Market Overview

Highpower International Reports Unaudited Second Quarter and First Half 2018 Financial Results

Share:

Highpower International Reports Unaudited Second Quarter and First Half 2018 Financial Results

PR Newswire

SAN DIEGO and SHENZHEN, China, Aug. 13, 2018 /PRNewswire/ -- Highpower International, Inc. (NASDAQ: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 second quarter ended June 30, 2018.

Second Quarter 2018 Highlights (all results compared to prior year period)

  • Net sales for the second quarter of 2018 increased by 25.6% to $64.9 million from $51.7 million. Excluding the impact of Ganzhou Highpower Technology Co., Ltd. ("GZ Highpower"), net sales increased 32.8% to $64.9 million from $48.9 million.
  • Lithium business net sales increased 31.1% to $48.5 million from $37.0 million.
  • Gross margin decreased to 17.4% of net sales compared to 23.3%. Excluding GZ Highpower, gross margin was 17.4% compared to 23.2%.
  • Net income attributable to the Company decreased 37.9% to net income of $2.7 million, or $0.17 per diluted share, compared to net income attributable to the Company of $4.4 million, or $0.28 per diluted share. Excluding GZ Highpower, net income attributable to the Company was $2.7 million compared to net income attributable to the Company of $4.2 million.

Mr. George Pan, Chairman and CEO of Highpower International, commented, "We are pleased to exceed our top-line guidance for the quarter, driven by growth in both our lithium and Ni-MH businesses. New and existing customers in the high-end consumer product, industrial application, and artificial intelligence product industries in particular grew our lithium business. In addition, our Ni-MH business benefited from increased demand generated by the trend of consumer electronics providers switching from one-time-use batteries to re-chargeable batteries.

"We will continue to drive our business forward in the second half of the year by producing higher quality and safer battery products and services to grow Top-line sales. At the same time, we will manage our prices, operations, and customer expectations to maintain a balance between growth and margins. We remain optimistic about the growth of our industry and our ability to be a leading provider of clean, safe, and efficient power solutions to meet society's needs," Mr. Pan concluded.

Second Quarter and First Half 2018 Financial Results

Net Sales

Net sales for the second quarter of 2018 increased 25.6% to $64.9 million from $51.7 million in the prior year period. The increase was driven by sales of the Company's lithium business, which grew 31.1%, or $11.5 million, during the quarter. In addition, sales in the Ni-MH business grew 39.3%, or $4.6 million, year over year. Excluding the impact of GZ Highpower, net sales increased 32.8% to $64.9 million from $48.9 million.

Net sales increased 22.6% to $114.7 million in the first half of 2018 compared to $93.6 million in the first half of 2017. Excluding the impact of GZ Highpower, net sales increased 28.9% to $114.7 million in the first half of 2018.

Gross Profit

Gross profit for the second quarter of 2018 decreased 6.3% to $11.3 million from $12.1 million in the prior year period due to high raw material prices. Gross margin for the second quarter of 2018 was 17.4% compared to 23.3% in the prior year period. Excluding GZ Highpower, gross margin was 17.4% compared to 23.2%.

Gross profit for the first half of 2018 decreased 14.2% to $18.9 million from $22.0 million in the prior year period. Gross margin was 16.5% and 23.5% for first half of 2018 and 2017, respectively. Excluding GZ Highpower, gross margin for the first half of 2018 was 16.5% compared to 23.2% in the prior year period.

Operating Expenses

  • Research and development (R&D) expenses for the second quarter of 2018 were $3.6 million compared to $2.1 million in the prior year period. As a percentage of net sales, R&D expenses increased to 5.5% from 4.1% in the prior year period due to the Company's continued investments in R&D.

Research and development expenses were $6.2 million, or 5.4% of net sales, for the first half of 2018 compared to $4.0 million, or 4.2% of net sales, for the first half of 2017.

  • Selling and distribution expenses for the second quarter of 2018 were $2.1 million compared to $1.7 million in the prior year period. As a percentage of net sales, selling and distribution expenses remained at 3.3% compared to the prior year period.

Selling and distribution expenses were $4.1 million, or 3.6% of net sales, for the first half of 2018 compared to $3.4 million, or 3.6% of net sales, for the first half of 2017.

  • General and administrative expenses for the second quarter of 2018 were $3.9 million compared to $3.0 million in the prior year period. As a percentage of net sales, general and administrative expenses increased to 6.0% from 5.8% in the prior year period.

General and administrative expenses were $8.0 million, or 7.0% of net sales, for the first half of 2018 compared to $6.1 million, or 6.5% of net sales, for the first half of 2017. The increase was due to the increase of payroll related and amortization of share-based compensation.

Net Income

Net income attributable to the Company for the second quarter of 2018 was $2.7 million compared to $4.4 million in the prior period. Net income attributable to the Company per diluted share for the second quarter of 2018 was $0.17 compared to $0.28 in the prior year period. Excluding GZ Highpower, net income attributable to the Company was $2.7 million compared to $4.2 million in the prior year period.

For the second quarter of 2018, the Company's weighted average diluted shares outstanding used in computing diluted share was 15,629,413.

Net income attributable to the Company for the first half of 2018 decreased to $1.6 million from $7.0 million in the prior year period. Net income attributable to the Company per diluted share for the first half of 2018 decreased to $0.10 from $0.45 in the prior year period. Excluding GZ Highpower, net income attributable to the Company for the first half of 2018 was $1.6 million compared to $6.5 million in the prior year period.

For the first half of 2018 and 2017, the Company's weighted average diluted shares outstanding used in computing diluted share was 15,619,771 and 15,304,773, respectively.

EBITDA

EBITDA for the second quarter of 2018 decreased 23.7% to $5.0 million from $6.5 million in the prior year period. EBITDA for the first half of 2018 decreased by 51.7% to $5.6 million from $11.5 million in the prior year period.

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


Balance Sheet Highlights





($ in millions, except per share data)


June 30,


December 31,

2018


2017



(Unaudited)





$


$

Cash


$7.3


$14.5

Total Current Assets


$187.6


$156.0

Total Assets


$255.0


$220.3






Total Current Liabilities


$186.8


$152.3

Total Liabilities


$186.8


$153.1

Total Equity


$68.2


$67.2

Total Liabilities and Equity


$255.0


$220.3

Book Value Per Share


$4.38


$4.33

 

Financial Outlook

For the third quarter of 2018, the Company expects net revenues to grow around 30% year over year. Gross margin is expected to be similar or better than that of the second quarter of 2018.

Conference Call Details

The Company will hold a conference call on August 13, 2018 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/26046/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 is reconciled in the accompanying table 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. 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, 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; and our ability to continue R&D development to keep up with technological changes. 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 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)





June 30,


December 31,




2018


2017




(Unaudited)






$


$

ASSETS







Current Assets:







Cash



7,280,576


14,502,171


Restricted cash



30,159,389


25,953,946


Accounts receivable, net



61,440,575


58,252,999


Amount due from a related party



432,320


1,165,838


Notes receivable



1,611,947


2,606,517


Advances to suppliers



8,031,483


6,050,531


Prepayments and other receivables



9,401,564


4,268,527


Foreign exchange derivative assets



-


236,436


Inventories



69,200,672


42,946,644









Total Current Assets



187,558,526


155,983,609









Property, plant and equipment, net



48,135,151


46,520,776


Long-term prepayments



3,992,080


3,715,445


Land use rights, net



2,564,161


2,639,631


Other assets



747,186


748,431


Deferred tax assets, net



1,219,521


750,267


Long-term investments



10,790,882


9,906,379







TOTAL ASSETS



255,007,507


220,264,538







LIABILITIES AND EQUITY












LIABILITIES







Current Liabilities:







Accounts payable



80,534,723


60,368,012


Deferred government grant



758,059


309,638


Short-term loans



25,080,521


10,128,646


Non-financial institution borrowings



9,069,335


10,756,158


Notes payable



51,710,779


54,859,478


Foreign exchange derivative liabilities



689,790


-


Amount due to a related party



423,236


-


Other payables and accrued liabilities



15,338,570


12,243,345


Income taxes payable



3,225,973


3,609,391









Total Current Liabilities



186,830,986


152,274,668









Income taxes payable, noncurrent



-


777,685









TOTAL LIABILITIES



186,830,986


153,052,353







COMMITMENTS AND CONTINGENCIES



-


-

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)




June 30,

2018 


December 31, 
2017



(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, 15,559,658 shares issued and
outstanding at June 30, 2018 and 15,509,658 at December 31, 2017, respectively)


1,556


1,551


Additional paid-in capital


13,410,368


12,709,756


Statutory and other reserves


6,549,815


6,549,815


Retained earnings


46,076,947


44,481,568


Accumulated other comprehensive income


2,137,835


3,469,495






TOTAL EQUITY


68,176,521


67,212,185






TOTAL LIABILITIES AND EQUITY


255,007,507


220,264,538


 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Stated in US Dollars)



Three months ended June 30,


Six months ended June 30,


2018


2017


2018


2017


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


$


$


$


$

Net sales

64,923,960


51,699,930


114,707,413


93,566,778

Cost of sales

(53,614,034)


(39,628,164)


(95,831,160)


(71,560,178)

Gross profit

11,309,926


12,071,766


18,876,253


22,006,600









Research and development expenses

(3,592,760)


(2,137,286)


(6,154,597)


(3,951,216)

Selling and distribution expenses

(2,121,650)


(1,722,910)


(4,096,746)


(3,361,223)

General and administrative expenses

(3,910,188)


(3,016,401)


(8,024,998)


(6,074,963)

Foreign currency transaction gain (loss)

1,670,932


(514,624)


656,239


(828,502)

Total operating expenses

(7,953,666)


(7,391,221)


(17,620,102)


(14,215,904)









Income from operations

3,356,260


4,680,545


1,256,151


7,790,696









Changes in fair value of warrant liability

-


31,811


-


259

Changes in fair value of foreign exchange derivative assets
(liabilities)

(1,125,140)


-


(421,425)


-

Government grants

988,679


209,297


1,318,499


558,812

Other income

56,581


67,068


80,142


295,646

Equity in earnings (loss) of investees

160,070


(41,607)


316,320


105,325

Gain on dilution in equity method investee

-


491,325


-


491,325

Interest expenses

(312,814)


(380,531)


(554,666)


(983,848)

Income before taxes

3,123,636


5,057,908


1,995,021


8,258,215









Income taxes expenses

(409,321)


(595,708)


(399,642)


(1,183,473)

Net income

2,714,315


4,462,200


1,595,379


7,074,742









Less: net income attributable to non-controlling interest

-


90,963


-


167,856

Net income attributable to the Company

2,714,315


4,371,237


1,595,379


6,906,886









Comprehensive income








Net income

2,714,315


4,462,200


1,595,379


7,074,742

Foreign currency translation (loss) gain

(4,168,216)


1,508,714


(1,331,660)


1,484,713

Comprehensive (loss) income

(1,453,901)


5,970,914


263,719


8,559,455









Less: comprehensive income attributable to non-controlling
interest

-


98,795


-


178,346

Comprehensive (loss) income attributable to the Company

(1,453,901)


5,872,119


263,719


8,381,109









Earnings per share of common stock attributable to the
Company








- Basic

0.17


0.29


0.10


0.45

- Diluted

0.17


0.28


0.10


0.45









Weighted average number of common stock outstanding








- Basic

15,556,361


15,317,101


15,533,139


15,218,820

- Diluted

15,629,413


15,479,357


15,619,771


15,304,773

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)



Six Months Ended June 30,


2018


2017


(Unaudited)


(Unaudited)


$


$

Cash flows from operating activities




Net income

1,595,379


7,074,742

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




Depreciation and amortization

3,003,872


2,429,982

(Reversal) allowance for doubtful accounts

(472,799)


17,994

Loss on disposal of property, plant and equipment

159,458


25,218

Deferred tax

(498,878)


263,673

Changes in fair value of foreign exchange derivative assets (liabilities)

955,790


-

Equity in earnings of investees

(316,320)


(105,325)

Gain on dilution in equity method investee

-


(491,325)

Share based compensation

488,117


44,815

Changes in fair value of warrant liability

-


(259)

Changes in operating assets and liabilities:




Accounts receivable

(3,877,577)


4,390,991

Notes receivable

986,591


(1,057,366)

Advances to suppliers

(2,154,883)


-

Prepayments and other receivables

(4,921,059)


(3,799,960)

Amount due from a related party

740,408


5,178,499

Amount due to a related party

-


(1,480,335)

Inventories

(27,915,901)


(9,595,161)

Accounts payable

21,683,401


(494,812)

Deferred government grant

469,895


109,892

Other payables and accrued liabilities

3,578,815


(2,145,295)

Income taxes payable

(1,140,753)


(227,668)

Net cash flows (used in) provided by operating activities

(7,636,444)


138,300





Cash flows from investing activities




Acquisitions of property, plant and equipment

(5,681,723)


(5,199,130)

Payment for long-term investment

(328,927)


-

Net cash flows used in investing activities

(6,010,650)


(5,199,130)





Cash flows from financing activities




Proceeds from short-term loans

15,664,587


2,916,017

Repayments of short-term loans

-


(2,841,696)

Proceeds from non-financial institution borrowings

-


10,200,959

Repayments of non-financial institution borrowings

(1,566,318)


(2,331,648)

Proceeds from notes payable

53,584,205


40,861,835

Repayments of notes payable

(55,920,682)


(31,049,819)

Proceeds from exercise of employee options

-


623,806

Net cash flows provided by financing activities

11,761,792


18,379,454

Effect of foreign currency translation on cash and restricted cash

(1,130,850)


1,387,318

Net (decrease) increase in cash and restricted cash

(3,016,152)


14,705,942

Cash and restricted cash - beginning of period

40,456,117


20,538,033

Cash and restricted cash - end of period

37,439,965


35,243,975





Supplemental disclosures for cash flow information:




Cash paid for:




Income taxes

2,039,273


1,147,467

Interest expenses

1,002,653


948,831

Non-cash transactions




Shares issued for legal case settlement

212,500


-

Offset of deferred income related to government grant and property, plant and
equipment

-


85,571

                                                                                           


Reconciliation of Net Income (loss) to EBITDA





Three months ended June 30,


Six months ended June 30,


2018


2017


2018


2017


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


$


$


$


$

Net income attributable to the Company

2,714,315


4,371,237


1,595,379


6,906,886









Interest expenses

312,814


380,531


554,666


983,848

Income taxes expenses

409,321


595,708


399,642


1,183,473

Depreciation and Amortization

1,528,644


1,155,648


3,003,872


2,429,982









EBITDA

4,965,094


6,503,124


5,553,559


11,504,189

 

Cision View original content:http://www.prnewswire.com/news-releases/highpower-international-reports-unaudited-second-quarter-and-first-half-2018-financial-results-300695886.html

SOURCE Highpower International, Inc.

View Comments and Join the Discussion!