Exhibit 99.1

 

 

Highpower International Reports Unaudited First Quarter 2018 Financial Results

 

SAN DIEGO, CALIFORNIA and SHENZHEN, China, May 11, 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 first quarter ended March 31, 2018.

 

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

 

·Net sales for the first quarter of 2018 increased by 18.9% to $49.8 million from $41.9 million. Excluding the impact of Ganzhou Highpower Technology Co., Ltd. ("GZ Highpower"), net sales increased 24.1% to $49.8 million from $40.1 million.
·Lithium business net sales increased 33.1% to $36.6 million from $27.5 million.
·Gross margin decreased to 15.2% of net sales compared to 23.7%. Excluding GZ Highpower, gross margin was 15.2% compared to 23.3%.
·Net loss attributable to the Company was $1.1 million, or loss of $0.07 per diluted share, compared to net income attributable to the Company of $2.5 million, or earnings of $0.17 per diluted share. Excluding GZ Highpower, net loss attributable to the Company was $1.1 million compared to net income attributable to the Company of $2.3 million.

 

Recent Event

 

·On February 28, 2018, the Company signed an investment agreement (the “Agreement”) with an aggregate amount of RMB4.9 million (approximately $0.8 million) for 49% of the equity interest of Shenzhen V-power Innovative Technology Co., Ltd (“V-power”). Pursuant to the terms of the Agreement, the Company shall complete the capital injection to V-power no later than December 31, 2018. V-power focuses on the development of electronic vehicle battery management systems (“EV BMS”), in the future V-power will gradually extend the business to the design and production of EV power modules, energy storage systems (“ESS”), and related products.

 

Mr. George Pan, Chairman and CEO of Highpower International, commented, “Despite the ongoing industry challenge of high raw material prices, we are pleased to beat our top-line guidance for the first quarter, driven by continued strong growth in our lithium business. During the quarter, we continued to focus on our core lithium products, such as by attending the 2018 International Consumer Electronics Show (CES) in Las Vegas, where we showcased our advanced rechargeable battery products for notebooks, smart phones, wearable devices, smart house appliances, portable power stations, and other digital products. We also increased our R&D efforts in order to fine-tune and develop new technologies that improve product safety and reliability as well as to provide solutions that fulfill the innovations of our international customer base.”

 

 

 

 

“While we continue to face industry cost headwinds, we are committed to improving our production efficiency and maintaining an efficient supply chain. As always, we remain focused on sustainable growth and on providing clean, safe, and efficient power solutions to meet society’s needs,” Mr. Pan concluded.

 

First Quarter 2018 Financial Results

 

Net Sales

 

Net sales for the first quarter of 2018 increased 18.9% to $49.8 million from $41.9 million in the prior year period. The increase was driven by sales of the Company’s lithium business, which grew 33.1%, or $9.1 million, during the quarter. Excluding the impact of GZ Highpower, net sales increased 24.1% to $49.8 million from $40.1 million.

 

Gross Profit

 

Gross profit for the first quarter of 2018 decreased 23.8% to $7.6 million from $9.9 million in the prior year period due to high raw material prices. Gross margin for the first quarter of 2018 was 15.2% compared to 23.7% in the prior year period. Excluding GZ Highpower, gross margin was 15.2% compared to 23.3%.

 

Operating Expenses

 

·Research and development (R&D) expenses for the first quarter of 2018 were $2.6 million compared to $1.8 million in the prior year period. As a percentage of net sales, R&D expenses increased to 5.1% from 4.3% in the prior year period due to the Company’s continued investments in R&D.

 

·Selling and distribution expenses for the first quarter of 2018 were $2.0 million compared to $1.6 million in the prior year period. As a percentage of net sales, selling and distribution expenses increased to 4.0% from 3.9% in the prior year period, remaining relatively stable.

 

·General and administrative expenses for the first quarter of 2018 were $4.1 million compared to $3.1 million in the prior year period. As a percentage of net sales, general and administrative expenses increased to 8.3% from 7.3% in the prior year period. The increase was due to an increase of the provisions for the Company’s incentive plan.

 

Net Income

 

Net loss attributable to the Company for the first quarter of 2018 was $1.1 million. During the prior year period, the Company achieved a net income attributable to the Company of $2.5 million. Net loss attributable to the Company per diluted share for the first quarter of 2018 was $0.07 compared to a net income attributable to the Company per diluted share of $0.17 in the prior year period. Excluding GZ Highpower, net loss attributable to the Company was $1.1 million compared to net income attributable to the Company of $2.3 million in the prior year period.

 

For the quarter ended March 31, 2018, the Company's weighted average diluted shares outstanding used in computing diluted share was 15,509,658.

 

 

 

 

EBITDA

 

EBITDA for the first quarter of 2018 decreased 88.2% to $0.6 million from $5.0 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        
   March 31,   December 31, 
($ in millions, except per share data)  2018   2017 
   (Unaudited)     
   $   $ 
Cash  $18.9   $14.5 
Total Current Assets  $176.3   $156.0 
Total Assets  $244.5   $220.3 
           
Total Current Liabilities  $175.4   $152.3 
Total Liabilities  $175.4   $153.1 
Total Equity  $69.2   $67.2 
Total Liabilities and Equity  $244.5   $220.3 
Book Value Per Share  $4.46   $4.33 

 

Financial Outlook

 

For the second quarter of 2018, the Company expects net revenues to grow over 30% year over year. Factoring in the impact of expected, continued high raw material prices, gross margin is expected to be similar or slightly lower than first quarter of 2018. 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 first quarter of 2018.

 

Conference Call Details

The Company will hold a conference call on Friday, May 11, 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/24661/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)

 

   March 31,   December 31, 
   2018   2017 
   (Unaudited)     
   $   $ 
ASSETS          
Current Assets:          
Cash   18,859,355    14,502,171 
Restricted cash   32,639,148    25,953,946 
Accounts receivable, net   56,240,961    58,252,999 
Amount due from a related party   921,862    1,165,838 
Notes receivable   67,612    2,606,517 
Advances to suppliers   6,511,584    6,050,531 
Prepayments and other receivables   5,029,550    4,268,527 
Foreign exchange derivatives   661,111    236,436 
Inventories   55,347,466    42,946,644 
           
Total Current Assets   176,278,649    155,983,609 
           
Property, plant and equipment, net   48,189,218    46,520,776 
Long-term prepayments   4,243,891    3,715,445 
Land use rights, net   2,719,885    2,639,631 
Other assets   746,938    748,431 
Deferred tax assets, net   1,135,550    750,267 
Long-term investments   11,209,442    9,906,379 
           
TOTAL ASSETS   244,523,573    220,264,538 
           
LIABILITIES AND EQUITY          
           
LIABILITIES          
Current Liabilities:          
Accounts payable   61,149,301    60,368,012 
Deferred government grant   799,040    309,638 
Short-term loans   24,760,223    10,128,646 
Non-financial institution borrowings   11,152,890    10,756,158 
Notes payable   58,833,089    54,859,478 
Amount due to a related party   780,702    - 
Other payables and accrued liabilities   13,339,920    12,243,345 
Income taxes payable   4,537,182    3,609,391 
           
Total Current Liabilities   175,352,347    152,274,668 
           
Income taxes payable, noncurrent   -    777,685 
           
TOTAL LIABILITIES   175,352,347    153,052,353 
           
COMMITMENTS AND CONTINGENCIES   -    - 

 

 

 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

 

   March 31,   December 31, 
   2018   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, 15,509,658 shares issued and outstanding at March 31, 2018 and at December 31, 2017, respectively)   1,551    1,551 
Additional paid-in capital   12,951,177    12,709,756 
Statutory and other reserves   6,549,815    6,549,815 
Retained earnings   43,362,632    44,481,568 
Accumulated other comprehensive income   6,306,051    3,469,495 
           
TOTAL EQUITY   69,171,226    67,212,185 
           
TOTAL LIABILITIES AND EQUITY   244,523,573    220,264,538 

 

 

 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Stated in US Dollars)

 

   Three months ended March 31, 
   2018   2017 
   (Unaudited)   (Unaudited) 
   $   $ 
Net sales   49,783,453    41,866,848 
Cost of sales   (42,217,126)   (31,932,014)
Gross profit   7,566,327    9,934,834 
           
Research and development expenses   (2,561,837)   (1,813,930)
Selling and distribution expenses   (1,975,096)   (1,638,313)
General and administrative expenses   (4,114,810)   (3,058,562)
Foreign currency transaction loss   (1,014,693)   (313,878)
Total operating expenses   (9,666,436)   (6,824,683)
           
(Loss) income from operations   (2,100,109)   3,110,151 
           
Changes in fair value of warrant liability   -    (31,552)
Changes in fair value of foreign exchange derivatives   703,715    - 
Government grants   329,820    349,515 
Other income   23,561    228,578 
Equity in earnings of investee   156,250    146,932 
Interest expenses   (241,852)   (603,317)
(Loss) income before taxes   (1,128,615)   3,200,307 
           
Income taxes benefit (expense)   9,679    (587,765)
Net (loss) income   (1,118,936)   2,612,542 
           
Less: net income attributable to non-controlling interest   -    76,893 
Net (loss) income attributable to the Company   (1,118,936)   2,535,649 
           
Comprehensive income          
Net (loss) income   (1,118,936)   2,612,542 
Foreign currency translation gain (loss)   2,836,556    (24,001)
Comprehensive income   1,717,620    2,588,541 
           
Less: comprehensive income attributable to non-controlling interest   -    79,551 
Comprehensive income attributable to the Company   1,717,620    2,508,990 
           
(Loss) earnings per share of common stock attributable to the Company          
- Basic   (0.07)   0.17 
- Diluted   (0.07)   0.17 
           
Weighted average number of common stock outstanding          
- Basic   15,509,658    15,119,693 
- Diluted   15,509,658    15,299,029 

 

 

 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

 

   Three Months Ended March 31, 
   2018   2017 
   (Unaudited)   (Unaudited) 
   $   $ 
Cash flows from operating activities          
Net (loss) income   (1,118,936)   2,612,542 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:          
Depreciation and amortization   1,475,228    1,274,334 
Allowance for doubtful accounts   18,524    5,015 
Loss on disposal of property, plant and equipment   21,805    3,262 
Deferred tax   (356,616)   124,548 
Changes in fair value of foreign exchange derivatives   (414,042)   - 
Equity in earnings of investee   (156,250)   (146,932)
Share based compensation   241,421    24,401 
Changes in fair value of warrant liability   -    31,552 
Changes in operating assets and liabilities:          
Accounts receivable   3,713,692    7,314,824 
Notes receivable   2,622,925    235,222 
Advances to suppliers   (236,789)   - 
Prepayments and other receivables   (601,315)   (485,520)
Amount due from related parties   285,657    161,693 
Amount due to a related party   -    193,240 
Inventories   (10,779,233)   (3,623,242)
Accounts payable   (1,377,447)   (5,111,874)
Deferred income   475,783    116,359 
Other payables and accrued liabilities   665,379    (1,977,117)
Income taxes payable   19,371    330,735 
Net cash flows (used in) provided by operating activities   (5,500,843)   1,083,042 
           
Cash flows from investing activities          
Acquisitions of property, plant and equipment   (1,553,979)   (2,873,489)
Prepayment for long-term investment   (317,188)   - 
Net cash flows used in investing activities   (1,871,167)   (2,873,489)
           
Cash flows from financing activities          
Proceeds from short-term loans   14,427,164    2,910,418 
Repayments of short-term loans   -    (1,381,758)
Proceeds from non-financial institution borrowings   -    8,726,892 
Repayments of non-financial institution borrowings   -    (2,327,171)
Proceeds from notes payable   28,429,600    20,467,907 
Repayments of notes payable   (26,488,407)   (13,081,781)
Proceeds from exercise of employee options   -    68,519 
Net cash flows provided by financing activities   16,368,357    15,383,026 
Effect of foreign currency translation on cash and restricted cash   2,046,039    (72,952)
Net increase in cash and restricted cash   11,042,386    13,519,627 
Cash and restricted cash - beginning of period   40,456,117    20,538,033 
Cash and restricted cash - end of period   51,498,503    34,057,660 
           
Supplemental disclosures for cash flow information:          
Cash paid for:          
Income taxes   327,565    132,481 
Interest expenses   114,588    583,720 

 

 

 

 

Reconciliation of Net Income to EBITDA

 

  

Three months ended March 31,

 
   2018   2017 
   (Unaudited)   (Unaudited) 
   $   $ 
Net (loss) income attributable to the Company   (1,118,936)   2,535,649 
           
Interest expense   241,852    603,317 
Income taxes (benefit) expenses   (9,679)   587,765 
Depreciation and amortization   1,475,228    1,274,334 
           
EBITDA   588,465    5,001,065