Thank you for standing by. This is the conference operator. Welcome to the Westport Fuel Systems Inc. First Quarter 2021 Results Conference Call. As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Christine Marks, Westport's Investor Relations representative. Please go ahead, Ms. Marks.
Thank you, and good morning, everyone. Welcome to Westport Fuel Systems' Q1 2021 conference call, which is being held to coincide with the press release containing Westport Fuel Systems' financial results that was distributed yesterday. On today's call, speaking on behalf of Westport Fuel Systems is Chief Executive Officer, David Johnson and Chief Financial Officer, Richard Orsietti. Attendance at this call is open to the public and to media, but questions will be restricted to the investment community. You are reminded that certain statements made in this conference call and our Responses to various questions may constitute forward looking statements within the meaning of the U.
S. And applicable Canadian securities laws. And as such, Forward looking statements are made based on our current expectations and involve certain risks and uncertainties. Actual results may differ materially from those projected entirety by information contained in the company's public filings. I'll now turn the call over to you, David.
Thanks, Christine. Good morning, everyone. Thanks for joining us today to review Westport Fuel Systems results for the Q1 2021. This is David Johnson speaking. If you're new to our story, thanks for your interest.
And on the slide, you'll see a brief synopsis about our company. Following a record Q4 close in 2020, we started 2021 with solid revenue growth despite the ongoing challenges brought on by COVID-nineteen. Our HPDI business is ramping well in Europe and our independent aftermarket, delayed OEM and electronics businesses are profitable. We have a comprehensive global offering of patenting, clean, affordable gas and fuel components and systems offered through a global network of distributors and partners. Please are continuing to gain confidence that our HPDI solutions outperform with demonstrated operational cost savings and reduced carbon emissions.
And as a result, our products are taking on an increasing role in large fleets and accelerating the global transition to cleaner fuels. We're driving innovation to power a cleaner tomorrow and changing the way the world moves people and freight. I'll cover just a few highlights from the Q1 And then provide a business overview before handing over to Richard to go into more details on our financial performance. Our revenues were $76,400,000 in the quarter compared to $67,200,000 for Q1 last year, a 14% increase. Q1 sales revenue in our light duty and heavy duty OEM businesses Also increased significantly, up 25% versus the year ago quarter.
Like many OEMs, our HVDI launch partner is experiencing supply chain production issues due to the global semiconductor shortage. While our HPDI manufacturing has thus far been unaffected by this particular Global shortages are expected to impact revenues and margins through the Q2. We do, however, expect the impact of this issue to decrease in the second half of twenty twenty one. Our business mix is shifting with growing revenue for HPDI, hydrogen and our light duty OEM businesses, Especially in India, but the ongoing COVID-nineteen pandemic effects and resulting shift in sales mix resulted in nearly flat performance of our IAM business. In total, gross margins are under pressure and not where we want them to be.
We ended the quarter with $59,700,000 of cash and cash equivalents, Including gross proceeds of $13,200,000 raised from our at the market equity offering in the 3 months ended March 31, 2021, for a cumulative total of $27,600,000 raised. I'm immensely proud of the progress our global team has made towards sustainable profitability, which is the foundation upon which Westport Fuel Systems is addressing a huge market, dollars 100,000,000,000 annually, of which roughly half is heavy duty trucking, And market share for gaseous fuel solutions is growing. We have substantial regulatory, economic and societal tailwind in markets around the world. Consumers buy our aftermarket conversion kits to save money while using cleaner fuels and our products also help OEMs to respond to regulations while meeting their customers' demands. We've worked hard to develop a solid reputation as an industry leader in gasless fuels over the last 2 decades with sales in 70 countries.
HPDI was launched in Europe in 2018 and our share of the market continues to grow. The EU market for alternative fuel trucks grew by 38% 2020 despite the impact of COVID-nineteen. And we finished last year with an HPDI sales rate almost double compared to 2019. Less it's unclear, HPDI is not a concept demonstration, it's a product. And with HPDI, OEMs can avoid penalties for CO2 non compliance that are built into the regulations in Europe.
For example, if no improvements are made to today's European diesel powered trucks, selling those trucks in 2025 which generate a penalty of €38,000 per truck sold payable by the OEM. This year, we expect to launch HPDI in The largest market for natural gas trucking. HVDI 2.0 is the only product in production at scale that can fully and cost effectively respond to the regulatory standards for commercial vehicles in Europe, India and China. We've announced the initial demonstration of the efficiency of hydrogen HPDI and we've shown the cost effectiveness of Hydrogen Internal Efflection Engine using HPDI. It's increasingly clear there is no panacea for 0 carbon transportation across all applications.
Today there is and tomorrow there will be a diversity of technologies and a diversity of fuels. Gas as fuels are cleaner, Renewable and go all the way to 0 carbon hydrogen. And because our gaseous fuel systems are available and affordable today, we will lead the way. For heavy duty, long haul applications, the size, weight and cost of batteries, not to mention the recharge time, make battery electric technology a nonstarter for this Regarding fuel cells, the demonstration vehicles that OEMs have shown include not just the fuel cell, but significant batteries and of course electric motors. And for both of these concepts, the investments required to industrialize batteries, fuel cells and motors and then to re architect vehicles is massive.
In North America, vehicles using gaseous fuels are not so common. So the existing and accelerating global adoption of gaseous fuels may be surprising to some of you. With the increasing substitution of renewable fuels like biomethane, our products can further decrease the greenhouse gas impact of transportation And they do so much more affordably than battery electric vehicles, for example. Against that backdrop, I also want With you the views of 2 global players, our customer Volvo and our partner Cummins. As you can see, both companies forecast an ongoing important role for natural gas over the next 2 decades and an important role for hydrogen as key ingredients on the pathway to near zero carbon and fossil free transportation.
In the long term view, the mix of products that will be sold is to be determined. We already design, develop, produce and sell hydrogen components Transportation and Industrial Applications. This area of our business saw substantial growth in 2020 and remains strong in the current quarter, and we could see a pathway for continued growth. The potential for OEMs and others to avoid new and significant investments required to develop and manufacture fuel cells, electric motors and batteries are incredibly compelling. Like trucking, other high load applications like mining, marine and rail have come to rely on the efficiency, power, durability and reliability of diesel engines.
An HPDI is the only alternative that offers the same performance and yet can leverage existing supply chains, manufacturing infrastructure and economies of scale And offer a roadmap on a technology platform that has a proven track record and longevity. We believe the potential to use hydrogen with HPDI And to do so more cost effectively than fuel cells means there's a very large portion of the future product mix for long haul transportation that will count on Westport Fuel Systems products. In November, we announced new product development work to apply HPDI 2.0 to an updated base engine platform designed to meet Euro 6 Steppe regulations that take effect in 2024. We interpret this as our customers' confidence in our HPDI systems and the increasing demand of their fleet customers who are already realizing the benefits of our HPDI solutions. In China, our JV's HPDI engine has been certified And we're pleased with the increased minimum volume commitment by Weichai Westport.
I'll go into more detail regarding China momentarily. For us, North America is next. UPS has already adopted natural gas, announcing in 2019 that they're adding 6,000 natural gas vehicles to their fleet. In February, Reuters reported that Amazon ordered 700 CNG trucks. Fleets aren't waiting for technology breakthroughs.
They're acting now to reduce carbon and our solutions will save them money. With the path established by our JV with Cummins, HPDI in North America can take natural gas The joint venture term is scheduled to end on December 31, 2021, and we're evaluating our strategic alternatives in anticipation of this termination. We see a growing opportunity to sell and supply our alternative fuel systems, especially our HBI technology in head duty applications in the North American market. We're making significant progress in China, where our joint venture with Weichai Power secured certification for the WP12 natural gas engine powered by HPDI 2.0. As one of the largest suppliers of natural gas engines in China, our JV currently supplies engines to leading Chinese commercial vehicle OEMs and they serve the largest natural gas trucking market in the world.
The engine certification sets us up to serve that market as vehicle OEMs complete certifications for their vehicle offerings with our engines. In the Q1, we announced the co investment agreement to expand the manufacturing for HPDI 2.0 injectors in China and also announced amended agreement terms with Weichai Westport for the supply of a minimum of 25,000 HPDI systems through December 31, 2024, which represents a 39% increase in the minimum volume compared China is already primed for our technology with the largest LNG refueling infrastructure in the world and already has hundreds of thousands of natural gas trucks on
the road.
And we're bullish about the opportunity that's in front of us in China. Recently, we presented with ABL, a leading independent engineering firm, an analysis Showing up the cost advantages of hydrogen fueled, HVAC equipped internal combustion engines for trucking. Next, we demonstrated that hydrogen with HVAC works very well, out of the box delivering efficiency on par with fuel cells in heavy duty applications. And we presented that data at the Vienna Motor Symposium for review by industry experts just last week. Among the combustion systems we investigated, we determined HPDAC Combustion offers the highest power density, highest efficiency It's the most robust system for using hydrogen in internal combustion engines for heavy duty applications.
We're in discussions with potential partners and customers to gain input and to further develop and validate this exciting opportunity. Although it's still early days, we don't think it's a stretch to say this could be a game changer for the internal combustion engine and for clean transportation globally. Before I hand back to Richard, I'd like to highlight our commitment to strong governance, social responsibility and environmental sustainability. This is inherent in Westport Fuel Systems DNA. The strength and diversity of our Board is a critical asset that provides oversight and guidance to the implementation of our strategies and achievement of our goals.
At the Board level, we have a fifty-fifty gender mix and more than 1 third of our global workforce identifies as female. We're committed to our employees' health and safety 97% of our employee base being represented by joint health and safety committees. Our major operational sites are also ISO certified For environmental management and product quality. In 2018, we established a sustainability working group that reports directly to me. Our commitment to the environment is in our DNA.
It's in our products and we're committed to reducing the energy and carbon intensity of our global operations. For those of you who know the transportation sector well, you'll recognize some of the talented individuals who've joined our team and led their considerable expertise. On our Board, Dan Hancock, our Chair, brings 43 years of experience at GM to our company. During his career, he was CEO of Allison Transmission and CEO of the Fiat GM Powertrain Joint Venture. Freda Forrest led vehicle and powertrain engineering during a 36 years career at Opel in Germany.
Doctor. Carl Victor Schaller led Purchasing and Vehicle Engineering as a Board Member at NMAN and later was the Chief Technical Officer of BMW's Motorcycle Division. Many of you will also know Tony Guglielmin, retiring CFO of Ballard, who joined our Board earlier this year. And on our management team, Jim Arthurs and Lance Filette have 30 years of Westport Fuel Systems leadership experience. Tim Smith joined us late last year, bringing his 38 years of experience Daimler, Navistar and Tier 1 Automotive Supplier Dana.
Niccolo Cociani joined us from the Italian automotive industry and leads our global manufacturing And our CFO, Richard Orsetti has extensive public company leadership experience with an international mining company and in in the telecom sector with Bell Canada earlier in his career. Our leadership team together represents impressive skills, experience and rich geographical and cultural diversity, We're grateful for their commitment to excellence in the pursuit of our objectives. Now, over to you, Mr. For more detail on our Q1 financial results.
Thank you, David. As David mentioned earlier, our revenues increased 14% year over year $76,400,000 compared to the Q1 2020, mainly due to the strong performance from our OEM businesses, driven by improving sales volumes in light duty OEM and continued year over year growth in our HPDI product sales. As much of our sales are in euros, revenues also benefited from a 9% increase in the average euro exchange rate period over period. Year over year gross margins increased The $13,000,000 compared to $4,300,000 primarily due to a $10,000,000 charge for the field service campaign for pressure release device taken in the Q1 of 2020, which excluded the $7,700,000 and insurance recoveries recorded later in the Q2 of that year. Excluding this charge, gross margins Experienced pressure this quarter due to the continued impact of COVID-nineteen on customer demand, primarily in our independent aftermarket business.
And we also realized lower margins on HPDI product sales and engineering services than in 2020. Equity income from the CWI joint venture increased to $6,400,000 a year over year improvement of $1,200,000 primarily due to reduced R and D expenses. We recorded a net loss of $3,100,000 or $0.02 per share for the Q1 of 2021 compared to a net loss of $15,300,000 or $0.11 per share for the same period in 2020. Besides the positive change in gross margin and pickup in equity income from CWI, the current quarter benefited from a decrease in unrealized foreign exchange losses due mostly to the strengthening of the Canadian dollar, partially offset by increasing operating expenses, including one time severance expenses. Notwithstanding the challenging business environment, we continue to generate positive adjusted EBITDA of $2,700,000 compared to negative $3,600,000 in the Q1 of 2020.
Turning to our business segment performance, OEM revenue for the 1st Quarter of 2021 was $42,700,000 which was a 25% increase year over year in revenue that was primarily driven by increased light duty OEM sales volumes to Russian and Indian OEMs, growing sales in our electronics business and higher year over year HPDI product sales, more than offsetting a decline in delayed OEM business that has been affected by the impact on customer demand due to COVID-nineteen. As David mentioned previously, global supply chain issues related to a lack Semiconductors have been impacting production and creating bottlenecks in the automotive industry, including our HPDI launch partner. Although the demand for our HPDI technology continues on a positive trajectory, our HPDI product sales were lower than in the second half of twenty twenty due to the supply chain challenges that have affected the production of trucks at our HPDI launch partner. These shortages do Gross margin for OEM increased by $11,000,000 to $4,900,000 We're 11% of revenue for the current quarter compared to negative $6,100,000 in the same period 2020. Gross margin in the prior period reflects the aforementioned $10,000,000 charge for the field service campaign.
Excluding this charge, gross margin for the current quarter increased by 1,000,000 gross margin percentage of 11%. This increase in gross margin was largely due to the higher sales in light duty OEM as discussed previously, more than offsetting the pressure of margins in HPDI product sales. OEM recognized an operating loss of $6,500,000 compared to $14,500,000 for the same period in 2020. Normalizing for the $10,000,000 charge, the operating loss in OEM increased by $2,000,000 year over year due to the increase in the average euro exchange rate and higher compensation expense. Turning to independent aftermarket, revenues for the current quarter increased modestly year over year by 2% to $33,700,000 Primarily due to the higher average euro exchange rate, which offset comparatively lower customer demand from our Western European customers affected by the continuing impact of COVID-nineteen.
Notwithstanding the comparable sales performance, gross margin decreased by 2,300,000 to $8,100,000 in the current quarter due to the increase in sales mix from lower margin emerging market customers and the challenging recovery in Western Europe. Besides the gross margin impact, operating income decreased $3,200,000 to $1,600,000 due to some one time severance expenses. AWI. Revenue for the Q1 2021 was $82,300,000 a 7% increase compared to the Q1 2020. Unit sales for the Q1 were 1873 compared to 1513 for the Q1 of 2020.
The increase in unit sales in the current year largely reflected the timing of sales and an increase in demand. Parts revenue decreased from $21,100,000 to $25,800,000 due to fewer parts purchases for repairs reflecting improving product quality. Gross margin decreased by $600,000 to $21,000,000 or 20 percent of revenue compared to $21,600,000 or 28 percent of revenue in the prior year period. The decrease in gross margin and gross margin percentage primarily reflects product mix and a $1,900,000 warranty provision. Operating income for the Q1 2021 increased by $3,700,000 year over year to $17,100,000 primarily reflecting lower R and D expenses.
As mentioned at the outset, our share of CWI's net income for the Q1 of 2021 increased to $6,400,000 from $5,300,000 in the same period last year. Turning to the balance sheet and our liquidity. Cash at the quarter end was approximately $60,000,000 a decrease of $4,500,000 compared to the Q4 2020. The decrease in cash was primarily due to debt repayment, cash used in operations and capital expenditures and a lower euro exchange rate on our cash held in Europe. This was partially offset by proceeds of $13,000,000 from equity issued from our ATM program during the quarter and $7,900,000 in dividends received from our CWI joint venture.
At the quarter end, our total debt stood at $62,000,000 down from $85,000,000 in the Q4 2020, largely due to the repayment of debt on our revolving receivables credit facility from our collections, scheduled debt repayment on our term loans and a partial conversion of $2,500,000 convertible notes. We are continuing our efforts to strengthen our balance sheet and ability to fund our long term growth and financial stability. 2 unit credit loans were refinanced subsequent to the quarter with principal increased from €5,400,000 to €7,500,000 maturing in the Q1 of 2027 at lower cost of borrowing. Further, we are also actively discussing with our lenders about refinancing other term loans to extend maturity and improved borrowing rates based on our investment horizon and improving credit profile. With that, I would like to turn
it back to Dave.
Thanks, Richard. In 2021, Our focus remains on continued growth and scale in key markets. For HPDI, that means Europe, China and the North America.
And for
our light duty business, profitable growth through the aftermarket and OEM channels in markets like Turkey, Russia, Egypt, India and other cost sensitive markets Where our products resonate strongly with the need to deliver affordable transportation and reduce carbon. And we'll continue our development work with hydrogen HPDI. Looking further ahead, we believe $1,000,000,000 in annual revenues is a very attainable goal and expect margins to improve as we gain economies of scale and operational leverage, Closer in line with industry standard performance. The market fundamentals are in place and the next catalysts for growth are clear. We have a talented team dedicated delivering continued value, affordable and sustainable transportation solutions.
With that, I'd like to turn it back to the operator for your questions.
Thank you. We will now begin the question and answer session. Then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using the speakerphone, We will pause for a moment as callers join the queue.
The first question comes from Eric Stine with Craig Hallum. Please go ahead.
Good morning, everyone.
Good morning.
Good morning. So I would love if you could just expand a little bit on your commentary on HPDI in North America. Just in the context, I know It's a different market, especially from the standpoint of not as vertically integrated as say Europe is. Just maybe some things we should look for as part of that because clearly you're focusing on North America more than we've heard on past calls.
Yes. Thanks for the question, Eric. We're really inspired by the opportunity in North America. And I would say most importantly, what we see is The success of CWI over a long stretch of time to bring natural gas engines to the marketplace. And then that creates from our perspective the opportunity for HPDI, which is that next level better performance.
So as the infrastructure is built out and customers have gotten More comfortable with natural gas, the benefits of HBEI now being demonstrated in Europe. We think This sustainability movement that is added to the other benefits, the environmental benefits, the economic benefits of our products We'll really help the market to develop and flourish in North America. As you know, the OEMs we work with around the world, all of them are global OEMs. And so when we have a product in one location, bring it to another one is a little easier than starting from scratch. And so We see a big opportunity, big market, and we think that the move to clean up transportation on a global basis It is in fact a global trend and so we're prepared and eager to serve the North American market with our superior technology.
Got it. Is this something that we should think about a 2021 event or something that Yes. I mean, I guess it's up to your OEM partners, but something that if not in 2021, at the very least, it's a potential near term
So we see it in our sites, but I have to be, let's say, pragmatic and reasonable about the timeframe. The emissions regulations in North America are different than the emissions regulations in Europe, and so some work is required. The vehicles are different. There's a fair number of differences. It's not just roll the product off the ship and start selling.
Having said that, we don't frequently get the chance to talk about our development contracts in advance of actual production start. And so I'm going to leave the announcements to our customers and so I can't give you any like forward looking on when we might expect those announcements. Sorry for that.
Right. No, I understand, but encouraging nonetheless. Okay. Maybe just last one for me, This $1,000,000,000 target by the middle of the decade. Nice to see that.
Just maybe a little more in-depth to your thought process, obviously, HPDI heavy, but whether it's that or how that breaks down between your segments From a high level and then also how you kind of foresee the mix when you're at that level by geographic area would be great.
Yes, absolutely. So clearly, our HPDI product is a very important part of that equation and it's off We do expect the Chinese market to be very important at this equation. We're very pleased to announce the contract amendment that we made with Our JV Westport, WeChat Westport, to increase the minimum volume commitment. And I want to reinforce that it's a minimum volume commitment. So we're talking So that I think and we're going into the largest market for natural gas trucking in the world with a superior product.
So I think Europe and China are very, very important and we expect North America to come along, but perhaps in that kind of context of Mid decade may not be the biggest piece, of course. Also, I want to say that while HPDI is critical to this growth trajectory and our targets of $1,000,000,000 by mid decade. It's not the only ingredient. We do have a comprehensive portfolio of products and ways to go to market, the OEM channel and the aftermarket channel. And I expect growth in all of those aspects of our business, growth in volume, revenue and profitability.
And those are our targets is to do that. So it all adds up and we're very excited about the prospects for the company in total, but there's lots of work to be done to realize it.
Okay. Thanks a lot.
Thank you, Eric.
The next question comes from Colin Rusch with Oppenheimer. Please go ahead.
Thanks so much guys. Can you speak to the timeframe for the next several kind of important benchmarks around proving out the hydrogen technology and
This is, I think, a really exciting development for the corporation. Fundamentally, as you know, Colin, we had analysis late last year that showed that it would work well. We put an engine in our test cell and Said it's in hydrogen and it worked very well exactly in line with our analysis. And for us with HPDI, hydrogen is a great Fuel. Just to make it clear, for a spark ignited engine, it's actually problematic that The fuel has the sustainability properties that it does.
But for HPDI, it's absolutely fantastic because we introduced the fuel after combustion started. And so That really is very much in our favor and we demonstrated that in the engine. Where we go from here, you know about the project we have with Scania. We expect and we're in discussions around other projects like that, that will take our hardware, our HPKI hardware, Put it on others' engines and then demonstrate the technology first in dyno, then vehicle. And really that's, I would say, Important ingredient actually for bringing it all the way to production will be how does the infrastructure develop.
And so this is a very important role for governments around the world to play. So there are a lot of ingredients, but I think you are well aware that around the world hydrogen is clearly Established as the 0 carbon fuel for long haul heavy duty transportation going forward. And we think that hydrogen has a tremendous potential. We've demonstrated in our engines. So we're looking forward to those next projects with customers to Further develop it, further validate it and bring it to production.
Perfect.
And then just around the current supply chain and what's going on globally at this point. I know that you guys have kind of proactively gotten some inventory in and But I wanted to get your sense of how things are trending in terms of procurement, availability of components and Kind of just fundamental availability of hardware as you try to again go through the second and third quarters here.
Yes. I've been reflecting on this, Collyn, because it is a global problem. It's not a Westport Fuel Systems specific problem, but of course, we face it too. And it comes at us in a couple of different ways. It affects our customers as we've talked about just moments ago.
And so far, it hasn't So much affected us in terms of our ability to get components, but of course, if our customers affected that affects us kind of the same way. And I look back Actually, what we were doing this time last year, which was as the pandemic started in China and then moved to Italy, we were trying to build those And so we're ordering more than we needed to build up that inventory to have some buffer stock. And I can only imagine this scenario that basically everybody was doing that. So there was a huge wave of orders and then all of a sudden factories shut down and then everybody stopped their orders. And so I think As a world globally, we have perturbed The supply lines in a very unnatural way as a result of actions taken to try and manage through COVID.
And so it's going to take some time to work through this. And some of these supply lines are very long. I was reading recently about the supply lines for chips and How long back in the supply chain it is where you actually make the silicon wafer and then go through that. It's not my area of specialty, but it's very interesting, this Long supply chain. So we've disturbed that.
I don't think it's anything that we can't recover from. We will recover from it, but it does take some time. In the meantime, it affects Our operations, hopefully not too much, so far not so much, but our customers' operations, unfortunately already and also hopefully not too much. But from my perspective, it is just something we have to work through caused by the pandemic and the supply and demand disruptions of that pandemic. To some degree, it's still impinging upon us.
As you heard from our commentary, we have some markets that aren't as strong as we'd like them to be because COVID is still Causing lockdowns. We have red and orange zones. We have problems in India, of course. So all these things around the world are unhelpful To running the business and caused a fair bit of work, but so far we've been able to manage them fairly well, but not without impact.
Thank you so much.
My pleasure.
The next question comes from Amit Dayal with H. C. Wainwright. Please go ahead.
Thank you. Good morning, guys. Looks like we're bracing for some variability in Sort of how the quarterly results may come through for the remainder of 2021 compared to say the historical period. Could you give us some sense of The revenue cadence potentially that you have visibility on for the rest of the year on a quarterly basis?
Yes, Amit, it's a fact that the visibility is not so great as we were just talking to Collin in the last question. The supply chain, I would say, is one of the big variables and the second big variable is the ongoing impact of COVID. India is an important market for us, as you know, and right now that's severely affected. And frankly, Europe is Still working through getting the vaccine out and recovering. And a fair bit of our revenue stream and profitability stream is from Consumer products in our aftermarket business.
So that does have a lingering and continuing impact. Turkey had a shutdown. So You can hear some of the countries and some of the markets that are important to us are still severely affected even though here in the U. S. We've got our Vaccines and people are opening up and we're trying to get back to normal.
So there are different scenarios around the world and that does affect us. And we don't have a crystal ball on it, so this is, hence, the lack of guidance for the year. But in the long term, we see that And I'm really quite thrilled to see our revenue up 14% over last year, which was almost unaffected by COVID last We just had a tail end of March where COVID started to close our factories and have other negative effects, but 14% year over year improvement and our OEM business up by 25%. So we do see a number of very positive signs in total And have a strong outlook for a good year in total, but the quarter by quarter is very, very tough to call at this moment.
That's understandable. Thank you, David. With respect to some of the same challenges on the margin and OpEx front, I mean, the factories, etcetera, are open now compared to being shut here last year. How should we think about some of these expenses moving higher for you this
Yes. So I'll comment on the mix, maybe Richard can give you a little insight on Our OpEx view. On the mix right now, some of our most important markets are still Significantly depressed. So Italy, for example, is significantly depressed in terms of our aftermarket business. And you can easily imagine that India Is facing challenges and Turkey's got that shutdown I just mentioned.
So we face these things And I think the quarter over quarter for Q2 will be a really great story because we were super so bad last year with our shutdown, but That really isn't any solid. We'd like to see quarter over quarter improvement sequential quarter improvement as it does a year over year. But I don't have a number to share with you or forecast, but we're working very hard to manage all the challenges And to be ready for our customers when they're ready to buy our products.
Understood. Yes.
Thanks David. Go ahead, Mr. Glenn.
No, sorry, sorry.
No, go ahead.
Sorry, Richard, please go ahead. Sorry.
Yes. No, I was just going
to say the One of the challenges we're facing is the lingering impact of COVID. And so the market Where we had a lot of profitability in our independent aftermarket in Western Europe, it's just a market that is just recovering. And now we're seeing, we'll call it, the beginnings where those markets are starting to reopen. And so We'll call it profitability will start improving with regards to that side of the house. With regards to our heavy duty OEM Business HPDI Sales.
I mean that's a temporary thing right now that our launch partner is dealing with. And We're seeing, we'll call it, a lot of interest that they're receiving for their truck. That it's just a question of a wait time right now, but that profitability, we're hoping that Get back on the right trajectory in the second half of the year. The one thing that you will notice that this is going to be different with regards to and you saw it, It's
a little bit foreign exchange.
The other thing is subsidies. Last year in the first half of the year, the second and the third quarter last year, there was a lot of wage subsidies Coming from the Italian government and we had in the Netherlands and the Canadian and Canada as well that those numbers year over year will Our operating expenses and some of our SG and A will be somewhat higher, because there'll be less of those subsidies This year because the we'll call it
the businesses are starting to return.
Okay. That's helpful. Thank you, Richard.
Just one last one I was going to ask David maybe. Any color on who that Tier 1 partner is with You're expanding the HPDI production in China. Is it the same partner in Europe, but The facilities are in China. I don't know if you can share this, but it would be helpful. Thank you.
Yes. We have A long standing partnership with Delphi, which is now BorgWarner on our injector and they are our global partner for this production and realization of the injector. So we're very happy to be working with them and bringing this product to the market And expanding that capacity to respond to the demand that's in our forecast. So, yes, happy to be partnered with such a capable company.
Thank you for that, David. That's all I have.
Thanks, Amit.
The next question comes from Rob Brown with Lake Street Capital Markets. Please go ahead.
Good morning. I'm just wondering if you could expand a little bit on your comments around the demand with your European launch partner. You're seeing kind of Good order activity even though it's maybe not coming through the production line yet. What are you sort of seeing in the demand trends there?
Yes. Overall, Rob, the demand looks good to us. So we're very encouraged By the order board, the challenges that we're facing right now, I would say, with our partner relate to the supply of components, the ability to keep There are lines running because of other components. We can make necessary HPDI parts and the order order Good. So as I've described before, the market that we see is a really strong Growing market, we've seen it since we launched in 2018 through 2019 and frankly to have a volume up so significantly in 2020, A COVID year with the shutdown, just reinforced our view that this is a growth product that's Extremely important in the compliance scenarios that OEMs are calculating all the time For the CO2 regulations in 2025 2030, the build out of the infrastructure supports that.
We're now over 400 LNG stations In Europe, so that's doubling in just the time I've been with the Westport Fuel Systems. So early grade expansion that Fully responds to the increasing pool of vehicles in the marketplace. We see good market share results of our partner in the marketplace for natural gas vehicles in the European Union. And so frankly, all the elements are lining up and the order book looks Stronger looking forward to getting through the supply chain issues and serving our customers and serving their customers.
Okay. Thank you. And then in terms of China, I think you're waiting for vehicle certifications at this point. Where is that at? And How do you see that playing out at this point?
Yes, we see good progress. And so we're encouraged by the outlook to get the product into the marketplace and in customers' hands. And I think that was best represented in a public way By the announcement that we had recently that we've rewritten that contract to expand the minimum commitment. My view is anytime Customers willing to sign up to a minimum commitment. That means they're planning to build and sell even more than that.
They're confident in the product And they're confident in their plans. And so I'm really excited to get the product into the marketplace. There's multiple OEMs working to integrate these engines into their trucks and bring those trucks all the way to fruition to their customers. The market in China, as you know, is on the order of 100,000 natural gas trucks per year, with spark embedded engines from our joint venture being a main component of those sales. And so we think when HPDI is added to the mix through our Weichai Westport JV That that will really grow the market.
So increase the share beyond the 10% that it is today at Total Trucking and it will start grabbing that And you can kind of track that as what's happened With our lead customer in Europe versus their spark ignited engine competitors in Sky and Tobacco. So we're really excited about it and we're really eager, But we'll wait for the announcements from the vehicle OEMs regarding their launches and their availability of practice and our customers.
Okay. Thank you. I'll turn it over.
Thanks, Rob.
The next question comes from Thomas Boyes with Cowen and Company. Please go ahead.
Great. Thank you for taking my questions. Just two quick ones from me. The first one would be, could you just Have a give us a quick update on what you're seeing in the passenger car market in places like Italy or maybe some other key geographies?
Yes. What we see in passenger car in total, maybe just to start with, actually the market in India has been very strong. So this a really important part of the story that now is seeing some headwinds with the COVID challenge, the severe COVID challenge they're facing. But surely that's temporary. We wish them all the best And to stay safe in India.
But the market itself in India adopted new regulations in April of last And so our customer and the leading passenger car OEM in India, Maruti Suzuki, dropped the offering of diesel engines because basically with the new emissions regulations, It just got too expensive for the marketplace. And they're pivoting to natural gas vehicles to replace those diesel vehicles. That's kind of the most affordable Alternative with respect to low cost of acquisition and combined with low cost of operation and even better that they're clean vehicles. And they have this building infrastructure of natural gas in these. That's very strong for us.
In Europe, I would tell you that the market is still under some substantial Depression, if you will, from the COVID pandemic. So although we're seeing some increase in, I'll say, Western Europe, Italy and other markets, It's rather modest and what we see is stronger responses in places like Russia And India, for example. So we do expect the market in Western Europe to come back, and we're And that's where our predictability about Q2 and Q3 when it comes back and what the numbers are is very, very challenging.
Great. I appreciate the color there. And then just the last one for me. I was just wondering maybe what the next steps We're around service support for the Cummins Westport JV longer term. What's being communicated to fleets that maybe would be I'd be reluctant to buy in the last year of the JV to give them kind of some confidence there.
Yes, I think we've been pretty clear within the JV that there won't be any disruption to services support and customers don't need to be worried about that aspect of whether or not they should purchase the Cummins Westport engine in Q2, Q3 or Q4 of this year. So, while we continue to evaluate the strategic alternatives as Cummins does in terms of what comes next, our view is So, I think that's Something that's not to be worried about. And I'm sure that the customers are hearing that message from Cummins Westport, Cummins and us
This concludes the question and answer session. I would like to turn the conference back over to Westport Management for any closing remarks.
Yes. Thank you very much everybody for joining us. I'm really quite pleased and proud of what we accomplished in 2020 and pleased to put up a year over year performance improvements in terms of the top line for the company. We have some ongoing headwinds in terms of COVID for sure, but the fundamentals of our company and the products we bring to the marketplace and the way the marketplace is Developing now in Europe, next in China and already in North America with respect to natural gas engines, Really tells the fundamental story that gives us the confidence around our $1,000,000,000 target for mid decade. The story of Westport Fuel Systems, the products we bring to the market is a growth story and we're hard at work to support that growth story and realize it in the coming years.
Thanks again for your time and attention and all your support. You all have a good day.
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.