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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

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