Highpower International Reports Unaudited First Quarter 2019 Financial Results

SAN DIEGO and SHENZHEN, China, May 13, 2019 /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, 2019.

First Quarter 2019 Highlights (all results compared to prior year period)

    --  Net sales for the first quarter of 2019 increased 16.7% to $58.1 million
        from $49.8 million.
    --  Lithium business net sales increased 16.8% to $42.7 million from $36.6
        million.
    --  Gross margin increased to 21.8% of net sales compared to 15.2%.
    --  Net income attributable to the Company was $0.3 million, or earnings of
        $0.02 per diluted share, compared to net loss attributable to the
        Company of $1.1 million, or loss of $0.07 per diluted share.

Mr. George Pan, Chairman and CEO of Highpower International, commented, "Our first quarter results show a good start to 2019. Top line performance beat our guidance in RMB terms, driven by continued growth in our battery solutions businesses. We also continued to optimize our product mix and improve labor efficiency, which successfully increased our margins, which also exceeded our expectations."

"We believe that raw material prices will stabilize in 2019. However, potential trade conflicts may place downward pressure on the broader global economic environment, creating uncertainties to our business. To offset these effects, we intend to adapt to market forces and remain focused on executing our strategy while ensuring that we have the talent, technology, and capacity necessary to continue our growth. We remain dedicated to sustainable long-term growth and to providing clean, safe, and efficient power solutions to meet society's needs," Mr. Pan concluded.

First Quarter 2019 Financial Results

Net Sales

Net sales for the first quarter of 2019 increased 16.7% to $58.1 million from $49.8 million in the prior year period. The Company's lithium segment grew 16.8% year over year, and the NiMH batteries and accessories segment grew 16.7% year over year.

Gross Profit

Gross profit for the first quarter of 2019 increased 67.3% to $12.7 million from $7.6 million in the prior year period. Gross margin was 21.8% compared to 15.2% in the prior year period.

Operating Expenses

    --  Research and development (R&D) expenses were $3.0 million compared to
        $2.6 million in the prior year period. As a percentage of net sales, R&D
        expenses remained steady at 5.1% from the prior year period.
    --  Selling and distribution expenses were $2.8 million compared to $2.0
        million in the prior year period. As a percentage of net sales, selling
        and distribution expenses increased to 4.8% from 4.0% in the prior year
        period. The increase was mainly driven by expanded business scale,
        including marketing expenses for more brand customers.
    --  General and administrative expenses were $4.8 million compared to $4.1
        million in the prior year period. As a percentage of net sales, general
        and administrative expenses remained at 8.3% from the prior year period.

Net Income

Net income attributable to the Company for the first quarter of 2019 was $0.3 million compared to a net loss of $1.1 million in the prior year period. Net income attributable to the Company per diluted share for the first quarter of 2019 was $0.02 compared to a net loss attributable to the Company per diluted share of $0.07 in the prior year period.

For the quarter ended March 31, 2019, the Company's weighted average diluted shares outstanding used in computing diluted share was 15,604,907.

EBITDA

EBITDA for the first quarter of 2019 increased 374.6% to $2.8 million from $0.6 million in the prior year period.

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



       
              Balance Sheet Highlights


                                ($ in millions, except per share data)               Mar
              ch
                                                                                            31,        Dec
       ember
       31,

    ---

                           
            
              2019                    2018

                                      ---

                                                                              
       (Unaudited)


                                                                            
       
          
                $ 
         
          
        $



       Cash                                                                                     24.2                 24.9



       Total Current Assets                                                                    194.9                215.0



       Total Assets                                                                            284.1                288.1





       Total Current Liabilities                                                               201.1                210.8



       Total Liabilities                                                                       204.6                210.8



       Total Equity                                                                             79.5                 77.3



       Total Liabilities and Equity                                                            284.1                288.1



       Book Value Per Share                                                                     5.10                 4.97

Financial Outlook

For the second quarter of 2019, the Company expects net revenues to grow over 20% year over year. Gross margin is expected to be similar or slightly lower than that of the first quarter of 2019.

Conference Call Details

The Company will hold a conference call on Monday, May 13, 2019, 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/30366/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 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, business and financial expectations and anticipated growth during 2019. 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; impact of trade relations between China and the U.S. and other countries where we sell our products; unexpected fluctuations in exchange rates and our ability to successfully manage hedging; our ability to continue R&D development to keep up with technological changes, and adverse changes in legal, regulatory and economic factors generally. 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, 2018 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


                                                  
         CONDENSED CONSOLIDATED BALANCE SHEETS


                                                     
              (Stated in US Dollars)




                                                                                                      March 31,           December 31,


                                                                                                            2019                   2018



                                                                                                     (Unaudited)


                                                                                    
              
       
               $    
     
     
                $



     
       ASSETS


      
     Current Assets:


      
     Cash                                                                                             24,167,300             24,916,484


      
     Restricted cash                                                                                  39,562,823             44,495,633


      
     Accounts receivable, net                                                                         59,037,769             77,279,817


      
     Amount due from a related party                                                                      61,131                477,663


      
     Notes receivable                                                                                  4,375,399                256,712


      
     Advances to suppliers                                                                               926,624              2,292,843


      
     Prepayments and other receivables                                                                 8,282,896             10,457,789


      
     Inventories                                                                                      58,456,282             54,790,461





      
     Total Current Assets                                                                            194,870,224            214,967,402





      
     Property, plant and equipment, net                                                               68,148,472             56,523,177


      
     Long-term prepayments                                                                             1,949,214              2,617,419


      
     Land use right, net                                                                               2,476,691              2,445,751


      
     Other assets                                                                                        635,015                643,128


      
     Deferred tax assets, net                                                                            983,879                865,370


      
     Long-term investments                                                                             9,768,087              9,993,852


      
     Right-of-use assets                                                                               5,272,558





     
       TOTAL ASSETS                                                                               284,104,140            288,056,099






     
       LIABILITIES AND EQUITY





     
       LIABILITIES


      
     Current Liabilities:


      
     Accounts payable                                                                                 68,943,619             66,486,690


      
     Deferred government grants                                                                          473,111                464,206


      
     Short-term loans                                                                                 17,749,981             24,856,744


      
     Non-financial institution borrowing                                                                                     8,761,426


      
     Notes payable                                                                                    75,053,041             73,607,284


      
     Foreign exchange derivative liabilities                                                               2,240                521,509


      
     Amount due to related parties                                                                     9,011,760              6,116,851


      
     Other payables and accrued liabilities                                                           23,733,687             25,860,703


      
     Income taxes payable                                                                              4,246,421              4,124,719


      
     Lease liabilities, current                                                                        1,866,177




      
     Total Current Liabilities                                                                       201,080,037            210,800,132





      
     Lease liabilities, non current                                                                    3,550,051




      
     
                TOTAL LIABILITIES                                                                  204,630,088            210,800,132


                                                                                                 
       HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES


                                                                                                   
          CONDENSED CONSOLIDATED BALANCE SHEETS


                                                                                                      
              (Stated in US Dollars)




                                                                                                                                                           March 31,           December 31,


                                                                                                                                                                 2019                   2018



                                                                                                                                                          (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, 15,567,953 shares issued                                                                   1,557                  1,556
        and outstanding at March 31, 2019 and 15,559,658 at December 31, 2018,
        respectively)


        
              Additional paid-in capital                                                                                                                 14,067,883             13,863,282


        
              Statutory and other reserves                                                                                                                8,012,052              8,012,052


        
              Retained earnings                                                                                                                          56,481,633             56,173,912


        
              Accumulated other comprehensive income (loss)                                                                                                 910,927              (794,835)




        
              
                TOTAL EQUITY                                                                                                                  79,474,052             77,255,967






     
                TOTAL LIABILITIES AND EQUITY                                                                                                           284,104,140            288,056,099


                                                                              
              HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES


                                                                          
     CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME


                                                                                          
              (Stated in US Dollars)




                                                                                                                                                          Three months ended

                                                                                                                                                              March 31,



                                                                                                                                                               2019                         2018



                                                                                                                                                        (Unaudited)                 (Unaudited)


                                                                                                                                 
              
            
                $          
     
     
                $





           Net sales                                                                                                                                    58,113,480                   49,783,453



           Cost of sales                                                                                                                              (45,452,951)                (42,217,126)




           Gross profit                                                                                                                                 12,660,529                    7,566,327






           Research and development expenses                                                                                                           (2,986,709)                 (2,561,837)



           Selling and distribution expenses                                                                                                           (2,792,862)                 (1,975,096)



           General and administrative expenses                                                                                                         (4,823,489)                 (4,114,810)



           Foreign currency transaction loss                                                                                                           (1,250,895)                 (1,014,693)




           Total operating expenses                                                                                                                   (11,853,955)                 (9,666,436)






           Income (loss) from operations                                                                                                                   806,574                  (2,100,109)






           Changes in fair value of foreign exchange derivatives                                                                                           387,100                      703,715



           Government grants                                                                                                                               221,435                      329,820



           Other income                                                                                                                                     66,698                       23,561



           Equity in (loss) earnings of investee                                                                                                         (418,204)                     156,250



           Interest expenses                                                                                                                             (470,423)                   (241,852)



           Income (loss) before income taxes                                                                                                               593,180                  (1,128,615)





           Income taxes (expense) benefit                                                                                                                (285,459)                       9,679




           Net income (loss)                                                                                                                               307,721                  (1,118,936)





           Comprehensive income



           Net income (loss)                                                                                                                               307,721                  (1,118,936)



           Foreign currency translation gain                                                                                                             1,705,762                    2,836,556




           Comprehensive income                                                                                                                          2,013,483                    1,717,620





           Earnings (loss) per share of common stock attributable to the
    Company



           - Basic                                                                                                                                            0.02                       (0.07)




           - Diluted                                                                                                                                          0.02                       (0.07)






           Weighted average number of common stock outstanding



           - Basic                                                                                                                                      15,566,478                   15,509,658




           - Diluted                                                                                                                                    15,604,907                   15,509,658


                                                                                              
      HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES


                                                                                             
      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                                  
              (Stated in US Dollars)




                                                                                                                                                       Three Months Ended March 31,



                                                                                                                                                              2019                                 2018

                                                                                                                                                                                                   ---

                                                                                                                                                       (Unaudited)                         (Unaudited)


                                                                                                                                                
     
     
                $                  
     
     
                $



              
                Cash flows from operating activities



              Net income (loss)                                                                                                                           307,721                          (1,118,936)



              Adjustments to reconcile net income to net cash provided by (used in) operating
    activities:



              Depreciation and amortization                                                                                                             1,729,440                            1,475,228



              Bad debt expense                                                                                                                             89,427                               18,524



              Loss on disposal of property, plant and equipment                                                                                                                                21,805



              Deferred taxes                                                                                                                            (102,366)                           (356,616)



              Changes in fair value of foreign exchange derivatives                                                                                     (387,100)                           (414,042)



              Equity in loss (earnings) of investee                                                                                                       418,204                            (156,250)



              Share based compensation                                                                                                                    204,602                              241,421



              Changes in operating assets and liabilities:



              Accounts receivable                                                                                                                      18,954,393                            3,713,692



              Notes receivable                                                                                                                        (4,120,877)                           2,622,925



              Advances to suppliers                                                                                                                     1,412,642                            (236,789)



              Prepayments and other receivables                                                                                                         2,379,960                            (601,315)



              Amount due from a related party                                                                                                             426,432                              285,657



              Amount due to related parties                                                                                                               113,794



              Inventories                                                                                                                             (2,626,489)                        (10,779,233)



              Accounts payable                                                                                                                        (6,016,313)                         (1,377,447)



              Deferred government grants                                                                                                                                                      475,783



              Other payables and accrued liabilities                                                                                                  (2,287,547)                             665,379



              Income taxes payable                                                                                                                         57,542                               19,371

                                                                                                                                                                                                   ---


              
                Net cash flows provided by (used in) operating activities                                                                   10,553,465                          (5,500,843)

                                                                                                                                                                                                   ---




              
                Cash flows from investing activities



              Acquisitions of plant and equipment                                                                                                     (4,336,823)                         (1,553,979)



              Payment for long-term investment                                                                                                          (313,073)                           (317,188)

                                                                                                                                                                                                   ---


              
                Net cash flows used in investing activities                                                                                (4,649,896)                         (1,871,167)

                                                                                                                                                                                                   ---




              
                Cash flows from financing activities



              Proceeds from short-term bank loans                                                                                                       5,963,296                           14,427,164



              Repayments of short-term bank loans                                                                                                    (13,560,014)



              Proceeds from a related party                                                                                                             2,981,648



              Repayments of non-financial institution borrowing                                                                                       (8,944,944)



              Proceeds from notes payable                                                                                                              30,205,286                           28,429,600



              Repayments of notes payable                                                                                                            (30,171,519)                        (26,488,407)



              Payment of derivative instruments                                                                                                         (143,089)

                                                                                                                                                                                                   ---


              
                Net cash flows (used in) provided by financing activities                                                                 (13,669,336)                          16,368,357

                                                                                                                                                                                                   ---


              Effect of foreign currency translation on cash                                                                                            2,083,773                            2,046,039

                                                                                                                                                                                                   ---


              Net (decrease) increase in cash and restricted cash                                                                                     (5,681,994)                          11,042,386



              Cash and restricted cash- beginning of year                                                                                              69,412,117                           40,456,117

                                                                                                                                                                                                   ---


              Cash and restricted cash- end of year                                                                                                    63,730,123                           51,498,503

                                                                                                                                                                                                   ===




              Supplemental disclosures for cash flow information:



              Cash paid for:



              Income taxes                                                                                                                                330,283                              327,565



              Interest expenses                                                                                                                           863,923                              114,588



              Non-cash investing and financing activities:



              Purchase of property and equipment financed by accounts payables                                                                          7,203,680



              Reconciliation of cash and restricted cash:



              Cash                                                                                                                                     24,167,300                           18,859,355



              Restricted cash                                                                                                                          39,562,823                           32,639,148

                                                                                                                                                                                                   ---


              Total cash and restricted cash shown in the condensed consolidated statements of                                                         63,730,123                           51,498,503
    cash flows

                                                                                                                                                                                                   ===



       
                
                  Reconciliation of Net Income to EBITDA

    ---



                                                                                 Three months ended March 31,



                                                                                        2019                                2018



                                                                                 (Unaudited)                        (Unaudited)


                                                                           
     
     
               $                  
     
     
               $



       Net income (loss) attributable to the Company                                307,721                         (1,118,936)






       Interest expenses                                                            470,423                             241,852



       Income taxes expenses (benefit)                                              285,459                             (9,679)



       Depreciation and amortization                                              1,729,440                           1,475,228






       EBITDA                                                                     2,793,043                             588,465

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SOURCE Highpower International, Inc.