Thank you for standing by. This is the conference operator. Welcome to the Westport Fuel Systems First Quarter 2020 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 Shawn Severson with Alpha Direct Advisors, Westport's Investor Relations representative. Please go ahead, Mr. Severson.
Thank you, and good morning, everyone. Welcome to Westport Fuel Systems' 1st quarter 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, Rich Dorisetti. Attendance on 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 This call and our responses to various questions may constitute forward looking statements within the meaning of the U.
S. And applicable Canadian securities laws.
Good morning. Thank you for joining our conference call to review Westport Fuel Systems Q1 2020 results. I sincerely hope that all of you, your colleagues, friends and family are healthy and well and that you stay healthy and well. I've had a chance to speak with many of you since our 2019 year end results call on March 17. It has certainly been a challenging time, but I've also been incredibly impressed with the resiliency and ingenuity of our team in the face of this global crisis.
Our focus has now shifted from COVID-nineteen response to a safe and efficient post COVID recovery. As this pandemic made its way around the world, our teams have been following government guidelines, local protocols in each jurisdiction where we operate. Our people have shown tremendous fortitude and have safely and effectively resumed operations at all our locations. Despite the near term uncertainty and expected I'm confident that the need for affordable, clean transportation solutions remains. It's encouraging to see that climate change hasn't fallen to the back burner.
Rather, we're seeing signs that the green recovery is on. Cost consciousness and renewed pragmatism means that CapEx decisions will be heavily scrutinized. And with that scrutiny, we'll come to realize That electric propulsion for long haul, heavy duty trucking applications is at best an expensive distant hope for the far off future. Gas and fuel solutions are proven, available and affordable right now. While vehicle purchase decisions might be delayed by the post COVID economy, We believe compelling fundamentals point directly to solutions from Westport Fuel Systems.
And with Renewable Natural Gas, Otherwise known as biomethane, the story only becomes more compelling. Post COVID, the challenges of climate change and urban air quality The need to efficiently move goods hasn't disappeared. The world needs affordable, clean transportation more than ever. There have been a number of important developments since our year end results call, and I'll walk through those in a moment. But first, I want to share the headline Q1 financial results.
Prior to the onset of the shutdowns and economic fallout of COVID-nineteen, our Q1 results reflect the impact of COVID-nineteen related customer shutdowns, began in China in January and spread to Europe and North America in mid March. Roughly 75% of our global operations are located in Italy, where shutdowns were implemented in the second half of March and then through all of April. In Q1, we mitigated Chinese supply chain disruptions that stem from their COVID shutdown We're able to increase inventories and ship to meet customer demand in advance of our own shutdown. Our headline financial results are as follows. Consolidated revenues The quarter decreased 8% or $6,000,000 to $67,200,000 compared to the same period last year.
Adjusted EBITDA of minus $3,600,000 was lower compared to $7,300,000 last year, primarily due to a $10,000,000 charge for a service campaign to replace pressure release valves in the field. I must note that there have been no failures in the field to date. We've been proactively working with our customers to eliminate the remote risk associated with the batch of our components by replacing those components in the field. We expect to recover a significant portion of this charge from our insurer during the second half of the year, but accounting rules do not allow us to book the insurer's recovery at this time. Our efforts to shore up the balance sheet and improve liquidity include the recently announced long term €5,000,000 loan secured through UniCredit, And we are in the process of securing a $10,000,000 bridge facility with export development in Canada.
We have been successful in various government support programs in Canada, Italy and the Netherlands and expect approximately $4,000,000 in wage subsidies in Q2 2020. We very much appreciate that support at this time. So now, we're back at work and order flow is returning. We continue to focus on cost reduction, disciplined cash management and supporting our global team and their communities as we navigate this recovery period. At the same time, we've been able to secure new business opportunities, such as the recently announced deal with GasTech in Egypt.
It's encouraging to see green shoots of optimism in the face of so much uncertainty. As our customers, partners and suppliers return to production, there have been many questions about the impact of the downturn in our industry. Let's start with China. Despite COVID-nineteen related delays, our Weichai Westport joint venture has completed all the emissions testing with the Chinese Ministry of Ecology and Environment And with the Chinese Ministry, we greatly respect the efforts of the Chinese government officials to confirm the tests that were completed to their satisfaction, We're optimistic that the current administrative proceedings will conclude with the final paperwork or certification in the near future. While the certification delay affects the timing of the commercial launch and the production and sales ramp that follows, we do not expect it will change the shape of the adoption curve.
The long term potential of HPEI in China, the largest natural gas commercial vehicle market in the world, remains compelling. We have a great partner and a great product and a large market to serve, and we look forward to doing that just when the Chinese government provides the final green light. Now let's turn to Europe. The European Union's green deal includes measures to increase the supply of low emissions fuels. Biomethane, otherwise known as Renewable Natural Gas or RNG, accounts for 17% of all natural gas fuel Consumed by road transportation in Europe.
And in some countries, biomethane already dominates. For example, in the U. K, renewable natural gas, Biomethane is nearly 70% of the mix, while in Sweden, 94% of CNG fuel is sold as renewable. In Denmark, all CNG stations dispense renewable natural gas exclusively. Production capacity is proven and the infrastructure is in place And rapidly expanding.
Royal Dutch Shell has just committed to opening 10 more sites this year in Germany, 2 more in Belgium, 1 in Poland, beginning to invest also in Austria. Their liquefaction plans for Bioenergy are progressing quickly, expected to come online this year and a large German liquefaction facility coming online in for CNG and LNG Heavy Duty Trucks Through 2023. While still subject to parliamentary approval, this is an important signal to the marketplace That natural gas trucking is a critical component of Germany's decarbonization plan. Additional subsidies on the purchase of natural gas vehicles Announced in July 2019, that is €12,000 for LNG vehicles, €8,000 for CNG vehicles and a fuel energy tax On natural gas that is 70% less than diesel adds up to significant savings. These subsidies amount to approximately €70,000 of savings in the 1st 5 years of vehicle operation.
We also see signs that warrant optimism for our light duty and aftermarket products. According to the European Automobile Manufacturers Association's latest report, the demand for cars fueled with CNG in Europe increased by 68% in the Q1 of 2020. Italy remains Europe's largest market for light duty vehicles, followed by Spain, Belgium, France, Sweden and Germany. Like most of you, I've been following closely the commentary about the global economic recovery. As the economy restarts, gaseous fuels, including LPG, natural gas, Hydrogen and Renewable Gases have figured prominently in the Green Deal initiatives of the EU's recovery plan.
Commercial demand is strong, though we may not see We believe a focus on renewable and decarbonized gases as well as clean and sustainable mobility offers an opportunity to boost the economic As we look out to the remainder of the year, the Steady recovery of our OEM and aftermarket businesses, the growth of HPDI in Europe and the upcoming production launch of HPDI in China are keys to our success. I'm confident that we can weather the current headwinds, and our team is committed to delivering on our strategic priorities. To recap, we remain focused on the successful commercial launch of HPDI in China, further cost reductions, new light duty and heavy duty OEM businesses in key market geographies and the price profitable growth of our light duty business through both our aftermarket and OEM channels. Despite the near term uncertainty, a Strong regulatory ecosystem is still there and so is a strong desire for a green recovery. Now, I'll turn it over to Richard to review our financials.
Richard?
Thank you, David. As David described in the financial highlights at the beginning of the call, during the Q1, our revenues were 67,200,000 which was a year over year decrease of $6,000,000 or 8% compared to the Q1 2019. The decrease was driven mainly by lower sales in March In our light duty and heavy duty business caused by the shutdowns from COVID-nineteen, we had softer sales in our light duty OEM to our Russian and German customers and we had some contracted price concessions to our HPDI launch partner that started in late Q4 2019. Gross margin of $4,300,000 decreased by $12,900,000 year over year, Primarily due to the $10,000,000 charge we took on the field service campaign. On a tax affected basis, The charge was approximately $7,500,000 As David described, we expect to recover 70% of the replacement However, we have not recorded the recovery at this time due to the early stage of the insurance claim review.
We expect to recognize the insurance recovery once we have official confirmation from the insurance company. Excluding the charge, Margins were also impacted by lower revenues from our OEM businesses by $3,600,000 partially offset by some improvement in our independent aftermarket Year over year due to lower CWI earnings driven by the 17% decrease in engine sales and lower parts sales. The decrease in engine sales in the Q1 of 2020 largely reflects the timing of transit orders and build schedules combined with lower refuse market sales. Net loss of negative $15,300,000 down $12,300,000 year over year resulted mainly from The $7,500,000 charge for the field service campaign, lower OEM margin and an unrealized foreign exchange loss of Approximately $7,000,000 from the translation of our U. S.
Dollar denominated debt in our Canadian legal entities. The unrealized foreign exchange loss was driven by a 9% devaluation in the Canadian dollar. As most of our revenues are generated in euros, This is somewhat less of a concern in paying down our debt and actually realizing a true cash foreign exchange loss and more of an accounting loss. Turning to EBITDA. Year over year EBITDA was negative $11,000,000 which was $15,300,000 Less than positive $4,200,000 in the Q1 of 2019.
After adjusting for non cash and non recurring items, That is share based compensation and the unrealized foreign exchange loss, year over year adjusted EBITDA decreased by $10,900,000 from positive $7,300,000 to negative $3,600,000 Turning to our liquidity and financing. We had a net cash outflow of $6,900,000 during the Q1 and we ended up with $39,000,000 in cash on hand. The cash outflow was driven mainly by a buildup of working capital. The CWI dividend was consistent year over year. However, we expect decreases for the remainder of the year.
Our cash flow from financing activities were lower year over year due to a deferral One principal payment on the Export Development Canada term loan and we drew on our credit facility. COVID-nineteen has dealt us new challenges, which we have been dealing with since early March and that we expect to persist through the end of the year. The majority of our businesses have now reopened and we are seeing demand beginning to pick up, albeit modestly. We have taken several steps to improve our liquidity and these actions to date have created approximately $20,000,000 in short term liquidity to weather the economic impact of COVID-nineteen. We are taking a structured and measured approach to secure liquidity for the short term, but thinking about refinancing for long term to fund our growth of HPDI and our other growth opportunities.
The actions taken to date, Many
of which we have communicated in press releases or at our AGM include a deferral of $6,000,000 in principal payments agreed Previously announced €5,000,000 loan to one of our Italian subsidiaries by UniCredit under the Italian We'll reduce expenses by $2,000,000 during 2020. Across the board spending cuts and capital expenditure reductions, which are anticipated Sweden and the United States are expected to provide $4,000,000 in the 2nd quarter. In addition to the actions completed, we also expect New debt financing enabled by government programs in Canada and Italy, including a $10,000,000 bridge facility from Export Development Canada. We are also pursuing additional loans in Italy under the Decreto Liquidita. As discussed at our AGM, we indicated that we were working We are comfortable that this range is achievable.
We are also in discussion with current lenders to potentially extend maturity dates on other loan obligations To improve our cost of capital and align to the long term growth needs of the company, we are confident that Our action plans will provide us with the necessary liquidity to meet our obligations as they come due and provide the capital to continue to grow our business. Westport Fuel Systems is market ready, tested and gaseous fuel vehicles have achieved scale in many market segments With the potential of renewable gas to offer net zero carbon solutions, we are ready to be part of the economic recovery. 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. Our first question comes from Eric Stine with Craig Hallum Capital Group. Please go ahead.
Hi, David. Hi, Richard.
Good morning, Mark.
Good morning. Hey, great to hear your Confidence in the balance sheet given the steps taken to date and some things you're targeting near term. I was wondering, you're 2 months into the quarter, about a month beyond where you've started to ramp back up in Italy. I mean, I know that a lot of uncertainty and Still, the environment is, I mean, just a lot of questions, Mark. But anything, any details you can share about What you're seeing early days in Italy, markets where you may be seeing some relative strengths, that would be very helpful.
Yes, Eric, glad to answer, glad to follow-up. It has been and continues to be a difficult time as everyone knows, not just us. But we do see green shoots, as we mentioned just a moment ago, that there are people coming back to life, consumers and And so as you know, going into the COVID crisis, we created a number of scenarios, surely like many companies did And stress tested our liquidity plans against those scenarios. And as we look at that, not kind of looking backwards a little bit on what's actually unfolding, We see that we bounded the equation enough. So, our worst case is that we use is worse than it actually is right now, which Maybe sounds not so optimistic, but frankly, we're pleased to see the market coming back.
And we think that the actions being taken by governments I've been very helpful, but we're not through this yet. And so that's where we come out saying, so far so good. We're pleased that Our factories are open. We're pleased that our customers are reopening. We're pleased to get the orders from our OEM customers and see that order bank building back up.
But there's a lot of time still ahead of us and it looks like a long road.
Right, right. Okay. I can appreciate that. Maybe then just on China and Weichai, I mean your commentary here in the Paul, it's certainly different and more optimistic than in the release itself, saying targeting something in 2020. I'm curious, I mean, what types of actions have you taken in the market?
And I know that it doesn't change What you think that the growth curve looks like, but I mean how does this set up that if we were to see The certification was granted. I mean, do you think this is a quarter or 2? Or how do you think about when You may start to see activity and then that activity followed by a ramp in volumes.
Yes. I totally get where you're coming from in the question and we're making our efforts to understand as best we can what looks ahead us in the Chinese market, we're confident in getting that certification. We've done all the things we need to do. The product is ready to launch. We need the certification, of course, we need that paperwork and we expect that will come.
I don't know at what pace, so we're hopeful it's any day now, but we're going to wait and see mode. In terms of the market dynamics though, I'm really encouraged about the opportunity that we have a great power partner with Ricci Power. We're the strongest player in the market with natural gas engines already today with spark ignited product, adding HPDI to the mix. It's a far superior product to the Spark augmented product and we think the market is really ready for it. Having said that, We also recognize, like we went through in Europe with our lead customer there, there is a learning cycle for every fleet operator, every truck driver To try it out and get used to the new technology and get comfortable with it, we do think that the evidence, if you will, of the market uptake in Europe We'll propel the Chinese market even more.
We also think that Weichai Power is a supplier of engines in our joint venture. Weichai Westport is a supplier of engines I can serve multiple OEMs and will serve multiple OEMs, and so we have that additional benefit. Nonetheless, my expectations for this year are modest, And my expectations for 2021 are quite significant. I'm looking forward to the launch curve that unfolds in front of us.
Got it. Maybe last one for me. Just if you could provide some details on the faulty, The pressure device, and I guess where I'm coming from is that, that likely Some bearing on the insurance repayment. I mean, you clearly feel confident about that, but also in the timing of getting that reimbursement, I think you're targeting 4Q?
Yes, absolutely. So this is you never like to have these situations, but in our business, you have to react. I'm very pleased with the way our team has reacted. We identified the root cause. We fixed the root cause.
We got new parts into production, We're working with all our customers around the world to replace those suspect parts that are in the field as quickly as we can. In terms of the insurance recoveries, it seems pretty clear to us that we're in a good place and we'll have a good result. But necessarily, we have to work with our insurer to secure those recoveries and to provide all the evidence and work through that process and that just takes time. So, I've had in my career, unfortunately, a chance to work on a number of actions like this with different OEMs, and it always takes longer than you'd like With respect to getting the job done and getting the insurance recoveries, but at the same time, this is just, Let's say, normal part of business unfortunately that we have to go through from time to time. So we see our way clear To the insurance recoveries and to providing good product for our customers.
And that view that it always takes longer than you'd like, you're Factoring that in when you talk about 4Q as the target?
Absolutely. So we have The discussion opened up with our insurer, but we haven't been able to conclude it at this point in time. It's pretty early in the process. We've just started the process in the field. So There's plenty of work to be done, but I don't think this is a multiyear process by any way, shape or form.
So I think within this year it's very reasonable.
Okay. Thank
you. Thank you, Eric. Good to hear you.
Our next question comes from Rob Brown with Lake Street Partners. Please go ahead.
Hi, good morning.
Good morning. I
Just wanted to clarify the kind of the automotive side, the OEM versus the aftermarket recovery expectations. Have you seen order flow start Return from the OEM side and I guess which one do you sort of see ramping more quickly and sort of your view on the how those two markets recover?
Yes, I think it's pretty clear from what we've seen already and just thinking about the marketplace But the trucking industry in general around the world has a demand that doesn't fluctuate nearly as much as what consumers do. So, on the trucking side, we need to move freight. And one of the things I was contemplating recently is that typically in an economic Downturn like we're surely having now and we'll have for some time, truck fleets do push off orders And don't buy as many trucks as they were originally planning to conserve some of their capital in kind of tough times. But what my expectation is that when they push up those orders, they're pushing orders off Diesel trucks and they're keeping or maybe increasing their order of LNG trucks. With Germany putting in place or they're extending The tax exemption for natural gas trucks in Germany, there are big economic incentives and we already know that our trucks provide A lower total cost of operations, even absent those road toll incentives and purchase incentives just based on the fuel price.
So from my perspective, while the market for trucking may decline overall, have some softness that will last some short period of time, hopefully, The demand for our products, I think, could actually and we expect to grow and we're seeing signs of that. On the passenger vehicle side, this really gets to family budgets. Basically, people taking their cars to a local workshop and having it changed from a gasoline only to a biofuel with natural gas or propane. This is an individual decision of a consumer. And so the consumers need to see that the economy is coming back.
They can go out to dinner again. Their job It retains these real individual aspects of budgets and so forth. At the same time, I think a countervailing force there That basically our products are purchased in markets around the world because of the money that the paid save on fuel. And so we think there is a balance there that will be Achieved and we will have a good business going forward, but it's really hard to judge it right now until we truly get into the, I'll say, The normal range of recovery that is just starting to unfold right now in markets around the world.
Okay, good. Thanks for that clarity. And then on the CWI side, it was down in the quarter, but what's your visibility there of how those Demand trends stabilized here into the most recent months. Have you seen that come back? Or is that still quite uncertain?
We see a little bit of softness, but I think much like the comments I made regarding commercial vehicles in Europe, the same thing plays out in North America. As an example, UPS placed this large order last year talking about their view of natural gas trucking. And I from what I understand in the marketplace, people aren't backing away from that. They recognize they've done years of work to decide what kind of technologies They want to apply in the marketplace. The waste managements in the world and other key customers of ours continue to be keen to have our product Their portfolio and operation for their fleet.
I do think there is some softness, if you will, in transit buses, as I've mentioned previously, has nothing to do with COVID, Where basically electric buses have made some inroads and so that puts pressure on our transit side of the business. Nonetheless, I think as people try out those Technologies, natural gas and transit will continue to be an important part of the mix. And so we see some softness just based on general economy And some delays and so forth, but not so significant in the grand scheme of things we believe.
Our next question comes from Colin Rusch with Oppenheimer and Company. Please go ahead.
Thanks so much guys.
Can we talk a little bit more about the Can you talk about any sort of covenants you're anticipating, collateral, including restricted crash that will be associated with that money?
Hi, Collyn. It's Richard. Regarding security and collateral, it's going to be the same one that is putting in place on the existing term loan. So Nothing really changed on that. It was a very friendly it's a very friendly It's going to be prime plus 3%.
So it comes at a time that's very helpful to us and The EDC has been a big supporter of CleanTech and has been in our corner right from the beginning, As can be seen by the deferral, sort of the extension effectively of the term loan.
Okay.
We hope to get it announced Shortly, we're just going through the paperwork because of all the security. Just the way the nature of some of our loans that we've done in the past, there's It's a little bit tricky of where we're attaching security in different jurisdictions, but that's the only thing that's really holding it up right now.
Okay. And so can you use that capital across the organization or is it really going to be restricted to the Italian business?
It's mainly dedicated towards investing in HPDI and working capital in the parent. So That's
where the money is going
to be spent. With regards to the rest of the business, we're using debt financing through mainly through Italian banks right now, which have been even more lucrative there, sub-two percent cost of borrowing.
Okay, go ahead. And then can you talk a little bit about the dynamics on inventory levels and sell through for both aftermarket kits and the DOEM business? And I think One of the concerns is really around having to work through existing components and kits that are out there. Do you have a sense of How many months of inventory are in the channel at this point and kind of the order pattern that you're seeing right now for incremental business?
Absolutely. Let me talk first about the OEM. I think this is a very interesting kind of dynamic to Dan, so our D OEM business, delayed OEM business, as you know, is basically retrofitting 0 kilometer brand new cars that come from OEMs As they come from the factory before they go to the dealer and they're really great business for us. And what we see right now is that basically The vehicles that were on ships and in transit from our customers in Asia Are still coming. So the pause, if you will, and the drop in the market for us in operations for delayed OEM It's still in our future.
So we're running quite strongly. There was a backlog because we shut down for a little bit more than a month in Carrasco. And as soon as we opened, there was all sorts of vehicles ready for us to retrofit. So that's going plus to minus close to full tilt for us in the delayed OEM side. On the kit side, where we're shipping kits out to customers around the world, basically, I would say inventory levels weren't particularly Out of line, and so but we had this pause of our operations producing kits and we had pause of the workshops and distributors around the world.
And I would say these were largely coordinated. So we don't see any specific buildup of inventory or drought of inventory. And so this is what we've been watching very closely because, of course, we're not going to sell more until they're sold to us at the dealers and distributors around the world, So that order flow is starting to come back and giving us some encouragement that the market's reopening and customers getting back to, let's say, normal behavior
Perfect. And then on the supply chain side, you guys have been pretty proactive in terms of getting components in. Are you seeing
This is another area where I think both through our efforts, as you mentioned, kind of when China shut down first, we had supplies from China that we had To find alternatives and accelerate shipments and things like that, we did that, that worked well kind of leading into our own shutdown. And then a lot of our supply base for our especially Italian operations, but also our Dutch operations are local And they're in the area, and so they had the same kind of experience, if you will, with respect to shutdown. And so overall, we have not had significant supply chain disruptions. There's always something to work on for our supply chain team, but nothing that we haven't been able to mitigate that causes any significant, That's a material consequence in our ability to deliver for our customers.
Okay. Thanks, guys.
Thanks, Cowen.
Our next question comes from Sameer Joshi with H. C. Wainwright. Please go ahead.
Yes. Good morning. Thanks for taking my questions. Just a clarification on China. You mentioned that the testing was done, but the certification was impending.
Was it were the tests According to the results that they expected, then is the certification delayed because of any technical issues?
There are no remaining technical issues, Sameer. So, yes, we passed all the tests. They confirmed we passed all the tests. It really is, as we understand from our side, within the bureaucracy of the Chinese ministries to Process the paperwork and get the certifications out. And I can't begin to explain what that process looks like and how long it will take.
Seems to all of us on the outside should be quick, but here we stand waiting for their certification. I do expect it to come. I do expect it's just bureaucracy, That's it's really hard to put a beat on. Okay, so how long? Is it a week?
Is it a month? What is it?
Right. Understood. Okay, thanks for that. As far as the field service campaign goes, are there is this just the cost of replacing The units or is there any associated liabilities that you expect or may already have incurred?
Yes, it's just the cost of the replacements basically. So it's a fair bit of labor to make the replacement component in the field. To go to the vehicle and make the replacement. So that's the primary cost that we see. And frankly and Unfortunately, we have no field instance.
There's no liabilities in that regard and I'm not going to keep that track.
Okay, good to know. And then one just last clarification on the SG and A costs, which were lower by 5,800,000 of which $1,800,000 related to the one time cost. But then how are the $4,000,000 Of the remainder distributed between the lower compensation costs and the favorable legal claim settlement. I'm just trying to understand, well, how much of This is going to be ongoing and what is one time.
Could you repeat your question again?
Yes. The SG and A costs were lower by $5,800,000 and around $4,000,000 of those can be attributed to lower compensation costs and So what was the legal claim amount?
The Lille claim was roughly about $400,000 and we had accrued more for that Historically, because we had managed to settle for a smaller amount. So that one goes away. And then what was the second one?
Yes. So I was trying to understand how much of this lower compensation costs will continue into Q2 and maybe Q3?
The lower compensation costs will definitely probably continue till about August. So, in terms of the wage subsidies that we get in Italy And Canada, those have been extended to the end of August 31, so almost So it really depends on the length of the pandemic. But right now, it's almost all of the Q3.
Our next question comes from Jeffrey Osborne with Cowen and Company. Please go ahead.
Hey, good morning. Most of the questions were asked, but I'm trying to get better understanding of your dialogue With Weichai, so clearly you're waiting for a certification. You seem frustrated that it's not in. Is Weichai actively marketing the vehicle Are the truck, engine, etcetera expecting an imminent receivable of the certification or Are all wheels not in motion until that is received?
Yes. So I would say hi, Jeff. Good morning. I would say very clearly that Weichai, our joint venture and our joint venture partner Weichai Power are working with our customers, the vehicle OEMs To prepare the field, if you will, because obviously when you prepare the HPDI engine that includes a number of components on the engine, include vehicle tests that we've been doing with our customers. So I would say that ground is pretty well established And ready, it's just a question of no and co order until you have a certification.
And so we need that certification, so we And take the orders from our customers and place and then the joint venture to place those orders with the thoughts for the component.
Got it. And then a couple of people asked about different end markets for you and order strength or lack thereof. Is there a way instead of playing the game of asking Each one separately, is there a way you could say of all the end markets you sell to, which one has recovered the quickest or has the best visibility for you and which one is the worst?
What I would tell you is that, let me start with the kind of struggling part. The struggling part is in India. I'm really bullish about that market in general, but they've had a very long shutdown and I think it's really challenging To reopen that business and to get back on our feet there. But on the other end of the spectrum, on the strength of our business, I'm really encouraged by what's happening in Europe with respect to support by the government and also order flow from our customers With respect to specifically HPDI. So, in the end, we won't get the growth that we were hoping for in this year just because of COVID, But I see significant strength and I'm continuously compelled by the business opportunity.
And frankly, the need, I think You might have caught it in my opening remarks that my view is as in tough times, OEMs Like the ones I've worked for before and like the ones that our customers today have to dial back on their CapEx investments just like we are. And when they do that, they're going to look for more pragmatic and practical solutions. And I think that's us. So I think it bodes well for us and we're seeing that already as Please place their orders with our lead customer in Europe and as those letters come on to us.
Got it. Thank you. That's all I had.
Thanks, Jeff.
This concludes the question and answer session. I would like to turn the conference back over to Sean Wersen for any closing remarks.
Yes, I think I'll take that. And speaking of Steve Johnson, so I want to thank everyone for joining the call and really appreciate your time and questions. As we look at our business, we recognize clearly this is a tough time and We've been very focused on making sure we could protect our employees and our team members. Their health and safety has been paramount. We think overall that has worked well and we're happy to be back at work and we're looking forward to the economic recovery as it unfolds And we're poised with the liquidity we have to get through this period and continue to deliver for our customers and help get the world to a lower carbon transportation That's truly economic affordable and available now.
So thanks everyone for your time. Have a good day.