Prepared remarks
Good day, and thank you for standing by. Welcome to Westport's Second Quarter 2026 Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To press *11 on your telephone, you will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today, Ashley Nuell. Please go ahead.
Thank you. Good morning, everyone. Welcome to Westport Fuel Systems' conference call regarding its second quarter 2026 financial and operational results. This call is being held to coincide with the press release containing Westport's financial results issued yesterday after the markets closed. On today's call, speaking on behalf of Westport will be Chief Executive Officer and Director, Daniel Sceli, and Chief Financial Officer, Elizabeth Owens. Attendance on this call is open to the public, but questions will be restricted to the investment community. You are reminded that certain statements made on this conference call and our responses to certain questions may constitute forward-looking statements within the meaning of U.S. and applicable Canadian securities laws. Forward-looking statements are based on current expectations and involve risks and uncertainties that could actually result in actual results differing materially. Please refer to Westport's filings for a more complete discussion of these risks. Before I turn the call over to Daniel, I wanted to highlight that since our first quarter release in May, Westport has continued to advance several important corporate and commercial priorities, including Cespira's hydrogen development agreement with Volvo and the completion of the $10 million offering and concurrent private placement. With that, I will turn the call over to you, Daniel.
Thank you, Ashley, and good morning, everyone. Q2 was an important quarter for Westport. We continue to execute against our strategy of focusing the business around high-impact, scalable, clean transportation solutions where our technology can deliver meaningful economic and emissions benefits without compromising performance. The quarter was also marked by important developments that strengthen our platform for future growth. First, Cespira, our joint venture with Volvo Group, signed an agreement with Volvo Group to complete development of a hydrogen-fueled engine. This is an important milestone because it reinforces the relevance of HPDI technology across multiple low-carbon fuels, including hydrogen, natural gas, and renewable natural gas. It also further validates the role of internal combustion engine technology as part of the practical pathway to decarbonizing heavy-duty transport. Second, we completed a $10 million offering in June. This financing provided additional working capital to support our ongoing operations and strategic priorities. As we continue to advance the business, we recognize the importance of managing capital carefully, and we remain focused on balancing investment and growth opportunities with continued financial discipline. Operationally, the quarter continued to reinforce the strategic value of our core platforms. At Cespira, we remain encouraged by the commercial momentum we are seeing in LNG-powered heavy-duty trucks and by the broader market context supporting adoption. The Q1 results showed strong year-over-year revenue growth and in Q2 we continued building on that foundation through development work, customer engagement, and the hydrogen engine development agreement with Volvo. We have consistently indicated that 2027 would be the breakeven year for Cespira, and the results we are seeing continue to build credibility behind that expectation. Since inception, Cespira has delivered quarter-over-quarter revenue growth with growth delivered in Q2 being particularly significant. That momentum, combined with continued operating leverage as volumes scale, reinforces our confidence that Cespira is progressing toward the financial profile we have been targeting for next year. The message is clear: Cespira is not a single-fuel opportunity. It is a platform that can support multiple lower-carbon pathways for heavy-duty transport while preserving the power, range, and reliability fleets require. The volume growth we are seeing is being supported by a more resilient commercial backdrop for LNG heavy-duty trucking. Despite ongoing geopolitical tensions, the price differential between LNG and diesel has continued to show consistency, reinforcing the economic case for fleets evaluating lower-carbon alternatives that can also support operating cost discipline. At the same time, recent regulatory developments in the European Union are increasing the strategic value of emissions-reducing technologies. OEMs are now able to generate additional CO2 credits in the years leading up to 2030, which may help with compliance from 2030 onward. That creates a stronger incentive for earlier deployment of lower-emission heavy-duty technologies such as HPDI, where reduced emissions can translate into avoided compliance costs and potential emission credit value. In North America, our HPDI high-pressure CNG fuel system remains an important area of focus. Following our ACT Expo showcase, we continue to build awareness around a solution designed to deliver diesel-like performance with lower fuel cost potential and reduced emissions. Over the last couple of months, we have had the opportunity to demonstrate our truck to several fleets at our Vancouver facility, giving them the opportunity to put a driver into the truck. The level of engagement we are seeing and the feedback we are receiving reinforce that fleets are looking for practical alternatives that can work within existing operating realities rather than requiring a wholesale change in how they run the business. Our high-pressure controls business also remains a key part of Westport's value proposition. With production underway at our expanded Cambridge, Ontario facility and at GFI's China Hydrogen Innovation Center and manufacturing facility in Jiangsu, China, we continue to believe this business is well positioned to serve growing demand across hydrogen, natural gas, and industrial applications. With that, I will ask Elizabeth to walk through the financial results in more detail. Elizabeth, over to you.
Thank you, Daniel. Our second quarter financial results have demonstrated meaningful progress. From a capital perspective, the June financing strengthened our near-term liquidity profile. Westport closed the sale of 1.6 million common shares and 3.3 million prefunded warrants in a registered direct offering, together with private placement warrants to purchase up to 4.8 million common shares. The combined effective purchase price was US$2.06 per common share or prefunded warrant and associated private placement warrant, generating gross proceeds of approximately $10 million before fees and expenses. The offering proceeds are intended for working capital and general corporate purposes. In addition, if the private placement warrants are exercised in full for cash, Westport would receive additional gross proceeds of approximately US$10 million, although the timing and likelihood of any exercise cannot be predicted. From an accounting perspective, the warrants contain settlement features that require us to account for these warrants as a liability rather than equity. These liabilities will be remeasured to fair value at each reporting date, with changes recorded through earnings until the warrants are exercised or expire. As of the end of June, our cash and cash equivalents position stood at $23.9 million compared to $24.5 million at March 31, 2026. The slight net decrease in cash was primarily driven by our operating losses, including certain one-time costs relating to the financing activities and to our cyber incident in Q1, and by the funding of the Cespira JV and debt repayment. This was offset by proceeds from the financing transaction. In the quarter, our capital contributions to Cespira decreased to $3.5 million in the current quarter compared to Q2 2025, reflecting the improvement in Cespira's financial performance. We anticipate this number will continue to decrease in the coming year as Cespira continues to drive volume growth. We also paid $1 million in debt repayments to EDC, and we will make our final debt repayment in Q3. Turning to our operating segments: Q2 2026 revenue for our high-pressure controls business was $2.7 million compared with $2.9 million for Q2 2025. The decrease in revenue was primarily driven by lower sales volume in the quarter. That said, at the end of the quarter, we did see a backlog of demand from customers that are waiting to be fulfilled as we continue to improve the production output from our two main manufacturing plants in Canada and China. Gross profit was $100 thousand or 5% of revenue, similar to what we saw in Q2 2025. We anticipate that as the manufacturing plants in Canada and China continue to localize their supply chain and improve manufacturing processes and output, gross profit and margin will improve. Since Cespira's beginning, we have driven quarter-over-quarter revenue growth with Q2 2026 being the strongest at 125% as compared to Q2 2025. The broader strategic direction remains consistent with what we outlined in Q1. Cespira is benefiting from demand for practical, lower-carbon heavy-duty solutions. The hydrogen development agreement signed during the quarter along with the work completed by the second OEM all add important technology pathways to the existing LNG and renewable natural gas opportunity. Product revenue was up 127% to $18.9 million compared to $8.3 million in Q2 2025. As Dan mentioned, Cespira's growth is influenced by the favorable price differential between diesel and natural gas and government regulatory support in markets like Europe. Aftermarket revenue was $5.5 million compared to $2.6 million, also driven by the increase in sales volumes. Service revenue was $2.6 million compared to $1.0 million in Q2 2025, primarily driven by milestones achieved. Service revenue allocated to project milestones is weighted differently across the phases of an engineering services project. One of Cespira's significant long-term engineering service revenue projects is expected to complete in Q4 2026 in advance of the anticipated launch of their Euro 7 product. Gross profit was $3.8 million compared to a gross loss of $1.9 million in Q2 2025. Cespira had a net loss of $2.4 million, a 65% improvement over the $6.7 million in Q2 2025 as it meaningfully increased product revenue and lowered its cost base while continuing to grow and scale the business. Year to date, we have seen our capital contributions to Cespira decrease, a trend that we see continuing, as Daniel mentioned, as they move towards an expected breakeven next year. With that, I will pass the call back to Daniel.
Thank you, Elizabeth. As we look ahead, Westport is focused on disciplined execution. The developments since our Q1 release reinforced the progress we are making across the business. Cespira continues to advance to perform true heavy-duty decarbonization. The hydrogen engine development agreement with Volvo is aligned with the rest of HPDI technology. Our high-pressure CNG solution is gaining visibility in North America, and the June financing provided additional flexibility to continue advancing our priorities. We are operating in a market where customers are not looking for theory. They are looking for solutions that can reduce emissions, lower operating costs, and maintain the performance they need today. That is where Westport is focused. We believe our technologies are well aligned with the realities of commercial transportation and industrial applications, and we are committed to translating that alignment into commercial traction, improved financial performance, and long-term shareholder value. Thank you for your time today, and we appreciate your continued interest in Westport. We will now open the call for questions.
Questions and answers
Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press *11 on your telephone. If your question has been answered and you wish to remove yourself from the queue, press *11 again. Our first question comes from Amit Dayal with H.C. Wainwright. Your line is open.
Thank you. Good morning, guys.
Hey, good morning.
Good to see Cespira coming through in a strong way for you guys. Can you give us a little more color on what some of the tactical drivers are? I know it is a practical solution and it is available, but in terms of any specific sales efforts or customer wins, is there anything that is supporting this trend?
Sure. I will break the market for the current LNG system into two chunks: the European Union, and then other countries around the world. The European market is moving forward with its emission credit system and new mandates. The trucking companies, OEMs, and fleets are all looking for ways to meet the new requirements that are coming up. Euro 7 is a big part of that with the new engine from Volvo and our HPDI 3.0. I think we are going to see more of this increased growth. The market is finding that the technology is proven and reliable, and the market is accepting the benefits. The economics are also becoming prevalent and giving us the growth that we expected. Outside of the European Union, Volvo is creating beachheads in South America and India. We are in 37 countries now, with over 12,000 trucks on the road. So adoption will continue to grow rapidly, not just in Europe but in other global markets. Of course, our plan to bring HPDI to North America is mission-critical. We are bringing a new storage system, a CNG system that will allow HPDI to run in North America. For us, it is very exciting to see this significant growth.
Understood. And just to follow up on the HPDI hydrogen efforts between Cespira and Volvo: there is no requirement for Westport to fund any of this, right? This is just between Cespira and Volvo and they will fund the effort and bring it to market?
It is a development contract that Volvo is funding for the development of the HPDI system for hydrogen. So it is a customer-funded development program.
Okay. Understood. That is all I have. I will get back in the queue.
Thanks, Amit.
One moment for our next question. Our next question comes from Eric Stine with Craig Hallum Capital Group. Your line is open.
Good morning, everyone.
Hey, good morning, Eric. How are you?
Doing well. You?
Doing alright.
So maybe I'll start with the high-pressure segment. You alluded to some unfulfilled demand as your two locations, Canada and China, ramp up. Is this just a typical ramp-up now that the equipment has been moved to both locations, or is there something else limiting near-term visibility or impacting production?
It is a bit of a combination. We had to shut down, pick up the equipment, move it from Europe to both Canada and China, install the equipment, get the facilities certified, and then bring them up and running. That is the primary issue — typical transferring of capital equipment. Then, launching it requires training people on the equipment and getting them to hit volume. So we are seeing a very typical changeover impact that has left us a bit behind on volume.
Once that is rectified in both locations, does that mean upside to these numbers? This quarter was the highest high-pressure revenue you have had in a while. Do you view Q2 as being meaningfully limited on the top line, or how should we think about it?
Q1 and Q2 were transition periods. As we go into Q3 and Q4 we will be ramping up volume and meeting customer demand. I do not think we have any more roadblocks or bottlenecks that would prevent us from hitting the volumes in the plan.
Got it. And on Cespira, you mentioned targeting breakeven in 2027. You have now had two consecutive quarters of positive gross margin in that joint venture. How should we think about that, and once you reach breakeven, how does that impact your capital contribution to the joint venture?
The moment they flip over to breakeven and do not need cash contributions, that is a huge step forward for both Westport and Volvo. Volumes are up 125% over the same period last year, which is fantastic, and we see continued strong growth in all 37 countries that are buying the system today. With Volvo launching the new Euro 7 engine, which is a much improved engine, combined with our new HPDI 3.0, we think market pull will be even stronger. We are excited to be crossing over that period. We thought it might take three or four years to get there, and with current volumes it might happen sooner than we thought. Going forward it is also important to get the HPDI system into North America and add volume from that market.
So just to be clear, contributions to the joint venture are not dictated by a fixed schedule; they are dictated by reaching breakeven. Once that is done, contributions end, broadly speaking?
Yes. It is really about cash need. There were no fixed numbers written into the agreement. It has been a year-by-year, quarter-by-quarter evaluation of the cash needs of the business. Recall that to start the business in 2024 as a certified Tier 1, we needed a fully built-out company with all disciplines and overhead in place from day one. As volumes go up, we do not need to add more of that overhead, so we will take advantage of the volume and we will not have the cash calls we've seen over the last two and a half years.
Okay. Thank you very much.
Alright. Take care, Eric.
I am not showing any further questions at this time. I would like to turn the call back to Daniel for any further remarks.
I would like to thank everybody for joining today. I hope you found our discussion helpful—
We just did have someone queue up. Did you want to go and take the question?
Absolutely. Sure.
One moment. Our next question comes from Christopher Dendrinos with RBC Capital Markets. Your line is open.
Hi. Yes. Thanks for fitting me in. I apologize, I missed earlier parts. Maybe just to start and follow up on a couple of prior questions: following the Cespira commentary, you mentioned additional work with that second potential OEM customer. Can you expand on that a little bit — where you are with them and possible timing related to additional milestones or advancements?
Yes. That second OEM did an original trial — I think it was a 200-truck trial. We are at the stage now where they are planning the second phase of their field trials, which would be much larger than the original field trial. We are imminently awaiting their planning for that; it will probably be another month at least before we hear details. What we have heard so far is that phase one, the initial field trials, went extremely well.
Thank you. Maybe to follow up on Eric's question regarding the high-pressure systems, trying to nail this down: if manufactures bottlenecks were not an issue, would you anticipate revenue growth in the back half of this year?
I think revenue growth is coming. We lost about six months picking up the equipment, moving it, installing it, and getting the facilities recertified to industrial and automotive standards. There is still a backlog we are filling. The hydrogen market itself has not grown as rapidly as we thought a year ago, which we all acknowledge, but in China, as the government pushes for rapid growth of hydrogen in mobility markets, we will see some volume increases. In North America and Europe, I think we will get back to plan and we expect to beat our plan this year on volume.
Got it. Thank you very much.
Alright.
That was our last question. Back to you, Daniel.
Thank you, everybody, for joining the call. I hope you leave as excited as we are about the growing business of Cespira. It is finally coming to where we all thought it would. Have a great day. Thank you.
Ladies and gentlemen, this does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day. Good day, and thank you for standing by. Welcome to Westport's Second Quarter 2026 Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. Press *11 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised, today's conference is being recorded. I would now like to turn the conference over to your speaker today, Ashley Nuell. Please go ahead.
Thank you. Good morning, everyone. Welcome to Westport Fuel Systems' conference call regarding its second quarter 2026 financial and operational results. This call is being held to coincide with the press release containing Westport's financial results issued yesterday after market close. On today's call, speaking on behalf of Westport will be Chief Executive Officer and Director, Daniel Sceli, and Chief Financial Officer, Elizabeth Owens. Attendance on this call is open to the public, but questions will be restricted to the investment community. You are reminded that certain statements made on this conference call and our responses to certain questions may constitute forward-looking statements within the meaning of U.S. and applicable Canadian securities laws. Forward-looking statements are based on current expectations and involve risks and uncertainties that could actually result in actual results differing materially. Please refer to Westport's filings for a more complete discussion of these risks. Before I turn the call over to Daniel, I wanted to highlight that since our first quarter release in May, Westport has continued to advance several important corporate and commercial priorities, including Cespira's hydrogen development agreement with Volvo and the completion of the $10 million offering and concurrent private placement. With that, I will turn the call over to you, Daniel.
Thank you, Ashley, and good morning, everyone. Q2 was an important quarter for Westport. We continue to execute against our strategy of focusing the business around high-impact, scalable, clean transportation solutions where our technology can deliver meaningful economic and emissions benefits without compromising performance. The quarter was also marked by important developments that strengthen our platform for future growth. First, Cespira, our joint venture with Volvo Group, signed an agreement with Volvo Group to complete development of a hydrogen-fueled engine. This is an important milestone because it reinforces the relevance of HPDI technology across multiple low-carbon fuels, including hydrogen, natural gas, and renewable natural gas. It also further validates the role of internal combustion engine technology as part of the practical pathway to decarbonizing heavy-duty transport. Second, we completed a $10 million offering in June. This financing provided additional working capital to support our ongoing operations and strategic priorities. As we continue to advance the business, we recognize the importance of managing capital carefully, and we remain focused on balancing investment and growth opportunities with continued financial discipline. Operationally, the quarter continued to reinforce the strategic value of our core platforms. At Cespira, we remain encouraged by the commercial momentum we are seeing in LNG-powered heavy-duty trucks and by the broader market context supporting adoption. The Q1 results showed strong year-over-year revenue growth and in Q2 we continued building on that foundation through development work, customer engagement, and the hydrogen engine development agreement with Volvo. We have consistently indicated that 2027 would be the breakeven year for Cespira, and the results we are seeing continue to build credibility behind that expectation. Since inception, Cespira has delivered quarter-over-quarter revenue growth with growth delivered in Q2 being particularly significant. That momentum, combined with continued operating leverage as volumes scale, reinforces our confidence that Cespira is progressing toward the financial profile we have been targeting for next year. The message is clear: Cespira is not a single-fuel opportunity. It is a platform that can support multiple lower-carbon pathways for heavy-duty transport while preserving the power, range, and reliability fleets require. The volume growth we are seeing is being supported by a more resilient commercial backdrop for LNG heavy-duty trucking. Despite ongoing geopolitical tensions, the price differential between LNG and diesel has continued to show consistency, reinforcing the economic case for fleets evaluating lower-carbon alternatives that can also support operating cost discipline. At the same time, recent regulatory developments in the European Union are increasing the strategic value of emissions-reducing technologies. OEMs are now able to generate additional CO2 credits in the years leading up to 2030, which may help with compliance from 2030 onward. That creates a stronger incentive for earlier deployment of lower-emission heavy-duty technologies such as HPDI, where reduced emissions can translate into avoided compliance costs and potential emission credit value. In North America, our HPDI high-pressure CNG fuel system remains an important area of focus. Following our ACT Expo showcase, we continue to build awareness around a solution designed to deliver diesel-like performance with lower fuel cost potential and reduced emissions. Over the last couple of months, we have had the opportunity to demonstrate our truck to several fleets at our Vancouver facility, giving them the opportunity to put a driver into the truck. The level of engagement we are seeing and the feedback we are receiving reinforce that fleets are looking for practical alternatives that can work within existing operating realities rather than requiring a wholesale change in how they run the business. Our high-pressure controls business also remains a key part of Westport's value proposition. With production underway at our expanded Cambridge, Ontario facility and at GFI's China Hydrogen Innovation Center and manufacturing facility in Jiangsu, China, we continue to believe this business is well positioned to serve growing demand across hydrogen, natural gas, and industrial applications. With that, I will ask Elizabeth to walk through the financial results in more detail. Elizabeth, over to you.
Thank you, Daniel. Our second quarter financial results have demonstrated meaningful progress. From a capital perspective, the June financing strengthened our near-term liquidity profile. Westport closed the sale of 1.6 million common shares and 3.3 million prefunded warrants in a registered direct offering, together with private placement warrants to purchase up to 4.8 million common shares. The combined effective purchase price was US$2.06 per common share or prefunded warrant and associated private placement warrant, generating gross proceeds of approximately $10 million before fees and expenses. The offering proceeds are intended for working capital and general corporate purposes. In addition, if the private placement warrants are exercised in full for cash, Westport would receive additional gross proceeds of approximately US$10 million, although the timing and likelihood of any exercise cannot be predicted. From an accounting perspective, the warrants contain settlement features that require us to account for these warrants as a liability rather than equity. These liabilities will be remeasured to fair value at each reporting date with changes recorded through earnings until the warrants are exercised or expire. As of the end of June, our cash and cash equivalents position stood at $23.9 million compared to $24.5 million at March 31, 2026. The slight net decrease in cash was primarily driven by our operating losses, including certain one-time costs relating to the financing activities and to our cyber incident in Q1, and by the funding of the Cespira JV and debt repayment. This was offset by proceeds from the financing transaction. In the quarter, our capital contributions to Cespira decreased to $3.5 million in the current quarter compared to Q2 2025, reflecting the improvement in Cespira's financial performance. We anticipate this number will continue to decrease in the coming year as Cespira continues to drive volume growth. We also paid $1 million in debt repayments to EDC, and we will make our final debt repayment in Q3. Turning to our operating segments, Q2 2026 revenue for our high-pressure controls business was $2.7 million compared with $2.9 million for Q2 2025. The decrease in revenue was primarily driven by lower sales volume in the quarter. That said, at the end of the quarter, we did see a backlog of demand from customers that are waiting to be fulfilled as we continue to improve the production output from our two main manufacturing plants in Canada and China. Gross profit was $100 thousand or 5% of revenue, similar to what we saw in Q2 2025. We anticipate that as the manufacturing plants in Canada and China continue to localize their supply chain and improve manufacturing processes and output, gross profit and margin will improve. Since Cespira's beginning, we have driven quarter-over-quarter revenue growth with Q2 2026 being the strongest at 125% as compared to Q2 2025. The broader strategic direction remains consistent with what we outlined in Q1. Cespira is benefiting from demand for practical, lower-carbon heavy-duty solutions. The hydrogen development agreement signed during the quarter along with the work completed by the second OEM all add important technology pathways to the existing LNG and renewable natural gas opportunity. Product revenue was up 127% to $18.9 million compared to $8.3 million in Q2 2025. As Dan mentioned, Cespira's growth is influenced by the favorable price differential between diesel and natural gas and government regulatory support in markets like Europe. Aftermarket revenue was $5.5 million compared to $2.6 million, also driven by the increase in sales volumes. Service revenue was $2.6 million compared to $1.0 million in Q2 2025, primarily driven by milestones achieved. Service revenue allocated to project milestones is weighted differently across the phases of an engineering services project. One of Cespira's significant long-term engineering service revenue projects is expected to complete in Q4 2026 in advance of the anticipated launch of their Euro 7 product. Gross profit was $3.8 million compared to a gross loss of $1.9 million in Q2 2025. Cespira had a net loss of $2.4 million, a 65% improvement over the $6.7 million in Q2 2025 as it meaningfully increased product revenue and lowered its cost base while continuing to grow and scale the business. Year to date, we have seen our capital contributions to Cespira decrease, a trend that we see continuing, as Daniel mentioned, as they move towards an expected breakeven next year. With that, I will pass the call back to Daniel.
Thank you, Elizabeth. As we look ahead, Westport is focused on disciplined execution. The developments since our Q1 release reinforced the progress we are making across the business. Cespira continues to advance to perform true heavy-duty decarbonization. The hydrogen engine development agreement with Volvo is aligned with the rest of HPDI technology. Our high-pressure CNG solution is gaining visibility in North America, and the June financing provided additional flexibility to continue advancing our priorities. We are operating in a market where customers are not looking for theory. They are looking for solutions that can reduce emissions, lower operating costs, and maintain the performance they need today. That is where Westport is focused. We believe our technologies are well aligned with the realities of commercial transportation and industrial applications, and we are committed to translating that alignment into commercial traction, improved financial performance, and long-term shareholder value. Thank you for your time today, and we appreciate your continued interest in Westport. We will now open the call for questions.
Ladies and gentlemen, if you have a question or a comment at this time, please press *11 on your telephone. If your question has been answered and you wish to remove yourself from the queue, press *11 again. Our first question comes from Amit Dayal with H.C. Wainwright. Your line is open.
Hey, Daniel. Good to see Cespira coming through in a strong way for you guys. Can you give us a little more color on some of the tactical drivers? I know it is a practical solution and it is available, but in terms of any specific sales efforts or customer wins, is there anything that is supporting this trend? And how should we think about future growth?
I will break the market for the current LNG system into two chunks: the European Union, and then the other countries around the world. The European market is moving forward with its emission credit system and new mandates. Trucking companies, OEMs, and fleets are all looking for ways to meet the new requirements coming up. Euro 7 is a big part of that with the new engine from Volvo and our HPDI 3.0. I think we are going to see more of this increased growth. The market finds that the technology is proven and reliable, and is accepting the benefits. Economic solutions are also becoming prevalent and giving us the growth we expected. Outside of the European Union, Volvo is moving and creating beachheads in South America and India. We are in 37 countries now, with over 12,000 trucks on the road. So adoption will continue to grow rapidly, not just in Europe but in other global countries. And our plan to bring HPDI to North America is mission-critical. We are bringing a new storage system, a CNG system that will allow HPDI to run in North America. For us, it is exciting to see this significant growth.
Understood. And just to follow up on the HPDI hydrogen efforts between Cespira and Volvo: there is no requirement for Westport to fund any of this, right? This is between Cespira and Volvo and they will determine how to fund and bring it to market?
It is a development contract that Volvo is funding for the development of the HPDI system for hydrogen. So it is a customer-funded development program.
Okay. Understood. That is all I have. I will get back in the queue. Thanks so much.
One moment for our next question. Our next question comes from Eric Stine with Craig Hallum Capital Group. Your line is open.
Good morning, everyone.
Hey, good morning, Eric. How are you?
Doing well. You?
Doing alright.
I'll start with the high-pressure segment. You mentioned some unfulfilled demand as your Canada and China locations ramp up. Is this typical ramp-up now that equipment has been moved, or is there something else limiting near-term visibility?
It is a bit of both. We had to shut down, move equipment from Europe to Canada and China, install it, get facilities certified, and bring them up to running. That typical transfer of capital equipment, then training and launching, has left us a bit behind on volume.
Once that is rectified in both locations, is there upside to these numbers? This quarter was the highest high-pressure revenue in some time. Was Q2 limited on the top line?
Q1 and Q2 were transition periods. In Q3 and Q4 we'll ramp up volume and meet customer demand. I do not see any more bottlenecks that would prevent us from hitting plan volumes.
Got it. On Cespira, you mentioned 2027 as breakeven. You've had two consecutive quarters of positive gross margin. Once you hit breakeven, what does that do for capital contributions from Westport?
Once they flip to breakeven and do not need cash contributions, that is a major improvement for both Westport and Volvo. Volumes are up significantly year over year, and with Volvo's new Euro 7 engine combined with our HPDI 3.0, we expect market pull to be stronger. We expected three or four years to get there, and volumes may bring us there sooner. The key will be adding North American volume when we bring HPDI there.
Okay. Thank you very much.
Alright. Take care, Eric.
I am not showing any further questions at this time. I would like to turn the call back to Daniel for any further remarks.
I would like to thank everybody for joining today. I hope you find our discussion helpful—
We did have someone queue up. Did you want to take the question?
Absolutely. Sure.
One moment. Our next question comes from Christopher Dendrinos with RBC Capital Markets. Your line is open.
Hi. Yes. Thanks for fitting me in. I apologize, I missed some earlier parts. Maybe to start and follow up on previous questions: with the second OEM customer you mentioned, can you expand on where you are with them and timing for additional milestones or advancements?
That second OEM did an original 200-truck trial. They are now planning the second phase of field trials which will be much larger. We are awaiting their planning, which should take about another month at least. Phase one went extremely well.
Thanks. On the high-pressure systems, if the manufacturing bottlenecks were not an issue, would you anticipate revenue growth in the back half of this year?
Yes, revenue growth is expected. We lost about six months moving and installing equipment and recertifying facilities. There is still backlog to fill. The hydrogen market overall has not grown as fast as we anticipated a year ago, but in China, the government push for hydrogen mobility will drive volume increases. In North America and Europe we expect to get back to plan and to beat our plan this year on volume.
Got it. Thank you very much.
That was our last question. Back to you, Daniel.
Thank you, everybody, for joining the call. I hope you leave as excited as we are about the growing business of Cespira. It is finally coming to where we all thought it would. Have a great day. Thank you.
Ladies and gentlemen, this does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.