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Highpower International Inc. was founded in 2001 as a clean energy group dedicated to R&D, production and sales of rechargeable Ni-MH / Lithium batteries, power source and energy storage systems. In June 2008, Highpower listed in NASDAQ.

Highpower International Reports Financial Results for the Third Quarter and Nine Months Ended September 30, 2014

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Company to Hold Conference Call on November 12, 2014, at 10:00 AM ET / 7:00 AM PT

SAN FRANCISCO and SHENZHEN, China, Nov. 12, 2014 /PRNewswire/ -- Highpower International, Inc. (NASDAQ: HPJ), a developer, manufacturer, and marketer of lithium and nickel-metal hydride (Ni-MH) rechargeable batteries, and a battery management systems and battery recycling provider, today announced its financial results for the third quarter and nine months ended September 30, 2014.

2014 Third Quarter Operating and Financial Highlights (all results are compared to prior year period)

  • Net sales increased 14.5% to $44.5 million, driven mainly by the growing lithium battery business
  • Lithium battery net sales increased 40.8% with total lithium battery per ampere hour sold increased by 41.8%
  • Gross margin improved to 21.1% from 18.6%
  • EBITDA increased 30.4% to $2.9 million from $2.2 million, adjusted EBITDA increased 89.8% to $4.3 million from $2.3 million
  • Net income attributable to the Company increased 17.8% to $0.9 million, or $0.06 per share, from $0.7 million, or $0.05 per share
  • Non-GAAP net income attributable to the Company increased 186.2% to $2.3 million, or $0.15 per share, from $0.8 million, or $0.06 per share

Management Commentary

Mr. George Pan, Chairman and CEO of the Company, commented, "We are pleased to report strong operating results during the third quarter, which was mainly driven by the result of increased sales in our lithium battery business. We continue to see growing global demand for lithium batteries from the mobile, portable products, electrical vehicles and energy storage sectors. Our new Huizhou facility is on the right track to ramp up production in this quarter over the first half of the year. We believe that we will continue to attract global customers with this state-of-the-art facility. In the meantime, we are committed to working with globally recognized brands and companies, and investing in research and development to advance our product offerings to meet our customers continuously evolving needs."

2014 Third Quarter and Nine Month Financial Review

Net Sales

Net sales for the third quarter ended September 30, 2014 increased 14.5% to $44.5 million compared with $38.9 million for the same period in 2013. The increase in net sales was mainly due to a $6.1 million increase in net sales of lithium batteries, and a $0.3 million increase from new material business, which was partly offset by a $0.8 million decrease in net sales of Ni-MH batteries.

For the nine months ended September 30, 2014, the Company's net sales increased 18.4% to $111.8 million compared with $94.4 million in the first nine months of 2013. The increase was due to a $15.4 million increase in net sales of lithium batteries, and a $0.9 million increase in net sales of Ni-MH batteries, and a $1.0 million increase from new material business.

Gross Profit

Gross profit for the third quarter ended September 30, 2014 increased to $9.4 million, as compared with $7.2 million for the same period in 2013. Gross profit for the nine months ended September 30, 2014 increased to $23.1 million, as compared with $17.7 million for the same period in 2013. The increase for both periods was due to decrease of unit cost of Ni-MH batteries and lithium batteries.

Gross Margin

Gross margin was 21.1% for the third quarter ended September 30, 2014, as compared with 18.6% for the same period in 2013. For the nine months ended September 30, 2014, gross margin was 20.6%, as compared with 18.8% for the same period in 2013. The increase for both periods was due to decrease of unit cost of Ni-MH batteries and lithium batteries.

Net sales, cost of sales, and gross profit by segments is set out as follows:



Three months ended


Nine months ended


September 30,

September 30,



2014


2013

Change in %

2014


2013

Change in %



(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)




$


$


$


$


Net sales










Ni-MH Batteries


22,468,264


23,278,902

-3.48%

57,109,202


56,195,672

1.63%

Lithium Batteries


21,069,435


14,960,966

40.83%

51,971,642


36,541,465

42.23%

New Materials


936,861


613,110

52.80%

2,688,666


1,692,829

58.83%

Total


44,474,560


38,852,978

14.47%

111,769,510


94,429,966

18.36%











Cost of Sales










Ni-MH Batteries


17,843,761


19,220,485

-7.16%

45,357,950


45,491,987

-0.29%

Lithium Batteries


16,355,265


11,859,111

37.91%

40,935,690


29,664,911

37.99%

New Materials


870,414


530,395

64.11%

2,410,314


1,532,442

57.29%

Total


35,069,440


31,609,991

10.94%

88,703,954


76,689,340

15.67%





















Gross Profit










Ni-MH Batteries


4,624,503


4,058,417

13.95%

11,751,252


10,703,685

9.79%

Lithium Batteries


4,714,170


3,101,855

51.98%

11,035,952


6,876,554

60.49%

New Materials


66,447


82,715

-19.67%

278,352


160,387

73.55%

Total


9,405,120


7,242,987

29.85%

23,065,556


17,740,626

30.02%

Research and Development (R&D)

R&D spending was $2.1 million, or 4.6% of total revenue, for the third quarter ended September 30, 2014, compared to $1.5 million, or 3.9% of total revenue, for the same period in 2013. R&D spending was $5.8 million for the nine months ended September 30, 2014, compared to $4.0 million for the same period in 2013. The increase for both periods was primarily a result of the expansion of Highpower's workforce to expand R&D in lithium batteries, particularly in the area of new product development for the electrical vehicles and energy storage sectors.

Selling & Distribution

Selling and distribution expenses were $1.7 million, or 3.8 % of total revenue, for the third quarter ended September 30, 2014, as compared with $1.6 million, or 4.1% of total revenue, for the same period in 2013. Selling and distribution expenses were $4.8 million for the nine months ended September 30, 2014, as compared with $4.4 million for the same period in 2013. The increase for both periods was due to the expansion of Highpower's sales force and increased marketing activities.

General & Administrative

General and administrative expenses were $3.3 million, or 7.4 % of total revenue, for the third quarter ended September 30, 2014, as compared with $3.0 million, or 7.6% of total revenue, for the third quarter of 2013. The increase was due to the expansion of workforce at the Company's Huizhou facility. Included in this amount was non-cash share-based compensation expense of $148,725, up from $64,642 in the third quarter of 2013.

General and administrative expenses were $10.2 million for the nine months ended September 30, 2014, as compared with $8.4 million for the same period in 2013. The primary reason for the increase was due to the expansion of our workforce at our Huizhou facility.  Included in this amount was non-cash share-based compensation expense of $1.1 million, up from $159,352 in the first nine months of 2013.

Net Income

Net income attributable to the Company for the third quarter ended September 30, 2014 was $874,167, or $0.06 per diluted share based on 15.6 million weighted average diluted shares outstanding, compared to net income of $742,228, or $0.05 per diluted share based on 13.7 million weighted average diluted shares outstanding.

Net income attributable to the Company for the nine months ended September 30, 2014 was $751,516, or $0.05 per diluted share based on 15.0 million weighted average diluted shares outstanding, compared to net income of $242,637, or $0.02 per share based on 13.6 million, both basic and diluted, in the same period of 2013.

EBITDA

EBITDA for the third quarter ended September 30, 2014 increased 30.4% to $2.9 million from $2.2 million in the prior year period.

For the nine month period, EBITDA increased 59.7% to $6.1 million from $3.8 million in the first nine months of 2013.

A table reconciling EBITDA, a non-GAAP (Generally Accepted Accounting Principles) 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)



9/30/2014

(Unaudited)

12/31/2013

(Audited)

Cash and Cash Equivalents



$11.8

$8.0

Total Current Assets



$93.6

$97.3

Total Assets



$149.5

$151.8

Total Current Liabilities



$105.3

$113.2

Total Liabilities



$110.2

$117.1

Shareholders' Equity



$39.3

$34.7

Total Liabilities and Shareholders' Equity



$149.5

$151.8

Book Value Per Share



$2.45

$2.55

Outlook for 2014

Based on current expectations for global demand in the rechargeable battery market in 2014 and the continued shift toward mobile power sources, higher-value energy storage systems and transportation products, the Company reiterates the 2014 guidance of revenues of between $150 million to $170 million, and non-GAAP net income of between $2.5 million and $4.0 million, and net income of between $1.5 million and $3.0 million.

Conference Call Details

The Company announced that it will discuss financial results in a conference call on November 12, 2014 at 10:00 a.m. Eastern time / 7:00 a.m. Pacific time to discuss these results.

The dial-in numbers are:

Live Participant Dial In (Toll Free):

877-407-3108

Live Participant Dial In (International):

201-493-6797

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/q3-2014. This webcast will be archived and accessible through the Company's website for approximately 30 days following the call. The Company will also have an accompanying slide presentation available in PDF format on its homepage prior to the conference 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 10 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. 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, and include discussions of strategy, and statements about industry trends and the Company's future performance, operations and products. 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; 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.
Henry Sun
CFO
+86-755-8968-6521
ir@highpowertech.com

INVESTOR RELATIONS:

The Equity Group Inc.
In China
Katherine Yao, Associate
86 10 6587 6435
kyao@equityny.com

In U.S.
Adam Prior, Senior Vice President
(212) 836-9606
aprior@equityny.com

 


HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Stated in US Dollars except Number of Shares)




Three months ended

September 30,


Nine months ended

September 30,



2014


2013


2014


2013



(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)



$


$


$


$










Net sales


44,474,560


38,852,978


111,769,510


94,429,966

Cost of sales


(35,069,440)


(31,609,991)


(88,703,954)


(76,689,340)

Gross profit


9,405,120


7,242,987


23,065,556


17,740,626










Research and development expenses


(2,056,045)


(1,531,477)


(5,844,962)


(3,984,942)

Selling and distribution expenses


(1,697,674)


(1,598,397)


(4,822,560)


(4,386,375)

General and administrative expenses, including stock-based compensation


(3,295,262)


(2,957,467)


(10,178,838)


(8,375,713)

Foreign currency transaction gain (loss)


(15,369)


(154,453)


334,326


(374,410)

Gain (loss) on derivative instruments


59,785


45,033


(56,349)


267,316

Total operating expenses


(7,004,565)


(6,196,761)


(20,568,383)


(16,854,124)










Income from operations


2,400,555


1,046,226


2,497,173


886,502










Loss on change of fair value of warrant liability


(1,286,335)


-


(1,211,787)


-

Other income


590,117


479,288


1,493,491


976,673

Interest expenses


(458,534)


(444,706)


(1,528,077)


(1,146,118)

Income before taxes


1,245,803


1,080,808


1,250,800


717,057










Income taxes expenses


(439,659)


(372,023)


(628,872)


(579,352)

Net income


806,144


708,785


621,928


137,705










Less: net loss attributable to non-controlling interest


(68,023)


(33,443)


(129,588)


(104,932)

Net income attributable to the Company


874,167


742,228


751,516


242,637










Comprehensive income









Net income


806,144


708,785


621,928


137,705

Foreign currency translation gain (loss)


19,368


232,201


(341,754)


531,143

Comprehensive income


825,512


940,986


280,174


668,848










Less: comprehensive loss attributable to non-controlling interest


(67,486)


(25,145)


(140,213)


(90,620)

Comprehensive income attributable to the Company


892,998


966,131


420,387


759,468










Earnings per share of common stock attributable to the Company









-Basic


0.06


0.05


0.05


0.02

-Diluted


0.06


0.05


0.05


0.02










Weighted average number of common stock outstanding









-Basic


15,052,158


13,657,930


14,632,491


13,607,474

-Diluted


15,590,142


13,657,930


15,045,776


13,607,474

 

HIGHPOWER INTERNATIONAL, INC.AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars except Number of Shares)





September 30,


December 31,




2014


2013




(Unaudited)






$


$

ASSETS







  Current Assets:







  Cash and cash equivalents



11,802,804


7,973,459


Restricted cash



15,467,638


28,586,121


  Accounts receivable, net



38,107,418


33,961,014


  Notes receivable



2,460,187


1,014,891


  Prepayments



4,482,975


4,969,743


Other receivables



715,550


1,063,656


  Inventories



20,567,199


19,739,360









Total Current Assets



93,603,771


97,308,244









  Property, plant and equipment, net



49,383,533


48,548,203


Land use right, net



4,312,435


4,421,415


Intangible asset, net



612,500


650,000


Deferred tax assets



1,626,446


802,225


Foreign currency derivatives assets



-


63,289







TOTAL ASSETS



149,538,685


151,793,376







LIABILITIES AND EQUITY












LIABILITIES







  Current Liabilities:







Foreign currency derivatives liabilities



4,976


-


Accounts payable



50,067,002


40,026,698


Deferred income



1,635,959


675,521


Short-term loan



15,817,971


36,142,105


Notes payable



27,002,824


25,271,256


  Other payables and accrued liabilities



6,819,899


7,801,431


Income taxes payable



2,046,929


1,279,658


Current portion of long-term loan



1,951,442


1,967,536









Total Current Liabilities



105,347,002


113,164,205









Warrant Liability



2,385,739


-


Long-term loan



2,439,302


3,935,071









TOTAL LIABILITIES



110,172,043


117,099,276







COMMITMENTS AND CONTINGENCIES



-


-

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(Stated in US Dollars except Number of Shares)





September 30,


December 31,




2014


2013




(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, 15,052,158 shares issued and outstanding at September 30, 2014 and 13,978,106 shares issued and outstanding at December 31, 2013)



1,505


1,398


Additional paid-in capital



10,403,566


6,011,305


Statutory and other reserves



3,142,411


3,142,411


Retained earnings



19,142,391


18,390,875


Accumulated other comprehensive income



5,517,730


5,848,859







Total equity for the Company's stockholders



38,207,603


33,394,848







Non-controlling interest



1,159,039


1,299,252







TOTAL EQUITY



39,366,642


34,694,100







TOTAL LIABILITIES AND EQUITY



149,538,685


151,793,376

 


HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)



Nine months ended September 30,


2014


2013


(Unaudited)


(Unaudited)


$


$

Cash flows from operating activities




Net income

621,928


137,705

Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

3,161,384


1,832,596

Allowance for doubtful accounts

103


(3,643)

Loss on disposal of property, plant and equipment

346,866


108,652

Loss on derivative instruments

67,748


117,966

Deferred income tax

(830,413)


(76,813)

Share based payment

1,064,969


159,352

Loss on change of fair value of warrant liability

1,211,787


-

Changes in operating assets and liabilities:




Accounts receivable

(4,404,612)


(7,918,758)

Notes receivable

(1,453,621)


(1,048,133)

Prepayments

448,249


(2,191,905)

Other receivable

339,411


(9,515)

Inventories

(989,237)


(188,974)

Accounts payable

10,701,057


7,255,970

Deferred income

1,635,985


-

Other payables and accrued liabilities

(920,591)


2,251,556

Income taxes payable

777,753


37,821

Net cash flows provided by operating activities

11,778,766


463,877





Cash flows from investing activities




Acquisition of plant and equipment

(5,864,112)


(11,905,424)

Net cash flows used in investing activities

(5,864,112)


(11,905,424)





Cash flows from financing activities




Proceeds from short-term bank loans

15,821,648


30,408,328

Repayment of short-term bank loans

(35,934,559)


(15,748,524)

Repayment of long-term bank loans

(1,463,605)


(1,449,322)

Proceeds from notes payable

34,246,949


32,308,322

Repayment of notes payable

(32,308,636)


(32,097,470)

Proceeds from issuance of capital stock, net

4,633,164


-

Change in restricted cash

12,900,973


(2,540,084)

Net cash flows provided by (used in) financing activities

(2,104,066)


10,881,250

Effect of foreign currency translation on cash and cash equivalents

18,757


367,544

Net increase (decrease) in cash and cash equivalents

3,829,345


(192,753)

Cash and cash equivalents - beginning of period

7,973,459


6,627,334

Cash and cash equivalents - end of period

11,802,804


6,434,581





Supplemental disclosures for cash flow information:




Cash paid for:




Income taxes

681,533


618,344

Interest expenses

1,489,796


1,146,118

Non-cash transactions




Accounts payable for construction in progress

648,385


1,408,336

Offset of deferred income and property, plant and equipment

669,995


-

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

(Stated in US Dollars)


Reconciliation of Net Income to EBITDA



Three Months Ended September 30,



Nine Months Ended September 30,


2014


2013



2014


2013


$


$



$


$

Net Income attributable to the Company

874,167


742,228



751,516


242,637

Non-GAAP Net Income(1)

2,309,227


806,870



3,028,272


401,989










Interest expenses, net

458,534


444,706



1,528,077


1,146,118

Income tax expenses

439,659


372,023



628,872


579,352

Depreciation and Amortization

1,107,898


650,282



3,161,384


1,832,596










EBITDA

2,880,258


2,209,239



6,069,849


3,800,703

Non-GAAP EBITDA(2)

4,315,318


2,273,881



8,346,605


3,960,055


(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 as set forth in the following table.

 

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




Three months ended

September 30,


Nine months ended

September 30,



2014


2013


2014


2013



(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)



$


$


$


$










Net income attributable to the Company


874,167


742,228


751,516


242,637

Stock-based compensation expense


148,725


64,642


1,064,969


159,352

Loss on change of fair value of warrant liability


1,286,335


-


1,211,787


-

Non-GAAP net income attributable to the Company


2,309,227


806,870


3,028,272


401,989










Basic net income per share of common stock attributable to the Company


0.06


0.05


0.05


0.02

Stock-based compensation expense


0.01


0.01


0.07


0.01

Loss on change of fair value of warrant liability


0.08


-


0.09


-

Non-GAAP income per share of common stock attributable to the Company


0.15


0.06


0.21


0.03










Diluted net income per share of common stock attributable to the Company


0.06


0.05


0.05


0.02

Stock-based compensation expense


0.01


0.01


0.07


0.01

Loss on change of fair value of warrant liability


0.08


-


0.08


-

Non-GAAP income per share of common stock attributable to the Company


0.15


0.06


0.20


0.03










Weighted average number of common shares outstanding









-Basic


15,052,158


13,657,930


14,632,491


13,607,474

-Diluted


15,590,142


13,657,930


15,045,776


13,607,474

SOURCE Highpower International, Inc.