HPJ Highpower International Inc

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

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

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

Management Commentary

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

2014 Third Quarter and Nine Month Financial Review

Net Sales

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

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

Gross Profit

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

Gross Margin

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

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

Research and Development (R&D)

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

Selling & Distribution

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

General & Administrative

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

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

Net Income

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

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

EBITDA

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

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

A table reconciling EBITDA, a non-GAAP (Generally Accepted Accounting Principles) financial measure, to the appropriate GAAP measure is included with the Company's financial information below.

Balance Sheet Highlights

Outlook for 2014

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

Conference Call Details

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

The dial-in numbers are:

To listen to the live webcast, please go to at www.highpowertech.com and click on the conference call link, or go to: http://highpowertech.equisolvewebcast.com/q3-2014. This webcast will be archived and accessible through the Company's website for approximately 30 days following the call. The Company will also have an accompanying slide presentation available in PDF format on its homepage prior to the conference call.

About Highpower International, Inc.

Highpower International was founded in 2001 and produces high-quality Nickel-Metal Hydride (Ni-MH) and lithium-based rechargeable batteries used in a wide range of applications such as electric buses, bikes, energy storage systems, power tools, medical equipment, digital and electronic devices, personal care products, and lighting, etc. Highpower's target customers are Fortune 500 companies, and top 10 companies in each vertical segment. With advanced manufacturing facilities located in Shenzhen, Huizhou, and Ganzhou of China, Highpower is committed to clean technology, not only in the products it makes, but also in the processes of production. The majority of Highpower International's products are distributed to worldwide markets mainly in the United States, Europe, China and Southeast Asia.

Use of Non-GAAP Measures

The Company has supplemented its reported GAAP (generally accepted accounting principles) financial information with non-GAAP measures. EBITDA was derived by taking earnings before interest expense (net), taxes, depreciation and amortization. Adjusted EBITDA and Non-GAAP net income exclude stock-based compensation expense. Adjusted EBITDA, as defined above, may not be similar to Adjusted EBITDA measures used by other companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP. The Company believes these non-GAAP measures are useful to investors as they provide a basis for evaluating the Company's operating results in the ordinary course of its operations.

These non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with its results of operations as determined in accordance with U.S. GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with, and not in lieu of, the corresponding GAAP measures. These non-GAAP financial measures are reconciled in the accompanying tables to the most directly comparable measures as reported in accordance with GAAP.

Forward Looking Statements

This press release contains "forward-looking statements" within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995 that are not historical facts. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology, and include discussions of strategy, and statements about industry trends and the Company's future performance, operations and products. Such statements involve known and unknown risks, uncertainties and other factors that could cause the Company's actual results to differ materially from the results expressed or implied by such statements, including, without limitation, fluctuations in the cost of raw materials; our dependence on, or inability to attract additional, major customers for a significant portion of our net sales; our ability to increase manufacturing capabilities to satisfy orders from new customers; our ability to maintain increased margins; our dependence on the growth in demand for portable electronic devices and energy storage systems and transportation products and the success of manufacturers of the end applications that use our battery products; our responsiveness to competitive market conditions; our ability to successfully manufacture our products in the time frame and amounts expected; the market acceptance of our battery products, including our lithium products; our ability to successfully develop products for and penetrate the electric transportation market; our ability to continue R&D development to keep up with technological changes. For a discussion of these and other risks and uncertainties see "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's public filings with the SEC. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The Company has no obligation to update the forward-looking information contained in this press release.

CONTACT:

Highpower International, Inc.
Henry Sun
CFO
+86-755-8968-6521
ir@highpowertech.com

INVESTOR RELATIONS:

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

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

SOURCE Highpower International, Inc.