Highpower International Reports Unaudited First Quarter 2019 Financial Results

SAN DIEGO and SHENZHEN,China,May 13,2019 -- Highpower International,Inc. (NASDAQ: HPJ) ("Highpower" or the "Company"),a developer,manufacturer,and marketer of lithium ion and nickel-metal hydride (Ni-MH) rechargeable batteries,battery management systems,and a provider of battery recycling,today announced its financial results for the first quarter ended March 31,2019.

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

Net sales for the first quarter of 2019 increased 16.7% to $58.1 million from $49.8 million.

Lithium business net sales increased 16.8% to $42.7 million from $36.6 million.

Gross margin increased to 21.8% of net sales compared to 15.2%.

Net incomeattributable to the Company was $0.3 million,or earnings of $0.02 per diluted share,compared to net loss attributable to the Company of $1.1 million,or loss of $0.07 per diluted share.

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

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

First Quarter 2019 Financial Results

NetSales

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

GrossProfit

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

Operating Expenses

Research and development (R&D) expenses were $3.0 million compared to $2.6 million in the prior year period. As a percentage of net sales,R&D expenses remained steady at 5.1% from the prior year period.

Selling and distribution expenseswere $2.8 million compared to $2.0 million in the prior year period. As a percentage of net sales,selling and distribution expenses increased to 4.8% from 4.0% in the prior year period. The increase was mainly driven by expanded business scale,including marketing expenses for more brand customers.

General and administrative expenseswere $4.8 million compared to $4.1 million in the prior year period. As a percentage of net sales,general and administrative expenses remained at 8.3% from the prior year period.

Net Income

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

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

EBITDA

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

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

Balance Sheet Highlights

($ in millions,except per share data)

March31,

December31,

2019

2018

(Unaudited)

$

$

Cash

24.2

24.9

Total Current Assets

194.9

215.0

Total Assets

284.1

288.1

Total Current Liabilities

201.1

210.8

Total Liabilities

204.6

210.8

TotalEquity

79.5

77.3

Total Liabilities and Equity

284.1

288.1

Book Value Per Share

5.10

4.97

Financial Outlook

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

Conference Call Details

The Company will hold a conference call on Monday,at 10:00 am Eastern Time,or 10:00 pm Beijing Time,to discuss the financial results. Participants may access the call by dialing the following numbers:

United States:

877-407-3108

International:

201-493-6797

To listen to the live webcast,please go to www.highpowertech.com and click on the conference call link,or go to https://78449.themediaframe.com/dataconf/productusers/hpj/mediaframe/30366/indexl.html. This webcast will be archived and accessible through the Company's website for approximately 30 days following the call.

About Highpower International,Inc.

Highpower International was founded in 2001 and produces high-quality Nickel-Metal Hydride (Ni-MH) and lithium-based rechargeable batteries used in a wide range of applications such as electric buses,bikes,energy storage systems,power tools,medical equipment,digital and electronic devices,personal care products,and lighting,etc. Highpower's target customers are Fortune 500 companies and top 20 companies in each vertical segment. With advanced manufacturing facilities located in Shenzhen,Huizhou,and Ganzhou of China,Highpower is committed to clean technology,not only in the products it makes,but also in the processes of production. The majority of Highpower International's products are distributed to worldwide markets mainly in the United States,Europe,China and Southeast Asia.

Use of Non-GAAP Measures

The Company has supplemented its reported GAAP (generally accepted accounting principles) financial information with non-GAAP measures. EBITDA was derived by taking earnings before interest expense (net),taxes,depreciation and amortization. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP.The Company believes this non-GAAP measure is useful to investors as it provides a basis for evaluating the Company's operating results in the ordinary course of its operations. This non-GAAP measure is not based on any comprehensive set of accounting rules or principles.The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with its results of operations as determined in accordance with U.S. GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with,and not in lieu of,the corresponding GAAP measures. EBITDA are reconciled in the tables below to the most directly comparable measure as reported in accordance with GAAP.

Forward Looking Statements

This press release contains "forward-looking statements" within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995that are not historical facts. Such forward-looking statements include outlook on net revenues and gross margins,business and financial expectations and anticipated growth during 2019. These statementscan be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements involve known and unknown risks,uncertainties and other factors that could cause the Company's actual results to differ materially from the results expressed or implied by such statements,including,without limitation; inability to successfully expand our production capacity and improve production efficiency; fluctuations in the cost of raw materials; our dependence on,or inability to attract additional,major customers for a significant portion of our net sales; our ability to increase manufacturing capabilities to satisfy orders from new customers; our ability to maintain increased margins; our dependence on the growth in demand for smart wearable devices and energy storage systems,and other digital productsand the success of manufacturers of the end applications that use our battery products;our responsiveness to competitive market conditions; our ability to successfully manufacture our products in the time frame and amounts expected; the market acceptance of our battery solutions,including our lithium ion batteries; impact of trade relations between China and the U.S. and other countries where we sell our products; unexpected fluctuations in exchange rates and our ability to successfully manage hedging; our ability to continue R&D development to keep up with technological changes,and adverse changes in legal,regulatory and economic factors generally. For a discussion of these and other risks and uncertaintiessee "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report for the year ended December 31,2018 on Form 10-K and other public filings with the SEC. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable,there can be no assurance that such expectations will prove to be correct. The Company has no obligation to update the forward-looking information contained in this press release.

CONTACT:

Highpower International,Inc.

Sunny Pan

Chief Financial Officer

Tel: +86-755-8968-6521

Email: ir@highpowertech.com

Yuanmei Ma

Investor Relations Manager

Tel: +1-909-214-2482

Email: yuanmei@highpowertech.com

ICR,Inc.

Rose Zu

Tel: +1-646-931-0303

Email: ir@highpowertech.com

HIGHPOWER INTERNATIONAL,INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

March 31,

December 31,

2019

2018

(Unaudited)

$

$

ASSETS

Current Assets:

Cash

24,167,300

24,916,484

Restricted cash

39,562,823

44,495,633

Accounts receivable,net

59,037,769

77,279,817

Amount due from a related party

61,131

477,663

Notes receivable

4,375,399

256,712

Advances to suppliers

926,624

2,292,843

Prepayments and other receivables

8,282,896

10,457,789

Inventories

58,456,282

54,790,461

Total Current Assets

194,870,224

214,967,402

Property,plant and equipment,net

68,148,472

56,523,177

Long-term prepayments

1,949,214

2,617,419

Land use right,net

2,476,691

2,445,751

Other assets

635,015

643,128

Deferred tax assets,net

983,879

865,370

Long-term investments

9,768,087

9,993,852

Right-of-use assets

5,272,558

-

TOTAL ASSETS

284,104,140

288,056,099

LIABILITIES AND EQUITY

LIABILITIES

Current Liabilities:

Accounts payable

68,943,619

66,486,690

Deferred government grants

473,111

464,206

Short-term loans

17,749,981

24,856,744

Non-financial institution borrowing

-

8,761,426

Notes payable

75,053,041

73,607,284

Foreign exchange derivative liabilities

2,240

521,509

Amount due to related parties

9,011,760

6,116,851

Other payables and accrued liabilities

23,733,687

25,860,703

Income taxes payable

4,246,421

4,124,719

Lease liabilities,current

1,866,177

-

Total Current Liabilities

201,080,037

210,800,132

Lease liabilities,non current

3,550,051

-

TOTAL LIABILITIES

204,630,088

210,132

HIGHPOWER INTERNATIONAL,

2019

2018

(Unaudited)

$

$

EQUITY

Stockholders' equity

Preferred stock

(Par value: $0.0001,Authorized: 10,000,000 shares,Issued and outstanding:

none)

-

-

Common stock

(Par value: $0.0001,Authorized: 100,15,567,953 shares issued

and outstanding at March 31,2019 and 15,559,658 at December 31,2018,

respectively)

1,557

1,556

Additional paid-in capital

14,067,883

13,863,282

Statutory and other reserves

8,012,052

8,052

Retained earnings

56,481,633

56,173,912

Accumulated other comprehensive income (loss)

910,927

(794,835)

TOTAL EQUITY

79,474,052

77,255,967

TOTAL LIABILITIES AND EQUITY

284,099

HIGHPOWER INTERNATIONAL,INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTSOF OPERATIONS AND COMPREHENSIVE INCOME

(Stated in US Dollars)

Three months ended

March 31,

2019

2018

(Unaudited)

(Unaudited)

$

$

Net sales

58,113,480

49,783,453

Cost of sales

(45,452,951)

(42,217,126)

Gross profit

12,660,529

7,566,327

Research and development expenses

(2,986,709)

(2,561,837)

Selling and distribution expenses

(2,792,862)

(1,975,096)

General and administrative expenses

(4,823,489)

(4,114,810)

Foreign currency transaction loss

(1,250,895)

(1,014,693)

Total operating expenses

(11,853,955)

(9,666,436)

Income (loss) from operations

806,574

(2,100,109)

Changes in fair value of foreign exchange derivatives

387,100

703,715

Government grants

221,435

329,820

Other income

66,698

23,561

Equity in (loss) earnings of investee

(418,204)

156,250

Interest expenses

(470,423)

(241,852)

Income (loss) before income taxes

593,180

(1,128,615)

Income taxes (expense) benefit

(285,459)

9,679

Net income (loss)

307,721

(1,118,936)

Comprehensive income

Net income (loss)

307,936)

Foreign currency translation gain

1,705,762

2,836,556

Comprehensive income

2,013,483

1,717,620

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

Company

- Basic

0.02

(0.07)

- Diluted

0.02

(0.07)

Weighted average number of common stock outstanding

- Basic

15,478

15,509,658

- Diluted

15,907

15,658

HIGHPOWER INTERNATIONAL,INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

Three Months Ended March 31,

2019

2018

(Unaudited)

(Unaudited)

$

$

Cash flows from operating activities

Net income (loss)

307,936)

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

activities:

Depreciation and amortization

1,729,440

1,475,228

Bad debt expense

89,427

18,524

Loss on disposal of property,plant and equipment

-

21,805

Deferred taxes

(102,366)

(356,616)

Changes in fair value of foreign exchange derivatives

(387,100)

(414,042)

Equity in loss (earnings) of investee

418,204

(156,250)

Share based compensation

204,602

241,421

Changes in operating assets and liabilities:

Accounts receivable

18,954,393

3,713,692

Notes receivable

(4,120,877)

2,622,925

Advances to suppliers

1,412,642

(236,789)

Prepayments and other receivables

2,379,960

(601,315)

Amount due from a related party

426,432

285,657

Amount due to related parties

113,794

-

Inventories

(2,626,489)

(10,779,233)

Accounts payable

(6,016,313)

(1,377,447)

Deferred government grants

-

475,783

Other payables and accrued liabilities

(2,287,547)

665,379

Income taxes payable

57,542

19,371

Net cash flows provided by (used in) operating activities

10,553,465

(5,500,843)

Cash flows from investing activities

Acquisitions of plant and equipment

(4,336,823)

(1,979)

Payment for long-term investment

(313,073)

(317,188)

Net cash flows used in investing activities

(4,649,896)

(1,871,167)

Cash flows from financing activities

Proceeds from short-term bank loans

5,963,296

14,427,164

Repayments of short-term bank loans

(13,560,014)

-

Proceeds from a related party

2,981,648

-

Repayments of non-financial institution borrowing

(8,944,944)

-

Proceeds from notes payable

30,205,286

28,429,600

Repayments of notes payable

(30,171,519)

(26,488,407)

Payment of derivative instruments

(143,089)

-

Net cash flows (used in) provided by financing activities

(13,669,336)

16,368,357

Effect of foreign currency translation on cash

2,083,773

2,046,039

Net (decrease) increase in cash and restricted cash

(5,681,994)

11,042,386

Cash and restricted cash- beginning of year

69,117

40,117

Cash and restricted cash- end of year

63,730,123

51,498,503

Supplemental disclosures for cash flow information:

Cash paid for:

Income taxes

330,283

327,565

Interest expenses

863,923

114,588

Non-cash investing and financing activities:

Purchase of property and equipment financed by accounts payables

7,203,680

-

Reconciliation of cash and restricted cash:

Cash

24,300

18,859,355

Restricted cash

39,823

32,639,148

Total cash and restricted cash shown in the condensed consolidated statements of

cash flows

63,503

Reconciliation of Net Income to EBITDA

Three months ended March 31,

2019

2018

(Unaudited)

(Unaudited)

$

$

Net income (loss) attributable to the Company

307,936)

Interest expenses

470,423

241,852

Income taxes expenses (benefit)

285,459

(9,679)

Depreciation and amortization

1,228

EBITDA

2,793,043

588,465

View original content:/news-releases/highpower-international-reports-unaudited-first-quarter-2019-financial-results-300848666.html