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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 Fiscal Fourth Quarter and Year Ended December 31, 2015

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Fiscal 2015 Net Income Attributable to the Company Increased 40.0% Year over Year

SAN FRANCISCO and SHENZHEN, China, March 24, 2016 /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 fiscal fourth quarter and year ended December 31, 2015.

Fiscal Year 2015 Operating and Financial Highlights (all results are compared to prior year period)

  • Net sales were $146.2 million compared to $147.1 million.
  • Lithium battery net sales increased 14.9% to $78.6 million from $68.4 million.
  • Gross margin was 19.1%, compared to 20.5%, due to a decrease in the average selling price of both Ni-MH batteries and lithium batteries, and increased labor costs.
  • EBITDA increased 20.7% to $10.3 million, compared to $8.6 million; Adjusted EBITDA was $10.1 million compared to $9.7 million.
  • Net income attributable to the Company increased 40.0% to $3.9 million, or $0.25 per diluted share, compared to $2.8 million, or $0.18 per diluted share. Non-GAAP net income attributable to the Company was to $3.6 million, or $0.23 per diluted share, compared to $3.9 million, or $0.26 per diluted share.
  • Received order from a global consumer electronics company to provide lithium polymer batteries for smartphone backup power products.
  • Received "The Best Design Company of China's Energy Storage Industry" award.
  • Secured a contract to produce a 100KWH energy storage system (ESS) for China Southern Power Grid.
  • Granted US patent for its safety technology on rechargeable battery.

Fiscal 2015 Fourth Quarter Operating and Financial Highlights (all results are compared to prior year period)

  • Net sales increased 7.2% to $37.9 million from $35.3 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 17.5% compared to 20.1%.
  • Net income attributable to the Company was $166,973, or $0.01 per diluted share, compared to $2.0 million, or $0.13 per diluted share.

Management Commentary

Mr. George Pan, Chairman and CEO of Highpower International, commented, "We were pleased to report positive operating results for fiscal 2015 despite the reduction in average selling prices of both Ni-MH and lithium batteries during the year. We were able to achieve double-digit growth in net sales of lithium batteries as a result of growing global demand for mobile/portable products and electrical vehicles. We continue to work on advancing our lithium battery technology through R&D investment and to extend our sales and marketing efforts for our products worldwide. Highpower has been recognized by many reputable global companies as their approved vendor, but we also continue to seek a number of opportunities within China, which possesses a vast market for both consumer electronics and electrical vehicles. As we take an aggressive yet responsible approach to expanding into these areas in China, we expect to continue to strengthen Highpower's brand, extend our sales channels and ultimately increase profitability."

Fiscal 2015 Fourth Quarter and Year-end Financial Review

Net Sales

Net sales for the fourth quarter ended December 31, 2015 increased 7.2% to $37.9 million from $35.3 million for the same period in 2014. The increase in net sales was mainly due to increased revenue contributions from the lithium batteries segment as a result of the increased battery sales into the electric bus and high end consumer electronic device markets.

Net sales for FY 2015 were $146.2 million compared to $147.1 million in the prior fiscal year. The decrease was due to a $10.2 million increase in net sales of lithium batteries offset by a $10.4 million decrease in net sales of Ni-MH batteries and a $0.7 million decrease in new material business.

Gross Profit

For the fourth quarter ended December 31, 2015, the Company's gross profit was $6.6 million compared to $7.1 million for the same period in 2014.

Gross profit for FY 2015 was $27.9 million compared to $30.2 million in the prior fiscal year. The decrease was primarily due to a decrease in the average selling price of both Ni-MH batteries and lithium batteries, coupled with increased labor costs.

Gross Margin

Gross margin was 17.5% for the fourth quarter ended December 31, 2015 compared to 20.1% in the same period in 2014.

For FY 2015, gross margin was 19.1% compared to 20.5% in FY 2014.

Research and Development (R&D)

R&D spending was $2.0 million, or 5.3% of net sales, for the fourth quarter ended December 31, 2015 compared to $1.9 million, or 5.3% of net sales, for the same period in 2014.

R&D spending was $7.6 million, or 5.2% of net sales, for FY 2015 compared to $7.7 million, or 5.2% of net sales, in FY 2014.

Selling & Distribution

Selling and distribution expenses were $1.6 million, or 4.3% of net sales, for the fourth quarter ended December 31, 2015, compared to $1.7 million, or 4.9% of net sales, for the same period in 2014.

For FY 2015, selling and distribution expenses were $6.7 million, or 4.6% of net sales, compared to $6.6 million, or 4.5% of net sales, in the prior fiscal year. The increase was due to the expanded marketing effort for the Company's lithium batteries, which included participation in industry trade shows and international travels to promote and sell products abroad.

General & Administrative

For the fourth quarter ended December 31, 2015, general and administrative expenses were $3.2 million, or 8.3% of net sales, compared to $2.7 million, or 7.7% of net sales, in the prior year period.

General and administrative expenses in FY 2015 remained flat at $12.9 million, or 8.8% of net sales, which compares to $12.9 million, or 8.8% of net sales, in FY 2014.

Net Income

For the fourth quarter of 2015, net income attributable to the Company was $166,973, or $0.01 per share based on 15.2 million weighted average diluted shares outstanding, compared to $2.0 million, or $0.13 per share based on 15.5 million weighted average diluted shares outstanding, for the same period in 2014.

Net income attributable to the Company for FY 2015 increased 40.0% to $3.9 million, or $0.25 per share based on 15.3 million weighted average diluted shares outstanding, from $2.8 million, or $0.18 per share based on 15.2 million weighted average diluted shares outstanding, in FY 2014.

EBITDA

EBITDA for the fourth quarter ended December 31, 2015, was $1.8 million, compared to $3.3 million in the prior year period.

For FY 2015, EBITDA increased 20.7% to $10.3 million from $8.6 million in FY 2014.

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)



12/31/2015

12/31/2014

Cash



$5.8

$14.6

Total Current Assets



$80.7

$89.2

Total Assets



$134.2

$146.2

Total Current Liabilities



$91.2

$101.4

Total Liabilities



$91.3

$104.4

Shareholders' Equity



$42.9

$41.8

Total Liabilities and Shareholders' Equity



$134.2

$146.2

Book Value Per Share



$2.84

$2.77

Conference Call Details

The Company announced that it will discuss financial results in a conference call on March 24, 2016, at 11:00 a.m. Eastern time / 8:00 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/q4-2015. 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, Senior 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


For the years ended


December 31,

December 31,


2015


2014


2015


2014


$


$


$


$

Net sales

37,850,736


35,318,656


146,181,011


147,088,166

Cost of sales

(31,240,809)


(28,233,409)


(118,234,935)


(116,937,363)

Gross profit

6,609,927


7,085,247


27,946,076


30,150,803









Research and development expenses

(1,995,873)


(1,864,656)


(7,631,181)


(7,709,618)

Selling and distribution expenses

(1,620,103)


(1,729,195)


(6,728,692)


(6,551,755)

General and administrative expenses

(3,151,313)


(2,714,540)


(12,895,649)


(12,893,378)

Foreign currency transaction gain

571,934


(60,426)


2,474,154


273,900









Loss on derivative instruments

-


1,943


-


(54,406)

Total operating expenses

(6,195,355)


(6,366,874)


(24,781,368)


(26,935,257)









Income from operations

414,572


718,373


3,164,708


3,215,546









Gain on change of fair value of warrant liability

(14,560)


1,318,065


927,125


106,278

Other income

447,275


214,025


1,189,326


1,707,516

Interest expenses

(211,470)


(310,078)


(1,002,151)


(1,838,155)

Income before taxes

635,817


1,940,385


4,279,008


3,191,185









Income taxes expenses

(624,530)


38,554


(818,736)


(590,318)

Net income

11,287


1,978,939


3,460,272


2,600,867









Less: net loss attributable to non-controlling interest

(155,686)


(22,781)


(393,812)


(152,369)

Net income attributable to the Company

166,973


2,001,720


3,854,084


2,753,236









Comprehensive income








Net income

11,287


1,978,939


3,460,272


2,600,867

Foreign currency translation loss

(1,032,199)


184,828


(3,055,839)


(156,926)

Comprehensive income

(1,020,912)


2,163,767


404,433


2,443,941









Less: comprehensive loss attributable to non-
controlling interest

(175,530)


51,120


(453,756)


(89,093)

Comprehensive income attributable to the Company

(845,382)


2,112,647


858,189


2,533,034









Earnings per share of common stock attributable to
the Company








- Basic

0.01


0.13


0.26


0.19

- Diluted

0.01


0.13


0.25


0.18









Weighted average number of common stock
outstanding








- Basic

15,101,679


15,055,346


15,096,166


14,739,073

- Diluted

15,153,745


15,541,398


15,286,196


15,154,239

 

 

 

HIGHPOWER INTERNATIONAL, INC.AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars except Number of Shares)








December 31,


December 31,



2015


2014



$


$

ASSETS






Current Assets:






Cash


5,849,967


14,611,892


Restricted cash


11,656,204


15,396,827


Accounts receivable, net


36,139,866


32,316,607


Notes receivable


1,757,709


621,110


Prepayments


5,354,552


3,283,520


Other receivables


706,352


665,828


Inventories


19,218,331


22,268,069








Total Current Assets


80,682,981


89,163,853








Property, plant and equipment, net


47,464,186


50,437,718


Land use right, net


3,963,003


4,305,317


Intangible asset, net


550,000


600,000


Deferred tax assets


1,544,314


1,647,184






TOTAL ASSETS


134,204,484


146,154,072






LIABILITIES AND EQUITY










LIABILITIES






Current Liabilities:






Accounts payable


36,077,396


44,562,647


Deferred income


879,944


1,887,409


Short-term loan


13,839,341


15,195,040


Notes payable


30,490,166


29,903,248


Other payables and accrued liabilities


6,292,492


5,896,547


Income taxes payable


1,783,013


1,968,656


Current portion of long-term loan


1,845,245


1,959,248








Total Current Liabilities


91,207,597


101,372,795








Warrant Liability


140,549


1,067,674


Long-term loan


-


1,959,247







TOTAL LIABILITIES


91,348,146


104,399,716






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, 15,101,679 shares issued and
outstanding at December 31, 2015 and 15,084,746 shares issued and outstanding at
December 31, 2014)


1,510


1,508


Additional paid-in capital


11,227,979


10,530,430


Statutory and other reserves


4,042,429


3,611,501


Retained earnings


24,098,175


20,675,021


Accumulated other comprehensive income


2,632,762


5,628,657






Total equity for the Company's stockholders


42,002,855


40,447,117






Non-controlling interest


853,483


1,307,239






TOTAL EQUITY


42,856,338


41,754,356






TOTAL LIABILITIES AND EQUITY


134,204,484


146,154,072

 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)




For the years ended December 31,


2015


2014


$


$

Cash flows from operating activities




Net income

3,460,272


2,600,867

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




Depreciation and amortization

4,939,882


4,201,533

Allowance for doubtful accounts

949


768

Loss on disposal of property, plant and equipment

233,296


227,264

Loss on derivative instruments

-


62,801

Deferred income tax

9,107


(845,068)

Share based payment

653,017


1,288,916

Gain on change of fair value of warrant liability

(927,125)


(106,278)

Changes in operating assets and liabilities:




Accounts receivable

(5,446,752)


1,472,589

Notes receivable

(1,222,793)


388,137

Prepayments

(2,352,669)


1,661,111

Other receivable

(82,649)


391,965

Inventories

1,831,737


(2,602,659)

Accounts payable

(3,322,054)


5,672,372

Deferred income

1,890,332


1,880,776

Other payables and accrued liabilities

755,757


(1,867,493)

Income taxes payable

(74,111)


691,949

Net cash flows (used in) provided by operating activities

346,196


15,119,550





Cash flows from investing activities




Acquisition of plant and equipment

(11,256,553)


(8,881,328)

Net cash flows used in investing activities

(11,256,553)


(8,881,328)





Cash flows from financing activities




Proceeds from short-term bank loans

14,430,014


20,346,228

Repayment of short-term bank loans

(13,438,449)


(41,122,204)

Repayment of long-term bank loans

(1,924,002)


(1,952,362)

Proceeds from notes payable

63,544,496


52,258,487

Repayment of notes payable

(61,118,292)


(47,536,694)

Proceeds from issuance of capital stock and warrants, net

44,534


4,633,164

Change in restricted cash

2,966,205


13,038,071

Net cash flows provided by (used in) financing activities

4,504,506


(335,310)

Effect of foreign currency translation on cash and cash equivalents

(2,356,074)


735,521

Net (decrease) increase in cash and cash equivalents

(8,761,925)


6,638,433

Cash and cash equivalents - beginning of year

14,611,892


7,973,459

Cash and cash equivalents - end of year

5,849,967


14,611,892





Supplemental disclosures for cash flow information:




Cash paid for:




Income taxes

883,740


743,437

Interest expenses

1,004,205


1,912,584

Non-cash transactions




Reduction of property, plant and equipment cost by realizing deferred income

2,547,545


672,675


 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

(Stated in US Dollars)






Reconciliation of Net Income to EBITDA / Adjusted EBITDA










Three months ended


For the years ended



December 31,


December 31,



2015


2014


2015


2014



$


$


$


$

Net income (loss) attributable to the Company


166,973


2,001,720


3,854,084


2,753,236

Non-GAAP Net Income (1)


298,789


907,602


3,579,976


3,935,874










Interest expenses, net


145,743


248,759


713,566


1,007,832

Income tax expenses


624,530


(38,554)


818,736


590,318

Depreciation and Amortization


901,286


1,040,149


4,939,882


4,201,533










EBITDA


1,838,532


3,252,074


10,326,268


8,552,919

Adjusted EBITDA(2)


1,970,348


2,157,956


10,052,160


9,735,557










(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


For the years ended

December 31,

December 31,



2015


2014


2015


2014



$


$


$


$

Net income attributable to the Company


166,973


2,001,720


3,854,084


2,753,236

Stock-based compensation expense


117,256


223,947


653,017


1,288,916

Gain on change of fair value of warrant liability


14,560


(1,318,065)


(927,125)


(106,278)

Non-GAAP net income attributable to the Company


298,789


907,602


3,579,976


3,935,874










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


0.01


0.13


0.26


0.19

Stock-based compensation expense


0.01


0.01


0.04


0.09

Gain on change of fair value of warrant liability


0.00


(0.09)


(0.06)


(0.01)

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


0.02


0.05


0.24


0.27










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


0.01


0.13


0.25


0.18

Stock-based compensation expense


0.01


0.01


0.04


0.09

Gain on change of fair value of warrant liability


0.00


(0.08)


(0.06)


(0.01)

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


0.02


0.06


0.23


0.26










Weighted average number of common shares outstanding









-Basic


15,101,679


15,055,346


15,096,166


14,739,073

-Diluted


15,153,745


15,541,398


15,286,196


15,154,239

 

 

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SOURCE Highpower International, Inc.