potential development?

Yes, sure. The intention isn't for trucks to come from Europe to North America at all. We're developing a CNG solution that is what we call the off-engine side of the thing. The on-engine, the Cespira's HPDI on-engine stuff is fully developed and ready to go. And so what this CNG strategy in North America will do for Cespira is bring additional volume. What it does for Westport, the -- what we call the back of cab system, the storage system for CNG combined with our high-pressure controls and our AFS engine control system is -- it's a full package that can be deployed into North America.

The initial steps are going to be demonstration fleets. We're going to have trucks built with the CNG systems that fleets are going to run and trial. And certainly, our anticipation is that they'll be screaming for commercialization. Once we're through the demonstrations and have it proven out, we'll be working with the OEM to build out a commercialization plan. Again, the on-engine side is fully developed with HPDI. It's just a matter now of certifying a back of cap and doing the EPA certification, which is just simply miles on trucks.

Got it. And then maybe just shifting gears a little bit to the engineering revenue that you all recognized in the quarter. I mean, is that sort of an ongoing, I guess, revenue stream? Or was this sort of a onetime, I guess, recognition this quarter?

Well, yes. So in our High-Pressure Controls business, we are paid for a lot of development work for the hydrogen systems from our OEM customers. And so that's an ongoing thing. And we'll be spending R&D money over the next 3 years and the customer pays for it at start of production. So we have a bit of a run here of cash out for R&D before we get the customers' payment to cover it. But it's an ongoing part of this business. These are very complex components that the customers, the OEMs look to us to develop the technology for them.

I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Dan Sceli for any closing remarks.

Thank you. Well, it's a pleasure always to share our story with our investors and the market. Thank you for your participation, and have a great day.

This concludes today's program. Thank you all for participating. You may now disconnect.