Ballard Power Systems, Inc.

five months we've received orders, all repeat orders from existing platform customers for a total of 1,200 engines for fuel cell buses in Europe and North America. This is very, very exciting. We see a tripling of the existing operating fleet in these markets over the next two to three years. Now let's move to the third milestone, the announcement of a major order in the stationary market. We announced a multi-year supply agreement and the largest order in Ballard's history for the stationary market, an order for 150 engines totaling 15 megawatts of fuel cell systems from a UK-based customer specializing in renewable off-grid power generation. Again, this is a repeat order from an existing customer and reflects a scaling in their market opportunities. Our customer is targeting the replacement of traditional diesel generators with fuel cell systems that can provide resilient, predictable, clean, and quiet solutions for on-site power generation in a variety of applications, including EV charging, filming, events, and construction. The customer also has an option to purchase an additional 296 engines by March 2026. Finally, to turn to the fourth milestone, the announcement of our next manufacturing facilities. As context, as part of our local for local global manufacturing strategy, we conducted a comprehensive comparative analysis during 2023 of sequence production capacity expansion options in North America, Europe, and China. Based on our review, we determined to prioritize the US as our next market for production capacity expansion. We announced our plan to build a new manufacturing facility to be located on a parcel of 22 acres of industrial land within the Rockwall Technology Park in Rockwall, just outside of Dallas, Texas. The facility is expected to have an initial main plate production capacity of 8 million MEAs, 8 million bipolar plates, 20,000 fuel cell stacks, and 20,000 fuel cell engines per year, or the equivalent of 3 gigawatts of fuel cells. Dubbed Ballard Rockwall Giga One, we plan to manufacture next generation fuel cell products, incorporating the benefits of our work related to technology innovation and design changes, supply chain collaboration, and the introduction of volume production processes and advanced automation to drive down costs. We also recently announced two separate non-dilutive funding awards to Ballard, totaling up to $94 million. consisting of 40 million in expected grants from the US DOE hydrogen and fuel cell technologies office, and up to another $54 million in expected advanced energy project tax credits, known as 48C, funded under the Inflation Reduction Act. Our capacity expansion plan comes at the very time that platform customers are being clear about what they need from Ballard in the future. They're counting on us to be there for them at volume and at the right cost. The ability for us to demonstrate a clear roadmap to high production volumes at significantly reduced cost is critical to customers transitioning from demonstrations to future scaled deployments. With Ballard Rockwell Giga One, we plan to bring scaled advanced manufacturing of next generation fuel cells online in late 2027. At the same time, we expect to reach capacity constraints of our existing North American production facilities based on our forecasted growth and production volumes. We expect to make a final investment decision on this facility later in 2024, pending completion of certain customary conditions, including necessary approvals and definitive documentation, including with Rockwall and with the US funding sources. Accordingly, we will provide a detailed review of the plans of Ballard Rockwell Giga One during an earnings call later this year. We want to also provide two interesting updates on the rail market so far in 2024. First, one of our customers in the commuter rail market, Stadler, revealed that its FLIRT H2 train powered by Ballard fuel cell engines has been entered in the Guinness Book of World Records for the longest distance achieved by a pilot hydrogen fuel cell electric multiple unit passenger train without refueling or recharging, an impressive 1,742 miles. Second, and importantly, on April 16th, CSX unveiled its first fuel cell locomotive, developed through its partnership with CPKC, where CPKC provides CSX with a powertrain conversion kit using Ballard fuel cell engines to refurbish diesel locomotives. We view this as a very exciting development. We believe hydrogen fuel cells offer the only viable zero-emission powertrain solution to replace or refurbish diesel locomotives in North America. The total North American fleet is estimated to be around 40,000 locomotives, and notably, CPKC has approximately 2,500 diesel locomotives, and CSX has approximately 3,500 diesel locomotives. With high power line haul locomotives using 2.4 megawatts of fuel cells, which is equivalent amount of fuel cells required to power about 24 buses, We believe this represents a large and attractive addressable market for Ballard. Before I turn the call over to Paul to review our Q1 financial highlights, I'd like to provide a headline summary of Q1 and some commentary on our setup moving forward. In Q1, we booked $64.5 million in new orders, increased our order backlog by 38%, announced total non-doubting funding of up to $94 million for the planned build-out of a Rockwell Gigafactory, grew revenue by 9%, improved gross margin by 5 points, and reduced cash operating costs slightly, while continuing to invest in next-generation products and product cost reduction. Looking forward, in the context of an increasingly constructive policy environment, a growing order backlog, And with sustained investments in product cost reduction, advanced manufacturing capacity expansion, we see an exciting setup for the second half of 2024 and growth in 2025. We are well positioned to enable our customers to compete in the energy transition and the adoption of hydrogen fuel cells to decarbonize heavy-duty mobility and select stationary power applications. With that, I'll turn the call over to Paul to discuss our financials. Thanks, Randy.

In Q1, Ballard delivered $14.5 million in revenue, driven by strong growth in the bus and stationary verticals. Heavy-duty mode of applications accounted for approximately 84% of the total, and when added to stationary power, our fuel cell products as a whole represented approximately 88%, once again emphasizing our shift into a commercial products company. As a reminder, From previous years, we see that valid revenue is typically weighted approximately 30%, 70% between the first and second half of the year and heavily indexed to Q4. 2024 looks to be no different. Even with the continued shift in revenue mix to power products and the burden of fixed production overhead costs being spread over seasonally low revenue, gross margin of negative 37% showed a five-point improvement compared to Q1 2023. We are still anticipating underlying gross margins will break even in Q4 as revenue increases and product cost reduction activities have greater impact. We reported total operating expenses of $37.1 million and cash operating costs of $29.8 million, both relatively flat compared to the prior year comparables. Capital expenditures totaled $7.5 million in Q1. We are maintaining our guidance ranges for total operating expenses and capital expenditures for the year. Our guidance for 2024 includes capital for the initial design and scoping activities for the Rockwall Gigafactory, assuming FID. The expected U.S. government funding for the facility would impact our net capital expenditures in subsequent years starting in 2025. We ended the quarter with a strong balance sheet with cash and cash equivalents just over $720 million. With that, I'll turn the call over to the operator for questions.

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