Highpower International Reports Unaudited First Quarter 2019 Financial Results

SAN DIEGO and SHENZHEN, China, May 13, 2019 /PRNewswire/ -- Highpower International, Inc. HPJ ("Highpower" or the "Company"), a developer, manufacturer, and marketer of lithium ion and nickel-metal hydride (Ni-MH) rechargeable batteries, battery management systems, and a provider of battery recycling, today announced its financial results for the first quarter ended March 31, 2019.

First Quarter 2019 Highlights (all results compared to prior year period)

  • Net sales for the first quarter of 2019 increased 16.7% to $58.1 million from $49.8 million.
  • Lithium business net sales increased 16.8% to $42.7 million from $36.6 million.
  • Gross margin increased to 21.8% of net sales compared to 15.2%.
  • Net income attributable to the Company was $0.3 million, or earnings of $0.02 per diluted share, compared to net loss attributable to the Company of $1.1 million, or loss of $0.07 per diluted share.

Mr. George Pan, Chairman and CEO of Highpower International, commented, "Our first quarter results show a good start to 2019. Top line performance beat our guidance in RMB terms, driven by continued growth in our battery solutions businesses. We also continued to optimize our product mix and improve labor efficiency, which successfully increased our margins, which also exceeded our expectations."

"We believe that raw material prices will stabilize in 2019. However, potential trade conflicts may place downward pressure on the broader global economic environment, creating uncertainties to our business. To offset these effects, we intend to adapt to market forces and remain focused on executing our strategy while ensuring that we have the talent, technology, and capacity necessary to continue our growth. We remain dedicated to sustainable long-term growth and to providing clean, safe, and efficient power solutions to meet society's needs," Mr. Pan concluded.

First Quarter 2019 Financial Results

Net Sales

Net sales for the first quarter of 2019 increased 16.7% to $58.1 million from $49.8 million in the prior year period. The Company's lithium segment grew 16.8% year over year, and the NiMH batteries and accessories segment grew 16.7% year over year.

Gross Profit

Gross profit for the first quarter of 2019 increased 67.3% to $12.7 million from $7.6 million in the prior year period. Gross margin was 21.8% compared to 15.2% in the prior year period.

Operating Expenses

  • Research and development (R&D) expenses were $3.0 million compared to $2.6 million in the prior year period. As a percentage of net sales, R&D expenses remained steady at 5.1% from the prior year period.
  • Selling and distribution expenses were $2.8 million compared to $2.0 million in the prior year period. As a percentage of net sales, selling and distribution expenses increased to 4.8% from 4.0% in the prior year period. The increase was mainly driven by expanded business scale, including marketing expenses for more brand customers.
  • General and administrative expenses were $4.8 million compared to $4.1 million in the prior year period. As a percentage of net sales, general and administrative expenses remained at 8.3% from the prior year period.

Net Income

Net income attributable to the Company for the first quarter of 2019 was $0.3 million compared to a net loss of $1.1 million in the prior year period. Net income attributable to the Company per diluted share for the first quarter of 2019 was $0.02 compared to a net loss attributable to the Company per diluted share of $0.07 in the prior year period.

For the quarter ended March 31, 2019, the Company's weighted average diluted shares outstanding used in computing diluted share was 15,604,907.

EBITDA

EBITDA for the first quarter of 2019 increased 374.6% to $2.8 million from $0.6 million in the prior year period.

A table reconciling EBITDA, a non-GAAP financial measure, to the appropriate GAAP measure is included with the Company's financial information below.

Balance Sheet Highlights









($ in millions, except per share data)



March 31,



December 31,

2019



2018





(Unaudited)









$



$

Cash



24.2



24.9

Total Current Assets



194.9



215.0

Total Assets



284.1



288.1











Total Current Liabilities



201.1



210.8

Total Liabilities



204.6



210.8

Total Equity



79.5



77.3

Total Liabilities and Equity



284.1



288.1

Book Value Per Share



5.10



4.97

Financial Outlook

For the second quarter of 2019, the Company expects net revenues to grow over 20% year over year. Gross margin is expected to be similar or slightly lower than that of the first quarter of 2019.

Conference Call Details

The Company will hold a conference call on Monday, May 13, 2019, at 10:00 am Eastern Time, or 10:00 pm Beijing Time, to discuss the financial results. Participants may access the call by dialing the following numbers:

United States:

877-407-3108

International:

201-493-6797

To listen to the live webcast, please go to www.highpowertech.com and click on the conference call link, or go to https://78449.themediaframe.com/dataconf/productusers/hpj/mediaframe/30366/indexl.html. This webcast will be archived and accessible through the Company's website for approximately 30 days following the call.

About Highpower International, Inc.

Highpower International was founded in 2001 and produces high-quality Nickel-Metal Hydride (Ni-MH) and lithium-based rechargeable batteries used in a wide range of applications such as electric buses, bikes, energy storage systems, power tools, medical equipment, digital and electronic devices, personal care products, and lighting, etc. Highpower's target customers are Fortune 500 companies and top 20 companies in each vertical segment. With advanced manufacturing facilities located in Shenzhen, Huizhou, and Ganzhou of China, Highpower is committed to clean technology, not only in the products it makes, but also in the processes of production. The majority of Highpower International's products are distributed to worldwide markets mainly in the United States, Europe, China and Southeast Asia.

Use of Non-GAAP Measures

The Company has supplemented its reported GAAP (generally accepted accounting principles) financial information with non-GAAP measures. EBITDA was derived by taking earnings before interest expense (net), taxes, depreciation and amortization. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP. The Company believes this non-GAAP measure is useful to investors as it provides a basis for evaluating the Company's operating results in the ordinary course of its operations. This non-GAAP measure is not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with its results of operations as determined in accordance with U.S. GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with, and not in lieu of, the corresponding GAAP measures. EBITDA are reconciled in the tables below to the most directly comparable measure as reported in accordance with GAAP.

Forward Looking Statements

This press release contains "forward-looking statements" within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995 that are not historical facts. Such forward-looking statements include outlook on net revenues and gross margins, business and financial expectations and anticipated growth during 2019. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements involve known and unknown risks, uncertainties and other factors that could cause the Company's actual results to differ materially from the results expressed or implied by such statements, including, without limitation; inability to successfully expand our production capacity and improve production efficiency; fluctuations in the cost of raw materials; our dependence on, or inability to attract additional, major customers for a significant portion of our net sales; our ability to increase manufacturing capabilities to satisfy orders from new customers; our ability to maintain increased margins; our dependence on the growth in demand for smart wearable devices and energy storage systems, and other digital products and the success of manufacturers of the end applications that use our battery products; our responsiveness to competitive market conditions; our ability to successfully manufacture our products in the time frame and amounts expected; the market acceptance of our battery solutions, including our lithium ion batteries; impact of trade relations between China and the U.S. and other countries where we sell our products; unexpected fluctuations in exchange rates and our ability to successfully manage hedging; our ability to continue R&D development to keep up with technological changes, and adverse changes in legal, regulatory and economic factors generally. For a discussion of these and other risks and uncertainties see "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report for the year ended December 31, 2018 on Form 10-K and other public filings with the SEC. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The Company has no obligation to update the forward-looking information contained in this press release.

CONTACT:

Highpower International, Inc.

Sunny Pan

Chief Financial Officer

Tel: +86-755-8968-6521

Email: ir@highpowertech.com

Yuanmei Ma

Investor Relations Manager

Tel: +1-909-214-2482

Email: yuanmei@highpowertech.com

ICR, Inc.

Rose Zu

Tel: +1-646-931-0303

Email: ir@highpowertech.com

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)









March 31,



December 31,







2019



2018







(Unaudited)











$



$

ASSETS













Current Assets:













Cash





24,167,300



24,916,484



Restricted cash





39,562,823



44,495,633



Accounts receivable, net





59,037,769



77,279,817



Amount due from a related party





61,131



477,663



Notes receivable





4,375,399



256,712



Advances to suppliers





926,624



2,292,843



Prepayments and other receivables





8,282,896



10,457,789



Inventories





58,456,282



54,790,461

















Total Current Assets





194,870,224



214,967,402

















Property, plant and equipment, net





68,148,472



56,523,177



Long-term prepayments





1,949,214



2,617,419



Land use right, net





2,476,691



2,445,751



Other assets





635,015



643,128



Deferred tax assets, net





983,879



865,370



Long-term investments





9,768,087



9,993,852



Right-of-use assets





5,272,558



-













TOTAL ASSETS





284,104,140



288,056,099













LIABILITIES AND EQUITY























LIABILITIES













Current Liabilities:













Accounts payable





68,943,619



66,486,690



Deferred government grants





473,111



464,206



Short-term loans





17,749,981



24,856,744



Non-financial institution borrowing





-



8,761,426



Notes payable





75,053,041



73,607,284



Foreign exchange derivative liabilities





2,240



521,509



Amount due to related parties





9,011,760



6,116,851



Other payables and accrued liabilities





23,733,687



25,860,703



Income taxes payable





4,246,421



4,124,719



Lease liabilities, current





1,866,177



-

















Total Current Liabilities





201,080,037



210,800,132

















Lease liabilities, non current





3,550,051



-

















TOTAL LIABILITIES





204,630,088



210,800,132













 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)









March 31,



December 31,







2019



2018







(Unaudited)











$



$

EQUITY













Stockholders' equity













Preferred stock













(Par value: $0.0001, Authorized: 10,000,000 shares, Issued and outstanding:

none)





-



-



Common stock













(Par value: $0.0001, Authorized: 100,000,000 shares, 15,567,953 shares issued

and outstanding at March 31, 2019 and 15,559,658 at December 31, 2018,

respectively)





1,557



1,556



Additional paid-in capital





14,067,883



13,863,282



Statutory and other reserves





8,012,052



8,012,052



Retained earnings





56,481,633



56,173,912



Accumulated other comprehensive income (loss)





910,927



(794,835)















TOTAL EQUITY





79,474,052



77,255,967













TOTAL LIABILITIES AND EQUITY





284,104,140



288,056,099

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Stated in US Dollars)





Three months ended

March 31,





2019



2018





(Unaudited)



(Unaudited)





$



$













Net sales

58,113,480



49,783,453



Cost of sales

(45,452,951)



(42,217,126)



Gross profit

12,660,529



7,566,327













Research and development expenses

(2,986,709)



(2,561,837)



Selling and distribution expenses

(2,792,862)



(1,975,096)



General and administrative expenses

(4,823,489)



(4,114,810)



Foreign currency transaction loss

(1,250,895)



(1,014,693)



Total operating expenses

(11,853,955)



(9,666,436)













Income (loss) from operations

806,574



(2,100,109)













Changes in fair value of foreign exchange derivatives

387,100



703,715



Government grants

221,435



329,820



Other income

66,698



23,561



Equity in (loss) earnings of investee

(418,204)



156,250



Interest expenses

(470,423)



(241,852)



Income (loss) before income taxes

593,180



(1,128,615)













Income taxes (expense) benefit

(285,459)



9,679



Net income (loss)

307,721



(1,118,936)













Comprehensive income









Net income (loss)

307,721



(1,118,936)



Foreign currency translation gain

1,705,762



2,836,556



Comprehensive income

2,013,483



1,717,620













Earnings (loss) per share of common stock attributable to the

Company









- Basic

0.02



(0.07)



- Diluted

0.02



(0.07)













Weighted average number of common stock outstanding









- Basic

15,566,478



15,509,658



- Diluted

15,604,907



15,509,658



 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)





Three Months Ended March 31,



2019



2018



(Unaudited)



(Unaudited)



$



$

Cash flows from operating activities







Net income (loss)

307,721



(1,118,936)

Adjustments to reconcile net income to net cash provided by (used in) operating

activities:







Depreciation and amortization

1,729,440



1,475,228

Bad debt expense

89,427



18,524

Loss on disposal of property, plant and equipment

-



21,805

Deferred taxes

(102,366)



(356,616)

Changes in fair value of foreign exchange derivatives

(387,100)



(414,042)

Equity in loss (earnings) of investee

418,204



(156,250)

Share based compensation

204,602



241,421

Changes in operating assets and liabilities:







Accounts receivable

18,954,393



3,713,692

Notes receivable

(4,120,877)



2,622,925

Advances to suppliers

1,412,642



(236,789)

Prepayments and other receivables

2,379,960



(601,315)

Amount due from a related party

426,432



285,657

Amount due to related parties

113,794



-

Inventories

(2,626,489)



(10,779,233)

Accounts payable

(6,016,313)



(1,377,447)

Deferred government grants

-



475,783

Other payables and accrued liabilities

(2,287,547)



665,379

Income taxes payable

57,542



19,371

Net cash flows provided by (used in) operating activities

10,553,465



(5,500,843)









Cash flows from investing activities







Acquisitions of plant and equipment

(4,336,823)



(1,553,979)

Payment for long-term investment

(313,073)



(317,188)

Net cash flows used in investing activities

(4,649,896)



(1,871,167)









Cash flows from financing activities







Proceeds from short-term bank loans

5,963,296



14,427,164

Repayments of short-term bank loans

(13,560,014)



-

Proceeds from a related party

2,981,648



-

Repayments of non-financial institution borrowing

(8,944,944)



-

Proceeds from notes payable

30,205,286



28,429,600

Repayments of notes payable

(30,171,519)



(26,488,407)

Payment of derivative instruments

(143,089)



-

Net cash flows (used in) provided by financing activities

(13,669,336)



16,368,357

Effect of foreign currency translation on cash

2,083,773



2,046,039

Net (decrease) increase in cash and restricted cash

(5,681,994)



11,042,386

Cash and restricted cash- beginning of year

69,412,117



40,456,117

Cash and restricted cash- end of year

63,730,123



51,498,503









Supplemental disclosures for cash flow information:







Cash paid for:







Income taxes

330,283



327,565

Interest expenses

863,923



114,588

Non-cash investing and financing activities:







Purchase of property and equipment financed by accounts payables

7,203,680



-

Reconciliation of cash and restricted cash:







Cash

24,167,300



18,859,355

Restricted cash

39,562,823



32,639,148

Total cash and restricted cash shown in the condensed consolidated statements of

cash flows

63,730,123



51,498,503

  

Reconciliation of Net Income to EBITDA







Three months ended March 31,



2019



2018



(Unaudited)



(Unaudited)



$



$

Net income (loss) attributable to the Company

307,721



(1,118,936)









Interest expenses

470,423



241,852

Income taxes expenses (benefit)

285,459



(9,679)

Depreciation and amortization

1,729,440



1,475,228









EBITDA

2,793,043



588,465

 

Cision View original content:http://www.prnewswire.com/news-releases/highpower-international-reports-unaudited-first-quarter-2019-financial-results-300848666.html

SOURCE Highpower International, Inc.

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