Exhibit 99.1 

 

 

Highpower International Reports Record Financial Results

For the Fourth Quarter and Year End December 31, 2016

 

Company to Hold Conference Call on March 28, 2017 at 10:00 a.m. Eastern Time / 7:00a.m. Pacific Time

 

SAN FRANCISCO, USA and SHENZHEN, CHINA– March 28, 2017 - Highpower International, Inc. (NASDAQ: HPJ), a developer, manufacturer, and marketer of lithium and nickel-metal hydride (Ni-MH) rechargeable batteries, battery management systems, and a provider of battery recycling, announced today its financial results for the fourth quarter and year-ended December 31, 2016.

 

Fiscal Year 2016 Operating and Financial Highlights (all results are compared to prior year period)

·Net sales increased 18.9% to $173.9 from $146.2 million.
·Lithium battery net sales increased 42.6% to $112.1 from $78.6 million.
·Gross margin was 21.9%, compared to 19.1%.
·EBITDA was $13.8 million, a 30.2% increase from $10.6 million; Adjusted EBITDA was $14.0 million compared to $10.3 million.
·Net income attributable to the Company increased 58.7% to $6.1 million, or $0.40 per diluted share, compared to $3.9 million, or $0.25 per diluted share. Non-GAAP net income attributable to the Company was to $6.3 million, or $0.42 per diluted share, compared to $3.6 million, or $0.23 per diluted share for the prior year period.
·Started providing lithium polymer batteries to DJI, a globally recognized manufacturer of commercial and recreational unmanned aerial vehicles, or drones. 
·Shipped its 1000Wh portable power station products (PPS) to Fry's Electronics.
·Expanded into the electric vehicles market through equity purchase of Huizhou Yipeng Energy Technology Co., Ltd., an electric vehicle power battery system solutions provider specializing in the plug-in hybrid electric vehicle (PHEV) and electric vehicle (EV) bus market in China, acquiring a 35.4% equity interest stake.

 

Fiscal 2016 Fourth Quarter Operating and Financial Highlights (all results are compared to prior year period)

·Net sales increased 43.0% to $53.9 million from $37.9 million, primarily due to increased revenue contributions from the lithium batteries as a result of the increased battery sales into the electric bus and high end consumer electronic device markets.
·Gross margin was 20.2%, an increase from 17.5%.
·Net income attributable to the Company was $1.8 million, or $0.12 per diluted share, compared to $166,971, or $0.01 per diluted share

 

Recent Event:

·The Company announced that it has decided not to move forward on the previously announced non-binding Cooperation Framework Agreement entered into on August 30, 2016 by the Company's subsidiary, Hong Kong Highpower Technology Co. Ltd., entered into a with Anshan Co-operation (Group) Co., Ltd. ("ACOC"). Under this agreement, ACOC had proposed to purchase newly issued shares of SZ Highpower, SZSpringpower and ICON for RMB540 million (approximately $81.0 million), which would have been paid directly to the subsidiaries resulting in ACOC holding more than 50% in each PRC subsidiary.

 

 

 

 

Management Commentary

Mr. George Pan, Chairman and CEO of Highpower International, commented, “We were pleased to deliver exceptional operating results for fiscal 2016. This growth was driven by double digit growth of our lithium battery business due to the rapid increase in demand for electric vehicles, mobile/portable and power storage system products both in China and worldwide. In 2016, Highpower was very proactive in regional expansion through a series of marketing initiatives across China, and domestic sales taking up a larger share of our revenue percentage. We continue to focus on enhancing our battery technology while adapting to this rapidly evolving market. ”

 

Fiscal 2016 Fourth Quarter and Year-end Financial Review

 

Net Sales

 

Net sales for the fourth quarter ended December 31, 2016 increased 43.0% to $53.9 million from $37.9 million in the same period in 2015. The increase in net sales was mainly due to growth in revenue contributions from the lithium batteries segment as a result of the increased battery sales into the electric vehicles, smart wearable devices, digital products and handheld devices markets.

 

Net sales for the fiscal year 2016 ended December 31, 2016 increased 18.9% to $173.9 million, compared to $146.2 million for the prior year period. This was due to a $33.5 million increase in net sales of the lithium batteries offset by a 20.7% decrease in the average selling price of such batteries.

 

Gross Profit

 

For the fourth quarter ended December 31, 2016, the Company's gross profit was $10.9 million, compared to $6.6 million, for the prior year period. This was primarily due to the increase in sales volume of our lithium batteries.

 

For the fiscal year 2016 ended December 31, 2016, the Company's gross profit was $38.1 million, compared to $27.9 million for the same period in 2015. The increase was due to the sales increase, reduction in the material purchase cost for the lithium and Ni-MH batteries and improvement in labor efficiency.

 

Gross Margin

 

Gross margin was 20.2% for the fourth quarter ended December 31, 2016, compared to 17.5% in the prior year period.

 

Gross margin for the 2016 ended December 31, 2016 was 21.9%, compared to 19.1% for the prior year period.

 

Research and Development (R&D)

Research and development expenses were $2.6 million, or 4.7% of net sales, for the fourth quarter ended December 31, 2016, compared to $2.0 million, 5.3% of net sales for the same period in 2015.

 

For the year ended December 31, 2016, R&D expenses were $9.2 million, or 5.3% of net sales, compared to $7.6 million, or 5.2% of net sales, for the same period in 2015. The increase was primarily due to the acceleration of research and development in lithium battery technologies.

 

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Selling & Distribution

 

Selling and distribution expenses were $1.9 million, or 3.5% of net sales, for the fourth quarter ended December 31, 2016, compared to $1.6 million, or 4.2% of net sales, for the same period in 2015.

 

For the year ended December 31, 2016, selling and distribution expenses were $6.9 million, or 4.0% of the net sales, compared to $6.7 million, or 4.6% of net sales, for the same period in 2015. The decrease was due to the optimization of the Company’s customer base.

 

General & Administrative

 

General and administrative expenses were $5.9 million, or 11.0% of net sales, for the fourth quarter ended December 31, 2016, compared to $3.2 million, or 8.4% of net sales, for the same period in 2015.

 

For the year ended December 31, 2016, general and administrative expenses were $18.2 million, or 10.5% of net sales, compared to $12.9 million, or 8.8% of net sales, for the same period in 2015. The increase was primarily due to salary and performance bonuses awarded to employees, impairment loss of machinery and equipment and allowance for doubtful accounts of $0.7 million, $0.5 million and $1.6 million, respectively.

 

Net Income

 

For the fourth quarter of 2016, net income attributable to the Company was $1.8 million, or $0.12 per diluted share based on 15.2 million weighted average diluted shares outstanding, compared to net income of $166,971, or $0.01 per diluted share based on 15.2 million weighted average diluted shares outstanding. Non-GAAP net income attributable the Company was $1.81 million, or $0.12 per diluted share, compared to a non-GAAP net income attributable to the Company of $0.30 million, or $0.02 per diluted share, in the prior year period.

 

For the year ended December 31, 2016, net income attributable to the Company was $6.1 million, or $0.40 per diluted share based on 15.1 million weighted average diluted shares outstanding, compared to net income of $3.9 million, or $0.25 per diluted share based on 15.3 million weighted average diluted shares outstanding. Non-GAAP net income attributable to the Company was $6.3 million, or $0.42 per diluted share, compared to a non-GAAP net income attributable to the Company of $3.6 million, or $0.23 per diluted share, in the prior year period.

 

A table reconciling non-GAAP net income attributable to the Company, a non-GAAP (Generally Accepted Accounting Principles) financial measure, to the appropriate GAAP measure is included with the Company's financial information below

 

EBITDA

 

EBITDA for the fourth quarter ended December 31, 2016 was $3.6 million, compared to $1.9 million in the prior year period.

 

For the fiscal year 2016 ended December 31, 2016, EBITDA was $13.8 million, compared to $10.6 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.

 

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Revenue Break-down By PRC and Continents:

 

   For the years ended December 31, 
   2016   2015 
   $   $ 
Net sales          
China mainland   101,459,371    68,201,408 
Asia, others   43,764,963    43,547,384 
Europe   17,958,060    26,101,398 
North America   9,371,838    7,450,898 
South America   759,472    499,669 
Africa   284,692    190,489 
Others   252,717    189,765 
    173,851,113    146,181,011 

 

Balance Sheet Highlights        
($ in millions, except per share data) 

December 31,

2016

  

December 31,

2015

 
         
   $   $ 
Cash and Cash Equivalents  $9.3   $5.8 
Total Current Assets  $104.5   $80.7 
Total Assets  $163.3   $134.2 
           
Total Current Liabilities  $118.0   $91.2 
Total Liabilities  $118.0   $91.3 
Shareholders’ Equity  $45.3   $42.9 
Total Liabilities and Shareholders’ Equity  $163.3   $134.2 
Book Value Per Share  $3.00   $2.84 

  

Conference Call Details

Date / Time: Tuesday, March 28, 2017 at 10:00 a.m. ET / 7:00 a.m. PT

Participant Dial-In Numbers

(United States): 877-407-3108

(International): 201-493-6797

 

Webcast

To listen to the live webcast, please go to at www.highpowertech.com and click on the conference call link, or go to: http://highpowertech.equisolvewebcast.com/q4-2016. 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.

 

 4 

 

 

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. Adjusted EBITDA and Non-GAAP net income exclude stock-based compensation expense. Adjusted EBITDA, as defined above, may not be similar to Adjusted EBITDA measures used by other companies. 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 these non-GAAP measures are useful to investors as they provide a basis for evaluating the Company's operating results in the ordinary course of its operations. These non-GAAP measures are 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. These non-GAAP financial measures are reconciled in the accompanying tables to the most directly comparable measures 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 portable electronic devices and energy storage systems and transportation 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 products, including our lithium products; our ability to successfully develop products for and penetrate the electric transportation market; 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

+86-755-8968-6521

ir@highpowertech.com

 

INVESTOR RELATIONS:

The Equity Group Inc.

In China

Katherine Yao, Senior Associate

+86-10-6587-6435 

kyao@equityny.com

 

In U.S.

Adam Prior, Senior Vice President

+1 (212) 836-9606

aprior@equityny.com

  

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HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Stated in US Dollars)

                  

   For three months  December 31,   For the year ended December 31, 
   2016   2015   2016   2015 
   (Unaudited)   (Unaudited)         
   $   $   $   $ 
                 
Net sales   53,878,832    37,850,736    173,851,113    146,181,011 
Cost of sales   (42,984,167)   (31,240,809)   (135,768,642)   (118,234,935)
Gross profit   10,894,665    6,609,927    38,082,471    27,946,076 
                     
Research and development expenses   (2,555,353)   (1,995,873)   (9,243,750)   (7,631,181)
Selling and distribution expenses   (1,932,344)   (1,620,103)   (6,888,052)   (6,728,692)
General and administrative expenses   (5,931,842)   (3,151,313)   (18,186,362)   (12,895,649)
Foreign currency transaction gain   1,322,427    571,934    1,959,036    2,474,154 
Total operating expenses   (9,097,112)   (6,195,355)   (32,359,128)   (24,781,368)
                     
Income from operations   1,797,553    414,572    5,723,343    3,164,708 
                     
Gain (loss) on change of fair value of warrant liability   24,894    (14,560)   140,290    927,125 
Other income   553,725    447,273    2,271,528    1,189,324 
Equity in earnings of investee   132,852    -    351,755    - 
Interest expenses   (368,048)   (211,470)   (1,419,962)   (1,002,151)
Income before taxes   2,140,976    635,815    7,066,954    4,279,006 
                     
Income taxes expenses   (460,295)   (624,530)   (1,439,177)   (818,736)
Net income   1,680,681    11,285    5,627,777    3,460,270 
                     
Less: net loss attributable to non-controlling interest   (76,766)   (155,686)   (490,150)   (393,812)
Net income attributable to the Company   1,757,447    166,971    6,117,927    3,854,082 
                     
Comprehensive income                    
Net income   1,680,681    11,285    5,627,777    3,460,270 
Foreign currency translation loss   (1,997,630)   (1,032,199)   (3,540,334)   (3,055,839)
Comprehensive  (loss) income   (316,949)   (1,020,914)   2,087,443    404,431 
                     
Less: comprehensive loss attributable to non-controlling interest   (94,427)   (175,530)   (524,140)   (453,756)
Comprehensive (loss) income attributable to the Company   (222,521)   (845,384)   2,611,583    858,187 
                     
Income per share of common stock attributable to the Company                    
- Basic   0.12    0.01    0.41    0.26 
- Diluted   0.12    0.01    0.40    0.25 
                     
Weighted average number of common stock outstanding                    
- Basic   15,111,335    15,101,679    15,105,235    15,096,166 
- Diluted   15,159,563    15,153,745    15,113,914    15,286,196 

  

 6 

 

  

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars except Number of Shares)    

  

  December 31,  December 31,
  2016  2015
  $  $
ASSETS          
Current Assets:          
Cash   9,324,393    5,849,967 
Restricted cash   11,213,640    11,656,204 
Accounts receivable, net   46,280,769    36,139,866 
Amount due from Yipeng   7,517,250    - 
Notes receivable   1,093,730    1,757,709 
Prepayments and other receivables   6,899,872    6,060,904 
Inventories   22,207,333    19,218,331 
           
Total Current Assets   104,536,987    80,682,981 
           
Property, plant and equipment, net   43,504,991    47,464,186 
Land use right, net   3,622,435    3,963,003 
Other assets   500,000    550,000 
Deferred tax assets   1,477,761    1,544,314 
Long-term investment   9,689,576    - 
           
TOTAL ASSETS   163,331,750    134,204,484 
           
LIABILITIES AND EQUITY          
           
LIABILITIES          
Current Liabilities:          
Accounts payable   49,463,901    36,077,396 
Deferred income   761,491    879,944 
Short-term loan   18,776,080    13,839,341 
Non-financial institution borrowings   3,741,115    - 
Notes payable   30,658,000    30,490,166 
Amount due to Yipeng   1,522,313    - 
Other payables and accrued liabilities   11,148,556    6,292,492 
Income taxes payable   1,963,298    1,783,013 
Current portion of long-term loan   -    1,845,245 
           
Total Current Liabilities   118,034,754    91,207,597 
           
Warrant Liability   259    140,549 
           
TOTAL LIABILITIES   118,035,013    91,348,146 
           
COMMITMENTS AND CONTINGENCIES   -    - 
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, 15,114,991 shares issued and outstanding at December 31, 2016 and 15,101,679 shares issued and outstanding at December 31, 2015)   1,511    1,510 
Additional paid-in capital   11,580,934    11,227,979 
Statutory and other reserves   4,992,463    4,042,429 
Retained earnings   29,266,068    24,098,175 
Accumulated other comprehensive income   (873,582)   2,632,762 
           
Total equity attributable to the stockholders of Highpower International Inc.   44,967,394    42,002,855 
           
Non-controlling interest   329,343    853,483 
           
TOTAL EQUITY   45,296,737    42,856,338 
           
TOTAL LIABILITIES AND EQUITY   163,331,750    134,204,484 

  

 7 

 

  

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

        

   For the years ended December 31, 
   2016   2015 
   $   $ 
Cash flows from operating activities          
Net income   5,627,777    3,460,270 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   4,937,688    4,939,882 
Allowance for doubtful accounts   1,651,546    949 
Impairment of machinery and equipment   530,914    - 
Loss on disposal of property, plant and equipment   609,842    233,296 
Deferred income tax   (32,756)   9,107 
Equity in earnings of investee   (351,755)   - 
Share based compensation   317,946    653,017 
Gain on change of fair value of warrant liability   (140,290)   (927,125)
Changes in operating assets and liabilities:          
Accounts receivable   (13,809,278)   (5,446,752)
Notes receivable   575,514    (1,222,793)
Prepayments and other receivables   (1,755,589)   (2,435,316)
Amount due from Yipeng   (7,457,338)   - 
Amount due to Yipeng   1,589,963    - 
Inventories   (4,410,429)   1,831,737 
Accounts payable   11,196,709    (3,322,054)
Deferred income   (64,658)   1,890,332 
Other payables and accrued liabilities   5,471,022    755,757 
Income taxes payable   307,984    (74,111)
Net cash flows provided by operating activities   4,794,812    346,196 
           
Cash flows from investing activities          
Acquisition of plant and equipment   (8,487,473)   (11,256,553)
Long-term investment   (3,005,666)   - 
Net cash flows used in investing activities   (11,493,139)   (11,256,553)
           
Cash flows from financing activities          
Proceeds from short-term bank loans   19,611,969    14,430,014 
Repayment of short-term bank loans   (13,526,998)   (13,438,449)
Proceeds from non-financial institution borrowings   4,508,499    - 
Repayment of non-financial institution borrowings   (601,133)   - 
Repayment of long-term bank loans   (1,803,399)   (1,924,002)
Proceeds from notes payables   59,952,794    63,544,496 
Repayment of notes payables   (57,731,108)   (61,118,292)
Proceeds from exercise of employee options   35,010    44,534 
Change in restricted cash   (320,093)   2,966,205 
Net cash flows provided by financing activities   10,125,541    4,504,506 
Effect of foreign currency translation on cash   47,212    (2,356,074)
Net increase (decrease) in cash   3,474,426    (8,761,925)
Cash - beginning of year   5,849,967    14,611,892 
Cash - end of year   9,324,393    5,849,967 
           
Supplemental disclosures for cash flow information:          
Cash paid for:          
Income taxes   1,163,950    883,740 
Interest expenses   1,229,173    1,002,151 
Non-cash transactions          
Offset of deferred income related to government grant and property, plant and equipment   229,951    2,547,545 
Long-term investment with capital injection by equipment   7,156,717    - 

  

 8 

 

  

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES RECONCILIATION OF

NON-GAAP FINANCIAL MEASURES (Unaudited)

(Stated in US Dollars)

 

Reconciliation of Net Income to EBITDA

          

   For three months ended December 31,   For the year ended December 31, 
   2016   2015   2016   2015 
                 
   $   $   $   $ 
Net income attributable to the Company   1,757,447    166,971    6,117,927    3,854,082 
Non-GAAP Net Income (1)   1,806,357    298,787    6,295,583    3,579,974 
                     
Interest expenses   368,048    211,470    1,419,962    1,002,151 
Income taxes expenses   460,295    624,530    1,439,177    818,736 
Depreciation and Amortization   1,062,615    901,286    4,797,968    4,939,882 
                     
EBITDA   3,648,405    1,904,257    13,775,034    10,614,851 
Non-GAAP EBITDA(2)   3,697,315    2,036,073    13,952,690    10,340,743 

 

(1)See table below for reconciliation of net income attributable to the Company to Non-GAAP net income attributable to the Company.

 

(2)Excludes share-based compensation expense and (loss) gain on change of fair value of warrant liability as set forth in the following table.

 

 9 

 

  

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES RECONCILIATION OF

NON-GAAP FINANCIAL MEASURES (Unaudited)

(Stated in US Dollars)

 

Reconciliation of Net Income Attributable to the Company to Non-GAAP Net Income Attributable to the Company

                  

   For three months ended December 31,   For the year ended December 31, 
   2016   2015   2016   2015 
   (Unaudited)   (Unaudited)         
   $   $   $   $ 
Net income attributable to the Company   1,757,447    166,971    6,117,927    3,854,082 
Stock-based compensation expense   73,804    117,256    317,946    653,017 
Gain (loss) on change of fair value of warrant liability   (24,894)   14,560    (140,290)   (927,125)
Non-GAAP net income attributable to the Company   1,806,357    298,787    6,295,583    3,579,974 
                     
Basic net income per share of common stock attributable to the Company   0.12    0.01    0.41    0.26 
Stock-based compensation expense   0.00    0.01    0.02    0.04 
Gain (loss) on change of fair value of warrant liability   0.00    0.00    (0.01)   (0.06)
Non-GAAP income per share of common stock attributable to the Company   0.12    0.02    0.42    0.24 
                     
Diluted net income per share of common stock attributable to the Company   0.12    0.01    0.40    0.25 
Stock-based compensation expense   0.00    0.01    0.03    0.04 
Gain (loss) on change of fair value of warrant liability   0.00    0.00    (0.01)   (0.06)
Non-GAAP income per share of common stock attributable to the Company   0.12    0.02    0.42    0.23 
                     
Weighted average number of common shares outstanding                    
- Basic   15,111,335    15,101,679    15,105,235    15,096,166 
- Diluted   15,159,563    15,153,745    15,113,914    15,286,196 

  

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