Ballard Power Systems, Inc.

Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems Q3 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. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Guy Macri, Director of Investor Relations. Please go ahead, sir.

Thanks very much, and good morning, everyone. Welcome to Ballard's third quarter 2020 Financial and Operating Results Conference Call. Today, we've got Randy McKeown, our President and CEO, along with Tony Gugman, our CFO, on the call. We're going to be making forward-looking statements that are based on management's current expectations, beliefs, and assumptions concerning future events. Actual results could be materially different, so please refer to our most recent annual information form and other public filings for our complete disclaimer and related information. So on today's call, Randy's going to review important developments on the policy and strategy fronts during quarter three. Tony is then going to review Q3 2020 financials, and then we'll move into a Q&A. And I'll pass the call now over to Randy.

Thanks, Guy, and welcome everyone to today's conference call. We recently held an Investor and Analyst Day event where we provided a transparent and comprehensive review of our industry and our business. So we'll keep our comments today relatively brief. For third quarter financial results, Valor delivered revenue of $25.6 million, gross margin of 19%, adjusted EBITDA of negative $7.7 million, and we finished the third quarter with $361.7 million in cash reserves. I noted on our last earnings call that we're seeing delays in certain programs, activities, and order intake as a result of COVID-19, and these delays impacted our Q3 results and order backlog. At the same time, however, we continue to see a significant increase in quoting activity. Indeed, by the end of Q2, our sales pipeline had grown by about 50% year-to-date, and by the end of Q3, it expanded further, up 64% year-to-date. A record sales pipeline and a positive indicator of growing market interest and engagement. There were important developments in target geographic markets since our last earnings call. Let's turn first to China, where a four-year policy framework was issued by the government in September. This underpins China's goal to deploy 1 million fuel cell electric vehicles and 1,000 hydrogen fueling stations by 2030. The new policy framework has made deployment of fuel cell electric trucks a priority in China, followed by buses. Under this framework, regional awards will be based on several key factors, including the existing industrial base in a particular region, the ability to provide competitive hydrogen energy supply in that region, prior demonstration of fuel cell electric vehicle fleets, and existence of local regional policy to support FCEV industries. At this point, 36 regions in China have announced incentive plans for FCEVs and for hydrogen fueling stations, representing a potential for more than 100,000 fuel cell electric vehicles by 2025. This aligns with volume targets contained in China's New Energy Vehicle Technology Roadmap 2.0, a document released just last week that specifies technology and vehicle performance requirements moving forward. So as a next step, cities and regions must submit their requests and plans to the national government in order to ensure eligibility for the new national level subsidy program in payment of demonstration region status. As a result, it will take some time before we get clarity as to which regions in China will qualify under this policy framework. So we'll need to be patient during this process. In the interim, we continue to make progress with the Wei Chai Ballard joint venture. including optimization of our plate, stack, and module production processes, including on product development work under our technology solutions program, including materials and component localization, including engagement with vehicle OEMs for platform certifications, and on-road field data. We continue to track performance metrics for fuel cell buses and commercial trucks already in the field in China with Ballard technology. In the past month, Ballard-powered buses and trucks in China have delivered over 98% fuel cell availability, representing impressive reliability metrics. Moving on to Europe, in late September, we announced our expected collaboration with Malé International to address the fuel cell electric truck market opportunity. We're pleased to announce that we subsequently signed The definitive collaboration agreement with Mahle on October 1st. This is a very exciting development with a leading Tier 1 supplier to the commercial vehicle and automotive industry. Mahle is a 100-year-old firm headquartered in Stuttgart, Germany, with 77,000 employees working at 160 production facilities and 16 research and development centers globally. About 50% of all vehicles operating on the world's roads have Mahle components. Its commercial vehicle division supplies a range of key components. Malé has extensive experience in the commercial truck value chain, including long-standing relationships with multiple commercial truck OEMs, supply chain muscle, high-volume production expertise, after-sales service infrastructure, and a highly respected global brand. Malé also has been supplying components for fuel cell systems for more than 10 years. including complex air intake systems, temperature control systems, and air filter systems. So we're delighted now to be working with Mahle to design and manufacture fuel cell systems for the $100 billion annual truck engine market with an initial focus in Europe. And while we're making great progress under this important collaboration, Ballard has prime responsibility for design of the fuel cell engine along with the design of the fuel cell stack subsystem. Molly's scope of work includes certain balance of plant components, thermal management and power electronics for the fuel cell engine together with engine assembly. With Ballard's market leading fuel cell stack technology, including unsurpassed durability in the field, free start capability and high power density, Together with Mahle's market position in the transportation industry and industrialization capabilities, we see this as a powerful union in addressing the zero-emission commercial truck engine opportunity. Now, we've also made an important announcement in Q3 relating to Ballard's high-power density stack technology. This is a particularly important technology feature in the context of commercial trucks. where limited engine base space for designs of certain vehicle platforms require high power density fuel cell engine solutions. Ballard has designed a compelling high power density fuel cell stack, the FCGen HPS product, in our development program with Audi. We previously held certain IP rights to the stack for certain market applications, including bus, off-road vehicles, rail, marine, and stationary power. As announced in September, we signed an MOU with Audi that expanded our rights to use the stack technology in all mode of applications, including commercial trucks and passenger cars. We're pleased to announce that last week we signed the definitive agreements with Audi affirming these additional rights. In addition to its high power density of 4.3 kilowatts per liter, the HPS stack offers other impressive performance metrics, including high power output, with rated power of 140 kilowatts and scalability to multiple power blocks, high operating temperature up to 95 degrees Celsius, which allows for more efficient and smaller cooling systems, and rugged cold weather capabilities with minus 28 degrees C, free start, and fast power ramp. And we're already seeing customer interest for this product. In another important development, in mid-October we sold our unmanned aerial vehicle or UAV business assets in Southboro, Massachusetts to Honeywell. This is an interesting transaction for us from a number of perspectives. We made the strategic determination that our UAV assets would be better utilized within the Honeywell organization and are pleased to conclude this divestiture. We see that Ballard's core technical capabilities and product portfolio are better aligned to provide larger fuel cell propulsion systems for aerospace, including urban air mobility applications, areas in which Honeywell is a market leader with steep expertise, strong technology, and extensive customer relations. We look forward to building a long-term relationship with Honeywell to address these opportunities as hydrogen fuel cells become recognized as a viable path forward in aerospace and underpinned by Honeywell's leading position in these markets. Finally, I want to acknowledge Tony Gugelman's plan to retire at Ballard CFO effective March 31, 2021, after 10 years in this role. Tony will continue in the CFO role through the completion and certification of our 2020 audited financial results and will support an orderly transition. Tony's leadership and contribution to our business strategy and financial management at Ballard will certainly be missed. We wish him all the best in his well-deserved retirement. We've retained a leading international executive search firm and expect to have a new CFO in place and an orderly transition completed By the end of Q1 2021. And with that, I'll turn the call over to Tony to briefly review the Q3 financials.