Can new boss put Westport on road to profitability?

CEO Gougarty cutting costs, selling assets since Fuel Systems Solutions acquisition

Westport Fuel Systems CEO Nancy Gougarty has been reducing costs and eliminating “unprofitable or distracting” initiatives since taking the helm last year | Submitted

Like a driver hitting nothing but green lights, Nancy Gougarty is way ahead of schedule.

The CEO at Westport Fuel Systems Inc. (TSX:WPRT) took the helm in July 2016 with the goal of realizing US$30 million in cost savings following the acquisition of a U.S.-based alternative energy firm a month earlier.

“We got there by mid-2017, which put us about a year and a half ahead of what we said it was going to take,” said Gougarty, an American who previously served as vice-president of TRW Automotive before joining Westport’s board in 2013.

Westport was launched in 1995 with the goal of designing and producing combustible engines for vehicles running on natural gas.

Those plans have shifted into different gears over two decades, stalling occasionally.

The University of British Columbia spinoff company has yet to post a profit.

In June 2016, Westport Innovations acquired New York-based Fuel Systems Solutions Inc. in an all-stock deal that valued the combined company at $351 million.

“Our portfolios really were very complementary to each other,” Gougarty said. “Whether it was manufacturing footprint, products or customers served or geographic locations, we had very few [conflicts].”

She added that while Fuel Systems Solutions was incorporated in the U.S., its operations base is in Europe, where there is a higher demand for combustible engines that run on natural gas.

Westport’s high-pressure direct injection (HPDI) technology allows heavy-duty trucks to operate on natural gas with performance comparable to diesel engines but with reduced fuel costs and emissions.

Meanwhile, the company has been transforming into a leaner organization since the 2016 acquisition.

Revenue reached US$60.8 million for the fiscal quarter ending September 30, up from US$56.1 million a year earlier.

Losses fell from US$33.6 million to US$15.7 million during the same period.

In early 2017, the company sold off its auxiliary power unit assets for US$70 million.

Gougarty told investors in an August conference call the company was eliminating “unprofitable or distracting businesses and/or initiatives.”

And as the company gets closer to launching its HPDI 2.0 product, it plans to cut in half spending on research and development midway through 2018.

Its 2017 R&D run rate is US$9.1 million, down 3% compared with a year earlier.

But what of the million-dollar question: when will Westport reach profitability?

“We’re taking it in steps, and if you learn anything about my style, I don’t promise anything until we’re there,” Gougarty said. “So I’m going to talk about what’s immediately ahead of us.

“And the next step is [adjusted] EBITDA [earnings before interest, taxes, depreciation and amortization] positive and cash positive.”

With most of the world planning to reduce emissions under the Paris Agreement, Gougarty said she’s trying to educate more people about Westport’s technology.

“What’s really impressive with us at this point in time is our technology is ready now,” she said. “I’d love to see Canada use their own technology. In some cases, we are able to vet it in other environments. But getting it here on this soil is challenging.”

torton@biv.com