Exhibit 99.1

 

SAN DIEGO, CALIFORNIA and SHENZHEN, China, April 2, 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 fourth quarter and year ended December 31, 2017.

 

Fourth Quarter 2017 Highlights (all results compared to prior year period)

·Net sales for the fourth quarter of 2017 increased by 47.0% to $79.2 million from $53.9 million.
·Gross profit for the fourth quarter of 2017 increased by 8.4% to $11.8 million from $10.9 million.
·EBITDA for the fourth quarter of 2017 increased by 136.5% to $9.0 million from $3.8 million.
·Net income attributable to the Company for the fourth quarter of 2017 was $4.8 million, or $0.31 per diluted share, as compared to $1.8 million, or $0.12 per diluted share.

 

Full Year 2017 Highlights (all results compared to prior year period)

·Net sales increased 40.4% to $244.2 million from $173.9 million. Excluding the impact of Ganzhou Highpower Technology Co., Ltd. ("GZ Highpower"), net sales increased 27.2% to $215.9 million from $169.7 million.
·Lithium Business net sales increased 44.2% to $161.7 million from $112.1 million.
·Gross margin was 19.4% compared to 21.9%. Excluding GZ Highpower, gross margin was 20.4% compared to 22.7%.
·EBITDA was $27.8 million, a 99.8% increase from $13.9 million. Excluding GZ Highpower, EBITDA was $25.8 million compared to $15.0 million.
·

Net income attributable to the Company increased 174.2% to $16.8 million, or $1.09 per diluted share, compared to $6.1 million, or $0.40 per diluted share. Excluding GZ Highpower, net income increased 116.8% to $15.7 million compared to $7.3 million.

 

Recent Event

·On December 15, 2017, the Company announced the investment of $14.3 million in its majority-owned subsidiary GZ Highpower from Xiamen Tungsten Co., Ltd. (“Xiamen Tungsten”) and Mr. Ou, the General Manager of GZ Highpower, for a total of $12.1 million and $2.2 million, respectively. This transaction closed on December 21, 2017, and the Company’s ownership of GZ Highpower decreased to 31.3%. Due to the loss of controlling power in GZ Highpower, the Company deconsolidated GZ Highpower accordingly. Key financial items excluding GZ Highpower are presented on an annual basis for comparison purposes.

 

Mr. George Pan, Chairman and CEO of Highpower International, commented, “We are pleased to report top-line performance that beat our guidance for both the fourth quarter and full year 2017. In addition, our bottom line, including EBITDA, grew significantly for both the fourth quarter and full year, thanks to continued progress in our efforts to strengthen our product offering, improve our production capacity and efficiency, and maintain an efficient supply chain.”

 

   

 

 

Mr. Pan continued, “We are living in a digital age where power is central to the functioning of our homes and jobs. We have seen an unprecedented expansion in the number of electrical products available to customers in recent years, not only among public consumers, but also among companies and governments worldwide, resulting in a surge in global energy demand and solutions. Due to this high demand, we expect continued high prices for raw materials such as cobalt in 2018, and we will endeavor to combat its effect on margins by improving production efficiency, maintaining proper inventory buildup, and hedging. We will continue to invest more on R&D, further improve the product safety and reliability, which are essential and critical to end users, especially in the age of artificial intelligence. With such improvement, we will further strengthen our core competitiveness which will partially offset the negative impact from raw material price increasing.”

 

“To drive our growth in the year ahead, we will continue to focus on our core lithium ion battery products. We are setting up a new production workshop in our Huizhou facility, which is expected to reach a target daily production volume of 100,000 pieces by the second quarter of 2018. In addition, a new building in Huizhou facility will be completed by May 2019 to further expand our production capacity to fulfill increasing international brand customer demand.”

 

“With our top-tier customer base and strong branding, we are optimistic about our growth in 2018 and beyond. At Highpower, we remain committed to providing clean, safe, and efficient power solutions to meet society’s needs,” Mr. Pan concluded.

 

Fourth Quarter and Full Year 2017 Financial Results

 

Net Sales

 

Net sales for the fourth quarter of 2017 increased by 47.0% to $79.2 million from $53.9 million in the prior year period, primarily attributable to growth in revenue from the Lithium segment. This was driven by continued increasing demand for consumer electronics, including portable power stations, smart wearable devices, smart phones, and notebooks.

 

Net sales increased 40.4% to $244.2 million for the year ended December 31, 2017 as compared to $173.9 million in 2016. The increase was driven by growth in the Lithium segment as well as growth in the GZ Highpower business. Excluding GZ Highpower, net sales increased 27.2% to $215.9 million from $169.7 million.

 

Gross Profit

 

Gross profit for the fourth quarter of 2017 increased by 8.4% to $11.8 million from $10.9 million in the prior year period. Gross margin for the fourth quarter of 2017 decreased to 14.9% from 20.2% in the prior year period due to continued high raw material prices and the expiration during the third quarter of some actions taken to offset the price fluctuations. There was also a substantial increase in the new materials business segment, which has a lower gross profit margin.

 

Gross profit for the year increased 24.4% to $47.4 million from $38.1 million in prior year period. Gross margin was 19.4% and 21.9% for full-year 2017 and 2016, respectively. The decrease in margin was primarily due to high raw material prices. Excluding GZ Highpower, gross profit for 2017 increased 14.5% to $44.0 million from $38.5 million and gross margin was 20.4% compared to 22.7%.

 

   

 

 

Operating Expenses

 

·Research and development (R&D) expenses for the fourth quarter of 2017 were $3.1 million as compared to $2.6 million in the prior year period. As a percentage of net sales, R&D expenses declined to 3.9% from 4.7% in the prior year period. The Company will continue to invest in R&D activities in the future.


Research and development expenses were $9.5 million, or 3.9% of net sales, for 2017 as compared to $9.2 million, or 5.3% of net sales, in 2016.

 

·Selling and distribution expenses for the fourth quarter of 2017 were $2.3 million compared to $1.9 million in 2016. As a percentage of net sales, selling and distribution expenses decreased to 2.9% from 3.6% in the prior year period, primarily attributable to the Company’s customer base optimization efforts.


Selling and distribution expenses were $7.5 million, or 3.1% of net sales, for 2017 as compared with $6.9 million, or 4.0% of net sales, in 2016.

 

·General and administrative expenses for the fourth quarter of 2017 were $5.4 million as compared to $5.9 million in the prior year period. As a percentage of net sales, general and administrative expenses decreased to 6.8% from 11.0% in the prior year period.


General and administrative expenses were $15.4 million, or 6.3% of net sales, in 2017 as compared with $18.2 million, or 10.4% of net sales, in the prior year.

 

Net Income

 

Net income attributable to the Company for the fourth quarter of 2017 increased to $4.8 million from $1.8 million in the prior year period. Net income attributable to the Company per diluted share for the fourth quarter of 2017 increased to $0.31 from $0.12 in the prior year period.

 

For the quarters ended December 31, 2017 and 2016, the Company's weighted average diluted shares outstanding used in computing diluted shares was and 15,648,888 and 15,159,563, respectively.

 

Net income attributable to the Company for the full year 2017 increased to $16.8 million from $6.1 million in the prior year period. Net income attributable to the Company per diluted share for the full year increased to $1.09 from $0.40 in the prior year period. Excluding GZ Highpower, net income for the full year of 2017 and 2016 was $15.7 million and $7.3 million, respectively.

 

For the years ended December 31, 2017 and 2016, the Company's weighted average diluted shares outstanding used in computing diluted share was 15,435,371 and 15,113,914, respectively.

 

   

 

 

EBITDA

 

EBITDA for the fourth quarter of 2017 increased by 136.5% to $9.0 million from $3.8 million in the prior year period. EBITDA for the full year of 2017 increased by 99.8% to $27.8 million from $13.9 million in the prior year period. Excluding GZ Highpower, EBITDA was $25.8 million for the full year compared to $15.0 million in 2016.

 

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

 

Revenue Breakdown by Geography:

   For the years ended December 31, 
   2017   2016 
    $    $ 
Net sales          
China mainland   139,096,630    101,459,371 
Asia, others   81,060,414    43,764,963 
Europe   18,684,852    17,958,060 
North America   4,769,797    9,371,838 
South America   269,596    759,472 
Africa   143,475    284,692 
Others   141,548    252,717 
    244,166,312    173,851,113 

 

Balance Sheet Highlights

   December 31, 
($ in millions, except per share data)  2017   2016 
    $    $ 
Cash   14.5    9.3 
Total Current Assets   156.0    103.3 
Total Assets   220.3    163.3 
           
Total Current Liabilities   152.3    118.0 
Total Liabilities   153.1    118.0 
Total Equity   67.2    45.3 
Total Liabilities and Equity   220.3    163.3 
Book Value Per Share   4.33    3.00 

 

Financial Outlook

 

For the first quarter of 2018, the Company expects net revenues to grow over 10% year over year excluding Ganzhou Highpower impact. Factoring in the impact of expected, continued high raw material prices, gross margin is expected to be between 15% and 17% due to lower volume in first quarter by seasonality impact. For the full year 2018, the Company expects net revenues to grow at least 20% compared to 2017 and gross margin levels to exceed that of the fourth quarter of 2017 excluding Ganzhou Highpower impact.

 

   

 

 

Conference Call Details

The Company will hold a conference call on Monday, April 2, 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 http://highpowertech.equisolvewebcast.com/q4-2017. 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, hedging, , production capacity, research and development efforts, strategic partnerships, and business and financial expectations and anticipated growth during 2018. 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; our ability to successfully manage hedging; 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 Annual Report for the year ended December 31, 2017 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

CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

 

   December 31,   December 31, 
   2017   2016 
    $    $ 
ASSETS          
Current Assets:          
Cash   14,502,171    9,324,393 
Restricted cash   25,953,946    11,213,640 
Accounts receivable, net   58,252,999    46,280,769 
Amount due from related parties   1,165,838    7,517,250 
Notes receivable   2,606,517    1,093,730 
Advances to suppliers   6,050,531    2,007,184 
Prepayments and other receivables   4,268,527    3,694,020 
Foreign exchange derivatives   236,436    - 
Inventories   42,946,644    22,207,333 
           
Total Current Assets   155,983,609    103,338,319 
           
Property, plant and equipment, net   46,520,776    43,504,991 
Long-term prepayments   3,715,445    1,198,668 
Land use rights, net   2,639,631    3,622,435 
Other assets   748,431    500,000 
Deferred tax assets   750,267    1,477,761 
Long-term investments   9,906,379    9,689,576 
           
TOTAL ASSETS   220,264,538    163,331,750 
           
LIABILITIES AND EQUITY          
           
LIABILITIES          
Current Liabilities:          
Accounts payable   60,368,012    49,463,901 
Deferred income   309,638    761,491 
Short-term loans   10,128,646    18,776,080 
Non-financial institution borrowings   10,756,158    3,741,115 
Notes payable   54,859,478    30,658,000 
Amount due to a related party   -    1,522,313 
Other payables and accrued liabilities   12,243,345    11,148,556 
Income taxes payable   3,609,391    1,963,298 
           
Total Current Liabilities   152,274,668    118,034,754 
           
Income taxes payable, noncurrent   777,685    - 
Warrant Liability   -    259 
           
TOTAL LIABILITIES   153,052,353    118,035,013 
           
COMMITMENTS AND CONTINGENCIES   -    - 

 

   

 

 

HIGHPOWER INTERNATIONAL, INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(Stated in US Dollars)

 

   December 31,   December 31, 
   2017   2016 
    $    $ 
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, 15,509,658 shares issued and outstanding at December 31, 2017 and 15,114,991 shares issued and outstanding at December 31, 2016)   1,551    1,511 
Additional paid-in capital   12,709,756    11,580,934 
Statutory and other reserves   6,549,815    4,992,463 
Retained earnings   44,481,568    29,266,068 
Accumulated other comprehensive income (loss)   3,469,495    (873,582)
           
Total equity attributable to the stockholders of Highpower International Inc.   67,212,185    44,967,394 
           
Non-controlling interest   -    329,343 
           
TOTAL EQUITY   67,212,185    45,296,737 
           
TOTAL LIABILITIES AND EQUITY   220,264,538    163,331,750 

 

   

 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Stated in US Dollars)

 

   For the years ended December 31, 
   2017   2016 
    $    $ 
Net sales   244,166,312    173,851,113 
Cost of sales   (196,792,444)   (135,768,642)
Gross profit   47,373,868    38,082,471 
           
Research and development expenses   (9,512,074)   (9,243,750)
Selling and distribution expenses   (7,500,560)   (6,888,052)
General and administrative expenses   (15,393,791)   (18,186,362)
Foreign currency transaction (loss) gain   (2,390,417)   1,959,036 
Total operating expenses   (34,796,842)   (32,359,128)
           
Income from operations   12,577,026    5,723,343 
           
Changes in fair value of warrant liability   259    140,290 
Changes in fair value of foreign exchange derivatives   273,496    - 
Government grants   1,357,852    1,762,266 
Other income   458,247    509,262 
Equity in earnings of investee   107,243    351,755 
Gain on dilution in equity method investee   500,270    - 
Gain on sale of long-term investment   1,677,367    - 
Gain on deconsolidation of a subsidiary   6,004,008    - 
Interest expenses   (1,426,547)   (1,419,962)
Income before income taxes   21,529,221    7,066,954 
           
Income taxes expenses   (4,315,325)   (1,439,177)
Net income   17,213,896    5,627,777 
           
Less: net income (loss) attributable to non-controlling interest   441,044    (490,150)
Net income attributable to the Company   16,772,852    6,117,927 
           
Comprehensive income          
Net income   17,213,896    5,627,777 
Foreign currency translation gain (loss)   4,234,078    (3,540,334)
Comprehensive income   21,447,974    2,087,443 
           
Less: comprehensive income (loss) attributable to non-controlling interest   479,098    (524,140)
Comprehensive income attributable to the Company   20,968,876    2,611,583 
           
Earnings per share of common stock attributable to the Company          
- Basic   1.09    0.41 
- Diluted   1.09    0.40 
           
Weighted average number of common stock outstanding          
- Basic   15,326,797    15,105,235 
- Diluted   15,435,371    15,113,914 

 

   

 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

 

   For the years ended December 31, 
   2017   2016 
    $    $ 
Cash flows from operating activities          
Net income   17,213,896    5,627,777 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:          
Depreciation and amortization   5,290,980    4,937,688 
Allowance for doubtful accounts   58,728    1,651,546 
Impairment of machinery and equipment   -    530,914 
Loss on disposal of property, plant and equipment   48,976    609,842 
Deferred taxes   374,626    (32,756)
Changes in fair value of foreign exchange derivatives   (228,314)   - 
Gain on deconsolidation of a subsidiary   (6,004,008)   - 
Equity in earnings of investee   (107,243)   (351,755)
Gain on dilution in equity method investee   (500,270)   - 
Gain on sale of long-term investment   (1,677,367)   - 
Share based compensation   326,171    317,946 
Changes in fair value of warrant liability   (259)   (140,290)
Changes in operating assets and liabilities:          
Accounts receivable   (11,926,311)   (13,809,278)
Other assets   (288,180)   - 
Notes receivable   (1,389,107)   575,514 
Advances to suppliers   (5,070,174)   (72,470)
Prepayments and other receivables   (673,006)   (1,683,119)
Amount due from related parties   7,140,963    (7,457,338)
Amount due to related parties   (1,569,839)   1,589,963 
Inventories   (24,705,574)   (4,410,429)
Accounts payable   15,183,933    11,196,709 
Deferred income   154,151    (64,658)
Other payables and accrued liabilities   2,023,991    5,471,022 
Income taxes payable   2,240,550    307,984 
Net cash flows (used in) provided by operating activities   (4,082,687)   4,794,812 
           
Cash flows from investing activities          
Acquisitions of plant and equipment   (13,730,328)   (8,487,473)
Acquisition of long-term investment   -    (3,005,666)
Loan to a related party   (514,821)   - 
Proceeds from sale of long-term investment   10,535,062    - 
Impact to cash resulting from deconsolidation of a subsidiary   (632,754)   - 
Net cash flows used in investing activities   (4,342,841)   (11,493,139)
           
Cash flows from financing activities          
Proceeds from short-term bank loans   12,725,676    19,611,969 
Repayments of short-term bank loans   (22,331,365)   (13,526,998)
Proceeds from non-financial institution borrowings   10,386,681    4,508,499 
Repayments of non-financial institution borrowings   (3,857,910)   (601,133)
Repayment of long-term bank loans   -    (1,803,399)
Proceeds from notes payable   90,871,294    59,952,794 
Repayments of notes payable   (69,511,376)   (57,731,108)
Proceeds from exercise of employee options   802,691    35,010 
Repayment from GZ Highpower   6,035,600    - 
Change in restricted cash   (13,498,698)   (320,093)
Net cash flows provided by financing activities   11,622,593    10,125,541 
Effect of foreign currency translation on cash   1,980,713    47,212 
Net increase in cash   5,177,778    3,474,426 
Cash - beginning of year   9,324,393    5,849,967 
Cash - end of year   14,502,171    9,324,393 
           
Supplemental disclosures for cash flow information:          
Cash paid for:          
Income taxes   1,700,149    1,163,950 
Interest expenses   1,550,878    1,229,173 
Non-cash investing and financing activities:          
Offset of deferred income related to government grant and property, plant and equipment   263,948    229,951 
Transfer of equipment to Yipeng   -    7,156,717 

 

   

 

 

Reconciliation of Net Income to EBITDA

 

   For the years ended December 31, 
   2017   2016 
    $    $ 
Net income attributable to the Company   16,772,852    6,117,927 
           
Interest expense   1,426,547    1,419,962 
Income taxes expenses   4,315,325    1,439,177 
Depreciation and Amortization   5,290,980    4,937,688 
           
EBITDA   27,805,704    13,914,754 

 

Key financial items excluding GZ Highpower

 

   For the years ended December 31, 
   2017   2016 
    $    $ 
Sales:          
Lithium Business   161,660,771    112,128,757 
Ni-MH Batteries and Accessories   53,492,309    57,211,657 
Sales to GZ Highpower   746,776    367,982 
Net sales (excluding GZ Highpwer)   215,899,856    169,708,396 
Gross profit (excluding GZ Highpwer)   44,023,549    38,455,939 
Gross profit margin (excluding GZ Highpwer)   20.4%   22.7%
           
Net income:          
Net income   17,213,896    5,627,777 
Less: Net income (loss) of GZ Highpower (including transaction with GZ Highpwer)   1,470,145    (1,633,834)
Net income (excluding GZ Highpwer)   15,743,751    7,261,611 

 

   December 31, 2017   December 31, 2016 
    $    $ 
Total Assets:          
Lithium Business   171,881,450    115,116,508 
Ni-MH Batteries and Accessories (including $8,102,520 investment in GZ Highpower under equity method)   48,383,088    37,994,369 
Amount due from GZ Highpower   -    6,601,065 
Investment to GZ Highpower   -    4,028,893 
Total Assets (excluding GZ Highpwer)   220,264,538    163,740,835