Ballard Power Systems, Inc.

Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems Q1 2021 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 zero. I would now like to turn the conference over to Guy Macri, Director of Investor Relations. Please go ahead.

Thanks very much and good morning, everyone. Welcome to Ballard's first quarter 2021 Financial and Operating Results conference call. With us today are Randy McEwen, Ballard's President and CEO, and Paul Dobson, our Chief Financial Officer. will 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. Please refer to our most recent annual information forum and other public forums for a complete disclaimer and related information. We are going to be changing the structure and format of our results conference calls beginning with the call today. Randy's formal commentary will be fairly brief, focusing on important developments and indicators of progress in the execution of the company's growth strategy during the quarter. Randy's comments will then be followed by a few very brief notes from Paul rather than a detailed review of the numbers, since those numbers are addressed in our press release and the MD&A. Our aim with this new approach is to leave more time for the growing list of analysts and investors to ask questions and engage in a dialogue with management. So with that in mind, I'll turn the call over to Randy.

Thanks, Guy, and welcome everyone to today's conference call. In Q1, Ballard revenue was $17.6 million, consistent with our internal projections and reflecting a muted China market currently awaiting further policy pronouncements. Gross margin was 15%, adjusted EBITDA was negative $14.0 million, and cash reserves at the end of the quarter were $1.27 billion. Today, I want to share with you how excited we are about the growing market opportunities we have at Ballard. Supported by a strengthening policy backdrop and increased customer engagement, we have a clear line of sight on long-term growth in our core, medium, and heavy-duty motor applications of bus, truck, rail, and marine. Activity levels are at record highs across the entire Ballard organization. Indeed, on the commercial front, we're witnessing unprecedented customer engagement across all markets. While we've previously commented on the slow pace of conversion of our sales pipeline to purchase orders, primarily as a result of the pandemic, we remain highly encouraged, highly encouraged with our sales pipeline. Indeed, our sales pipeline has grown more than 70% over the past five quarters. This reflects the underlying momentum in our business prospects. And while the pandemic is still challenging many markets, we see encouraging recovery signs including strong order conversion over the past month. Given this backdrop, 2021 sets up as an important year marked by increased and accelerated investment ahead of market tipping points. Ulcer by a fortified balance sheet will deepen our investments in talent, technology, products, advanced manufacturing, localization, and customer experience. We're already making solid progress on key strategic deliverables in 2021, including on technology innovation, product cost reduction, capacity expansion, our Weichai Ballard JV, and our relationship with Mahle. Now let me just briefly review some specific details so far this year. We're proud to announce during the quarter Ballard's industry-leading metric of powering fuel cell electric buses and trucks with over 75 million cumulative kilometers, enough to circle the globe 1,870 times. In the fuel cell electric bus market, we continue to be encouraged with progress in Europe. As previously reported, we received several purchase orders from our European bus OEM partners during the quarter, specifically from Ritebus and Solaris. Through last year to date in 2021, we've received orders for 135 fuel cell engines for buses in Europe and we've delivered 69 or about 50% of these engines through Q1 this year. We're also excited by our work with Global Bus Ventures in New Zealand to put the first fuel cell electric bus in that country through testing and now into revenue service with Auckland Transport. New Zealand passed its Climate Change Response Amendment Act in 2019, setting that country on a path to net zero emissions by 2050, and also making it one of the few countries to have a zero emissions goal enshrined in law. Seeing traction in new geographies such as New Zealand is a very positive indicator. In the truck market, our work is progressing to plan with the Wei Chai Ballard joint venture in China, as well as with Malé, on the design of a prototype 240-kilowatt engine for heavy-duty commercial trucks. We continue to expect this product to be ready for testing by the end of the year. And yesterday, we announced an exciting strategic partnership with Linamar for the development and sale of fuel cell powertrains and components for Class I and II vehicles, initially in North America and Europe. In the starting phase of work under the framework agreement, a demonstration platform with a fuel cell powertrain solution will be co-developed with Ballard providing the fuel cell subsystem and Linamar providing the rolling chassis, tanks, enclosures, cradles, and other balance of plant. Following successful testing of the demonstration platform, Ballard and Linamar expect to form a joint venture to sell and support fuel cell powertrains for light duty vehicles, including light trucks and commercial vans. We're thrilled to partner with Linamar, a leading global manufacturer of precision products and powertrain solutions that's leaning into the future of zero emission mobility. This collaboration is a natural extension for our existing joint working relationship on the recently announced UPS delivery vans trial in California. We're deepening our relationship based on a joint vision to provide zero-emission fuel cell powertrains for light-duty vehicles, particularly those where fleets require extended duty cycles and rapid refueling to maximize utilization. I noted the increased momentum in the rail market on our last conference call, including our ongoing important work with Siemens to power its Morale commuter train. continued commercial operation on the world's first fuel cell tram line operating in Foshan, China since late 2019, receipt of a purchase order from Arcola Energy in Scotland, an announcement of our collaboration with Canadian Pacific to power the first fuel cell freight train in North America. In addition, subsequent to Q1, we also announced that Ballard will be powering a switching locomotive for Sierra Northern Railway in Northern California. Another proof point in this rapidly evolving rail market. In the marine market during Q1, we announced a non-binding MOU with Global Energy Ventures in Australia for development of a new fuel cell powered ship called CH2 Ship designed to transport 2,000 tons of compressed green hydrogen. This is a fascinating opportunity with a small-scale demonstration of the CH2 ship expected to require 10 megawatts of fuel cells and the full-scale ship requiring propulsion power of approximately 26 megawatts. In Q1, we also signed a non-binding MOU with Chart Industries to develop a liquid hydrogen storage and vaporization solution for heavy-duty vehicles. Given the high energy density of liquid hydrogen, This will be a potentially strong solution to address the greatest range requirements for heavy-duty vehicles, including coaches, long-haul trucks, rail, and marine applications. In other commercial progress during the past several weeks, we announced Ballard's membership in the Hydra Consortium, focused on enabling heavy-duty mining mobile equipment to run on renewable hydrogens. and other key partnerships in the consortium, including Mining 3 and Angie. As we've noted before, off-road opportunities, including in mining and construction, represent very exciting upside potential for fuel cells moving forward. On the technology and product development front, we continue to make measured progress on our key development programs, including ongoing work with our Wei Chai Ballard joint venture in China. We're also tracking ahead of our plan on our 3x3 fuel cell stack cost reduction program, enhanced by breakthrough designs and performance from our new MEAs and bipolar plates, continued progress with our supply chain, and implementation of advanced manufacturing initiatives. We're proud to have recently published Ballard's second annual ESG report, demonstrating our strong commitment to transparency reduced emissions, investment in our employee value proposition, including diversity and inclusion, and strong governance. As a purpose-driven company with a vision to deliver fuel cell power for a sustainable planet, we're making clear progress on our own ESG journey. We continue to work toward our Mission Carbon Zero 2030 initiative with a goal of achieving carbon neutrality at Ballard by 2030. As noted in our recent ESG report, beyond the progress we made in reducing our own operational carbon footprint, we completed cradle-to-gate GHG assessments of our key fuel cell products. The Ballard were poised with highly disruptive, leading fuel cell technology for large, attractive, addressable markets. We believe we're set up for a strong long-term growth as a result of the accelerated investment we're making this year. We also continue to assess strategic acquisition opportunities, including opportunities that will reduce customer friction points and simplify customer experience. Before finishing, I'd like to formally introduce Paul Dobson, Ballard's new CFO. Paul joined us in late March and has been actively working to fully familiarize himself with the hydrogen and fuel cell industry and with Ballard. Paul's skills and experience will serve Ballard well as we seek to scale our business over the coming decade. And with that, I'll turn the call over to Paul.