20-F: Westport Fuel Systems Reports 2025 Losses Amidst Strategic Shift

Westport Fuel Systems Inc. reported a significant revenue decline and continued net losses in 2025, driven by the divestiture of its Light-Duty segment and hydrogen industry slowdown, while its Cespira joint venture showed strong revenue growth.

Summary

• Revenue decreased by 43% to $23.3 million in 2025 compared to $40.7 million in 2024.
• The Heavy-Duty OEM segment revenue decreased by $16.3 million due to the end of the transitional service agreement with Cespira in Q2 2025.
• Sales in the High-Pressure Controls segment were negatively impacted by a slowdown in the hydrogen industry and the relocation of manufacturing from Italy to Canada and China in Q3/Q4 2025.
• Cespira's revenue increased by 80% to $77.4 million in 2025 from $43.1 million in 2024, driven by increased sales volume to its initial OEM customer and engineering services.
• Net loss from continuing operations was $29.6 million in 2025, an improvement from a net loss of $31.3 million in 2024.
• Adjusted EBITDA was negative $17.3 million in 2025, worsening from negative $11.4 million in 2024.
• Cash and cash equivalents were $27.2 million as at December 31, 2025.
• Cash used in operating activities from continuing operations was $14.2 million in 2025, an $8.4 million increase from $5.8 million in 2024.
• The sale of the Light-Duty segment closed on July 29, 2025, for a base price of approximately $79.5 million (67.7 million EUR), with potential earnouts of up to a revised estimate of $3.9 million (3.3 million EUR).
• A $37.3 million loss on disposal of the Light-Duty segment operations was recognized.
• Management identifies a material uncertainty regarding the company's ability to continue as a going concern, projecting insufficient cash to fund operations through the next twelve months.
• New manufacturing facilities in Cambridge, Ontario, and Changzhou, China, commenced production in January 2026, with initial product shipments in December 2025.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a challenging period for Westport, marked by significant revenue decline, worsening Adjusted EBITDA, and a stated going concern risk. While the Cespira JV shows growth and strategic shifts are underway, the overall financial health and reliance on future capital raises indicate high uncertainty.

Positives

• Net loss from continuing operations improved to $29.6 million in 2025 from $31.3 million in 2024, primarily due to lower operating expenditures and favorable foreign exchange gains.
• Cespira joint venture revenue increased by 80% to $77.4 million in 2025, indicating strong growth in its HPDI fuel system technology.
• New manufacturing facilities in Cambridge, Ontario, and Changzhou, China, commenced production in January 2026, supporting global hydrogen, CNG, and RNG strategies and enabling local manufacturing in China.
• Expected capital contributions to Cespira for fiscal year 2026 are significantly reduced to $11.0 million (55% of $20.0 million) compared to $21.7 million in 2025, reflecting improved cash flow in Cespira.
• A foreign exchange gain of $5.4 million was recognized in 2025, compared to a $6.2 million loss in 2024.
• Corporate Selling, General and Administrative (SG&A) expenses decreased by $4.6 million in 2025 due to cost-cutting initiatives and headcount reduction.
• The company is in compliance with all covenants under its financing arrangements as of December 31, 2025.
• Successful divestiture of the Light-Duty segment for approximately $79.5 million, providing cash proceeds.

Negatives

• Total revenue decreased by 43% to $23.3 million in 2025.
• Heavy-Duty OEM segment revenue was nil in Q4 2025 and decreased by 52% for the full year due to the end of the transitional service agreement with Cespira.
• High-Pressure Controls segment revenue decreased by 12% for the year due to a slowdown in hydrogen infrastructure development and manufacturing relocation.
• Gross profit decreased to $2.7 million (11% of revenue) in 2025 from $2.8 million (7% of revenue) in 2024.
• The High-Pressure Controls segment reported a negative gross profit of $0.2 million in Q4 2025, impacted by lower sales volumes and a $0.4 million inventory provision.
• Adjusted EBITDA worsened to negative $17.3 million in 2025 from negative $11.4 million in 2024.
• Cash used in operating activities from continuing operations increased to $14.2 million in 2025 from $5.8 million in 2024.
• Loss from investments accounted for by the equity method increased to $15.8 million in 2025 from $6.7 million in 2024, primarily due to Cespira's full year of activity and increased operating losses.
• Cespira's gross profit was negative $3.5 million for the year ended December 31, 2025, due to a EUR 1.7 million provision for obsolete inventory and a EUR 2.8 million loss on an onerous contract.
• Cespira's operating loss increased to $27.5 million in 2025 from $12.1 million in 2024.
• An impairment loss of $0.5 million on property, plant, and equipment was recognized due to a hydrogen development program cancellation.
• 0% of the Performance Share Units (PSUs) awarded for the 2023-2025 period met the required vesting conditions and expired.

Risks

• A material uncertainty exists regarding the ability to continue as a going concern due to projected insufficient cash to fund operations through the next twelve months.
• Significant competition from competing alternative powertrain technologies, including incumbent technologies, improvements to current powertrain technologies, and new alternative powertrain technologies (such as fuel cell and battery electric technologies).
• The market for alternative fuel systems may be limited or may take longer to develop than anticipated, affecting the ability to recover investments and achieve profitability.
• Growth is dependent on available refueling infrastructure, fuel price differentials, and environmental regulations, policies, and government incentives, which may not persist or develop as anticipated.
• Failure of products to perform as expected could negatively impact the ability to develop, market, and sell products, potentially leading to delivery delays, product recalls, product liability claims, and significant warranty expenses.
• Additional funds will be needed to grow the business and meet financial obligations, and there is no assurance that these funds will be available on favorable terms or at all.
• Dependence on relationships with suppliers for critical components and materials, with risks of shortages, labor disruptions, lack of capacity, equipment failure, and price fluctuations.
• Conducting business in foreign markets carries risks related to political and economic uncertainty, corruption, high inflation, trade/customs/tax risks, currency exchange rates, limitations on fund repatriation, competition for employees, pandemics, and expropriation.
• The ability to achieve objectives with the Cespira joint venture may be impacted by its operational performance, ability to expand commercialization, secure additional customers, achieve anticipated production volumes, and the actions and strategic priorities of the joint venture partner.
• Limited production trials, commercial launch activities, and field tests could encounter problems and delays.
• Potential product liability claims are inherent to natural gas, hydrogen, and products that use these gases, which are flammable and potentially dangerous.
• The risk of losing or failing to attract the human capital necessary to run the business, especially skilled employees in the highly competitive alternative fuel industry.
• Warranty claims could be higher than forecasted, potentially necessitating re-design, re-specification, manufacturing changes, and/or product recalls.
• Difficulty responding to significant demand growth for products, potentially straining operations, strategic partners, and suppliers.
• Failure to realize the anticipated benefits from joint ventures, investments, or acquisitions, including integration difficulties and unforeseen liabilities.
• Foreign currency risk, as many operating expenses are in Canadian dollars, Euros, and Renminbi, while reporting is in U.S. dollars, could negatively impact margins and financial results.
• Risk of cyber-based attacks, as experienced in Q1 2026, which could result in operational disruptions, remediation costs, legal claims, regulatory investigations, and reputational harm.
• Risks with anti-corruption laws (e.g., Canadian Corruption of Foreign Public Officials Act, U.S. Foreign Corrupt Practices Act) could have a material adverse effect on reputation and results of operations.
• Involvement in legal proceedings and commercial or contractual disputes could result in substantial costs, diversion of management's attention, and adverse effects on business, results of operations, and financial condition.
• Dependence on intellectual property; failure to protect it could adversely affect future growth and success, or lead to intellectual property litigation.
• Economic sanctions may impact the business of certain foreign subsidiaries and the joint venture, limiting managerial oversight and supervision.
• Potential liability for environmental damages resulting from research, development, or manufacturing activities, including the release of methane and other greenhouse gases.
• Failure to comply with privacy laws could result in regulatory or litigation-related actions, legal liability, fines, damages, and significant costs.
• Additional or higher tariffs may impact the demand for products, cause volatility in pricing, influence raw material costs, and affect cross-border trade dynamics.
• The Common Share price may fluctuate significantly due to various factors unrelated to operating performance, leading to market risk for investors.
• Litigation, including litigation due to Common Share price volatility, could cause substantial costs and divert management's time and attention.
• No cash dividends are currently paid or anticipated in the near future, meaning shareholders may not receive a return until they sell their shares.
• If characterized as a Passive Foreign Investment Company (PFIC), U.S. holders may be subject to adverse U.S. federal income tax consequences.
• If a U.S. person is treated as owning at least 10% of shares, such holder may be subject to adverse U.S. federal income tax consequences as a 'United States shareholder' with respect to any Controlled Foreign Corporation (CFC) in the group.
• Loss of foreign private issuer status in the future could result in significant additional costs and expenses due to more extensive disclosure obligations.
• U.S. investors may not be able to obtain enforcement of civil liabilities against the company due to its Canadian jurisdiction and the residency of its officers and directors outside the U.S.

Future Outlook

Management plans to improve liquidity by raising funds from public markets, borrowing debt, or other financing alternatives, though these plans are not final and are subject to market conditions. Output and efficiency are expected to increase at the new Canada and China manufacturing facilities throughout 2026. Cespira anticipates requiring capital contributions from its joint venture partners to fund operating losses and planned capital expenditures in 2026, with Westport's expected portion being $11.0 million. Cespira is also advancing the application of HPDI fuel systems for hydrogen and other alternative fuels in internal combustion engines, and Westport continues ongoing development of next-generation hydrogen-rated regulators and expansion of electronics and controls.

Management Comments

• "Management continues to identify a material uncertainty that raises substantial doubt about the Company's ability to continue as a going concern."
• "Based on the Company's projected capital expenditures, debt servicing obligations and operating requirements under its current business plan, we anticipate that our cash and cash equivalents will not be sufficient to fund our operations through the next twelve months from the date of the issuance of this annual report."
• "We may need to raise additional funding in order to continue as a going concern and we cannot provide any assurance that it will be successful in doing so."
• "If we are unable to improve its liquidity position when required, we may not be able to continue as a going concern."
• "We plan to improve our liquidity position by raising funds from public markets, borrowing debt, or other financing alternatives. These plans are not final and are subject to market and other conditions not in our control."
• "As such, there can be no assurances that Westport will be successful in obtaining sufficient funding."
• "Accordingly, we concluded under the accounting standards that these plans do not alleviate the substantial doubt about Westport's ability to continue as a going concern."
• "Our Information Technology leadership continues to develop and enhance internal controls, policies and procedures designed to protect systems, servers, computers, software, data and networks from attack, damage, or unauthorized access."
• "As cyber threats continue to evolve, we may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities."

Industry Context

StockSavvy.ai notes that Westport Fuel Systems operates in the evolving alternative fuel transportation sector, facing intense competition from both traditional and emerging powertrain technologies like battery electric and fuel cell. The company's strategic shift towards heavy-duty and high-pressure controls, coupled with its Cespira joint venture, positions it to capitalize on the global decarbonization trend, particularly in markets like China, which is a leader in hydrogen commercial vehicle deployment. However, the industry remains sensitive to fuel price differentials, government incentives, and the development of refueling infrastructure, which can significantly impact market adoption and profitability. The slowdown in hydrogen infrastructure development observed in early 2025 highlights the nascent and volatile nature of this market segment.

Management Changes

Corporate Governance

Legal Proceedings

• Involved in patent-related litigation and administrative proceedings in the U.S. concerning two U.S. patents.
• Commenced patent infringement actions against certain third parties, which are currently stayed pending the resolution of a related declaratory judgment action initiated by a third party.
• Asserted counterclaims in the ongoing declaratory judgment action.
• While the outcome is uncertain, a favorable outcome could result in a positive financial impact; an unfavorable outcome is not expected to have a material adverse impact on the company.

Related Party Transactions

• Engaged in transactions with Cespira (joint venture) primarily through cross charges, provision of services, and sale of inventory under a transitional services agreement that ended on June 30, 2025.
• Sales of goods, services, and other income from Cespira amounted to $15.684 million in 2025 ($9.598 million in 2024).
• Inventory purchased, services, and other expenses from Cespira amounted to $1.525 million in 2025 ($1.320 million in 2024).
• Receivables from Cespira were $0.274 million in 2025 ($4.973 million in 2024).
• Payables to Cespira were $0.078 million in 2025 ($1.137 million in 2024).
• Cespira Canada LP incurred expenses from Cespira Sweden AB of EUR 51.394 million in 2025 (EUR 17.322 million in 2024).
• Cespira Canada LP had accounts receivable of EUR 0.499 million due from Cespira Sweden AB (EUR 1.317 million in 2024) and accounts payable of EUR 12.192 million due to Cespira Sweden AB (EUR 6.616 million in 2024).
• Cespira Canada LP sold products and services of EUR 67.196 million to Volvo affiliated entities in 2025 (EUR 39.253 million in 2024).
• Cespira Canada LP had accounts receivable of EUR 14.468 million due from Volvo entities (EUR 13.814 million in 2024).
• Cespira Sweden AB sold manufactured goods and provided services to Cespira Canada LP, recognizing EUR 48.940 million in revenue in 2025 (EUR 16.225 million in 2024).
• Cespira Sweden AB incurred expenses from Westport and its affiliates of EUR 6.068 million in 2025 (EUR 0.184 million in 2024).
• Cespira Sweden AB provided services to Westport and its affiliates, recognizing EUR 0.536 million in 2025 (EUR 0.208 million in 2024).
• Cespira Sweden AB purchased supply chain management services from a Volvo affiliate for EUR 0.151 million in 2025.

Stakeholder Impact

• Shareholders face significant risk due to continued operating losses and the material uncertainty regarding the company's ability to continue as a going concern. Potential future capital raises could lead to dilution, and no dividends are anticipated in the near future.
• Employees experienced a significant reduction in workforce size in Europe and South America due to the Light-Duty segment sale, while headcount increased in China for new manufacturing facilities. Cost-cutting initiatives led to lower compensation costs in corporate functions.
• Customers may be impacted by potential product defects, delays, or recalls, which could affect satisfaction and trust. The new facilities in Canada and China aim to support global strategies and meet demand for alternative fuel systems.
• Suppliers face risks related to the company's dependence on them for critical components and materials, including potential for shortages and price volatility.
• Creditors are exposed to the company's liquidity risk, despite current compliance with debt covenants, due to the stated going concern uncertainty and reliance on future funding to meet obligations.

Next Steps

• Increase output and efficiency at new manufacturing facilities in Cambridge, Ontario, and Changzhou, China, throughout 2026.
• Cespira to receive capital contributions from joint venture partners for fiscal year 2026 (expected $11.0 million from Westport).
• Cespira to continue advancing the application of HPDI fuel systems for hydrogen and other alternative fuels.
• Ongoing development of next-generation hydrogen-rated regulators and expansion of electronics and controls.
• Management plans to raise additional funds through public markets, debt, or other financing alternatives to improve liquidity.
• Remediation actions for the Q1 2026 ransomware incident are ongoing, with targeted enhancements to cybersecurity controls and monitoring.
• Notification and regulatory reporting activities for the ransomware incident where required under applicable laws.
• The HRC Committee will review the Omnibus Plan's available pool and complete appropriate benchmarking reviews in 2026.
• A stable and comparable peer group for PSU awards should be determined in 2026.

Key Dates

Recommendation

Westport Fuel Systems faces substantial financial challenges, including a material uncertainty about its ability to continue as a going concern, significant revenue contraction in its core segments, and worsening Adjusted EBITDA. While the Cespira joint venture shows promising revenue growth and strategic investments in new manufacturing facilities for hydrogen and natural gas components are underway, these positives are currently overshadowed by the overall losses, increased cash burn from operations, and the need for future capital raises. The recent cyber incident adds another layer of operational risk. For existing investors, holding the stock might be justified if they have a high-risk tolerance and conviction in the long-term strategic pivot and the success of Cespira. However, for new investors, the current risk profile suggests caution, making a 'hold' a more appropriate stance until there is clearer evidence of sustained profitability and alleviated going concern risks.

Keywords

Alternative Fuels, Hydrogen, Natural Gas, HPDI, Fuel Systems, Automotive Technology, Clean Energy, SEC Filing, Financial Results, Joint Venture, Westport Fuel Systems, Cespira, Corporate Governance, Risk Factors, Going Concern, Manufacturing, Divestiture, Cybersecurity