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| Statement |
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| And we’re excited about the opportunity |
| And I can say that we are starting to see the benefit, and we will continue to do so |
| Gross margins in our OEM business expanded in the quarter, increasing to $7.8 million or 15% of revenue |
| We also delivered higher sales volumes from delayed OEM business, increased sales volumes in electronics and fuel storage businesses and higher engineering services revenue in the heavy-duty OEM business |
| So it’s a very exciting opportunity as part of the transition to cleaner energy, which the locomotives, these are very long-life assets, not dissimilar to some of the on-highway truck markets |
| Our third quarter results saw improvements in many of our key metrics |
| And the other one is improving the financial performance and margins |
| In addition, we continued to deliver improved gross margins, both in dollar terms and as a percentage of revenue |
| We also improved our adjusted EBITDA to negative $3 million for the quarter from negative $4.5 million for the same period in 2022 |
| As I mentioned, with the heavy-duty OEM, we did have quite a bit of engineering services revenue, which helped to improve margin |
| And the Renault application is a nice win |
| The teams have made great progress on all items |
| We expect to see gross margin improvement going forward as we achieve scale for our HPDI fuel system |
| Second, consistent with our objective of improving profitability and strengthening our balance sheet |
| So, it’s going to be really from a couple of different angles that will have a really a positive benefit on HPDI adoption |
| As you gathered, we are very excited about not just the future business, but we are seeing improvements in our current business |
| We’re – I think are really excited and motivated to continue to increase and drive demand for this product |
| Just from a high-level point of view, I think what’s very exciting for us, and it’s actually part, I would say, of a broader theme over the last year or so, which is the opportunity for hydrogen in HPDI as a way to decarbonize without having to change the overall, shall we say, the layout of the engines and so forth |
| Also, we anticipate this reorganization of our presence in India will improve our cash flows going forward |
| As LNG fuel prices continue to trend positively against diesel and Volvo’s HPDI engine becomes more available, we expect volumes to continue to improve with Q4 being a full quarter with higher volumes |
| Looking forward, we have multiple projects and initiatives, either announced or in the way that will have a positive impact on equity |
| This will be a net positive for our balance sheet going forward |
| The improvements in revenue and gross margin drove the positive improvements in adjusted EBITDA, which were partially offset by higher selling, general and administrative expenses from increased trade show activity during which we highlighted our HPDI fuel system technology in North America and Asia |
| This improvement was mainly due to higher sales volumes across multiple businesses and increased gross margin in our heavy-duty OEM business, driven by higher engineering services revenue |
| Looking ahead, supportive LPG pricing continues to boost demand in Europe, which is an important area of growth for our company in the years ahead |
| This is a significant improvement in net cash used of $8.6 million in the third quarter of last year |
| Second, as Tony highlighted, we have reorganized our presence in India to streamline the business, consistent with our objective of improving profitability and strengthening our balance sheet |
| And again, they mentioned HPDI in their technical podcasts and were really excited and believe in the HPDI technology |
| And hence, we did the restructuring and our relationship with Minda to take advantage of that and the leverage, which will help improve our cash flows |
| They’re very excited about HPDI |
| Statement |
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| Margins were negatively impacted by a change in sales mix and inflation in South America |
| However, our gross margin was negatively impacted from higher production costs to continue to impact our business coming from global supply chain challenges and inflation, specifically in logistics and labor costs |
| To the next slide, our independent aftermarket revenue for the third quarter was $24.5 million, down $2.6 million compared to $27.19 million in the third quarter of last year |
| Certainly, over the last 12 months, 18 months, supply chain has been an issue |
| So what’s unique here is and what this OEM is looking at is effectively retrofitting an existing locomotive, which is – which will have some challenges |
| Cost price has been an issue |
| In the third quarter of 2023, adjusted EBITDA was a loss of $3 million |
| In line with the decrease in revenue, our gross margin declined to $5.4 million or 22% of revenue in the third quarter as compared to $6.6 million or 24% of revenue in the prior year period |
| Lower sales volumes in African European markets drove the decline, partially offset by higher sales volume in South America |
| So we – as we mentioned, as we get kind of the switchover, we did expect a lower decline in our unit volumes in the second quarter |
| Offsetting these increases were lower sales to customers in India in the light-duty OEM business |
| As a reminder, Q3 tends to be our seasonally slow quarter due to the annual summer production shutdown in Europe |
| So the packaging is not going to be that challenging |
| And so we expect that to continue to increase in the fourth quarter even with probably the slower holidays, slower sales during the last couple of weeks for the year |
| But having said that, there has been a bit of an alleviation on the supply chain |
| So from a feint standpoint, I think it’s less of a challenge |
| Some of those supply chain pressures, some of them continue to exist, but that’s starting to alleviate somewhat |
| I know previously, there were some dynamics around the changeover to a new model with the Volvo Truck, and that was kind of weighing on things maybe a little bit near-term |
| And that’s really, frankly, has had as much as the biggest impact, including mix, but also the biggest impact in the last year has been on having some hard conversations with customers |
| So, the delay – I will say, the delay the timeframe between today and closing in Q2 next year is, frankly, just the time it’s going to take to execute on it |
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