Ballard Power Systems, Inc.

Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems fourth quarter 2024 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 one on your telephone keypad. If you do need assistance during the conference call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Sumit Kundu, Manager, Investor Relations. Please go ahead.

Thank you, Operator, and good morning. Welcome to Ballard's fourth quarter financial and operating results conference call. With us on today's call are Randy McEwen, Ballard's CEO, and Kate Igbalode, Chief Financial Officer. We 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 newly filed annual information form and other public filings for our complete disclaimer and related information. I'll now turn the call over to Randy.

Thank you, Suman, and welcome everyone to today's conference call. 2024 was a difficult year for the hydrogen fuel cell industry. Amidst prolonged policy uncertainty, a multi-year push out in development of hydrogen projects and the deployment of fuel cell applications, and a challenging funding environment, and industry rationalization is underway. Notwithstanding this challenging industry backdrop, Ballard achieved important progress in 2024. And I want to highlight four key achievements relating to order intake, product shipments, operating cost reductions, and product development milestones. First on order intake. Put simply, 2024 was a record-breaking year for Ballard for two total new order intake for our power products. We secured new order intake of approximately 113 million during 2024, punctuated by new order intake of 75.4 million in Q4. Both were records. We ended the year with a record year-ending order backlog of 173.5 million, an increase of 41% compared to the end of Q3. This order backlog includes a 12-month order book of 98.9 million, up 48% compared to the prior year. Now, this outcome is particularly noteworthy given the challenging industry dynamics and the contrast with most of our competitors. underscoring Ballard's technology and market position. We were front and center for most major commercial order announcements in the European and North American markets for PEM fuel cells in our target applications in 2024. We move next to product shipments. Delivery of fuel cell engines in 2024 grew by approximately 30%, increasing from over 500s engines in 2023 to more than 660 in 2024. This marked the fourth consecutive year of engine shipment growth, representing a CAGR of approximately 40%. Our 2024 deliveries of PEM fuel cell engines accounted for over 90% of our total revenue in 2024. We shipped a total of 56.5 megawatts of fuel cell engines reflecting a 10% increase from 51.2 megawatts in 2023. These engine shipment milestones represent new records for Ballard and are critical proof points in our manufacturing execution capabilities. With our shipments in 2024, we continue to grow industry-leading field deployments with valuable real-world data on the performance of our PEM fuel cell engines in various applications and duty cycles. This data helps us gain deeper insights into our customer requirements and product performance in various operating conditions. This rich field data is another valid differentiator and helps inform our next generation product development programs, reliability and warranty models, and field maintenance approach. We're pleased to report we had another successful year with our engines deployed and monitored in the field with zero reported safety incidents and fuel cell engine availability around 99% in 2024. We move next to operating costs. In 2024, we observed further indicators of slowing hydrogen and fuel cell policy implementation and market adoption. We noted a material weakening of the financial position of certain customers. and we also observed a continuing deterioration in the financing environment for our industry. As this context represents a significant headwind to our corporate growth plan, we initiated a global corporate restructuring in September to moderate our investment intensity and pacing to better align with delayed market adoption. We expect our restructuring to reduce total annualized operating costs by more than 30%, with a substantial part of the anticipated reductions being realized in 2025. Our restructuring included sizable workforce reduction, rationalization and consolidation of certain global operations and facilities, and a reduction in certain planned capital expenditures. Given the revised industry outlook, there's no business case for production capacity expansion investments for the foreseeable future. Accordingly, we have deferred any final investment decision on the proposed TEXA Gigafactory to 2026, pending market adoption and demand indicators. With continued policy and other uncertainties and other challenges in the China fuel cell market and underperformance of the Weichai Ballard JV, and as part of our global restructure, we also reduced our corporate cost structure in China and initiated a strategic review of the Weichai-Beller JV. Following this review, we will not be making any additional significant investments in China, including in the Weichai-Beller JV for the foreseeable future. As we look to our long-term strategic plan, we continue to believe hydrogen and PEM fuel cells will play an important long-term role in decarbonizing select heavy mobility and stationary power applications. We believe there are certain use cases where customers will be attracted to the differentiated PEM fuel cell value proposition of long-range, fast refueling, heavy payload, and zero tailpipe emissions. However, given near-term market challenges, we expect further industry rationalization, failures, restructuring, and consolidation in 2025. We'll continue to closely monitor various factors impacting the commercial adoption of our markets and products, and continue to reassess our investment plans, cost structure, and cash usage based on these factors. We started 2025 with over $600 million in cash and no bank debt. With our reductions in operating costs and changes to our long-term CapEx plans, we have no near or mid-term financing requirements. Let me repeat that. We have no near or midterm financing requirements. And now we move to product development milestones. 2024 was a banner year at Ballard for product innovation, including our programs on product cost reduction. We made important progress against our technology and product roadmap with the execution of high impact development programs. We launched our ninth generation high performance fuel cell engine named FCMove XD, resetting the industry standard for PEM fuel cell engine performance for heavy duty mobility. FCMove XD delivers significant improvements in reliability, durability, efficiency, power density, scalability, serviceability, and total cost of ownership. We have programs underway to drive down the cost of next generation modules through simplifying system design, reducing part count, and joint supplier balance of plant component development. For our fuel cell stacks, we realized important milestones on our development programs for membrane electrode assemblies, bipolar plates, and stack compression hardware. We also successfully completed the initial development phase of Project FORGE, our high-volume bipolar plate manufacturing line that we've talked about before. This is a key achievement on our ongoing efforts to substantially lower bipolar plate costs and increase plate manufacturing capacity without expanding our Burnaby manufacturing footprint. Taken together, our product cost reduction initiatives are valuable levers to enable gross margin expansion. Next, I'd like to move to some comments on key verticals, starting with BUS. The bus vertical was a standout in 2024, driven by growing demand for fuel cell buses in both Europe and North America. Industry-wide, in Europe, 378 fuel cell buses were registered in 2024, marking an impressive 82% increase from the previous year. Additionally, in the U.S., Federal Transit Administration Low-No Awards was the most successful for fuel cell buses to date, showing an increase of over 150% above the 2023 year awards. Ballard's bus market revenue was approximately $44 million in 2024, a 51% increase compared to 2023. And this represented over 60% of our total revenue for 2024. Bus engines account for almost half of our current order backlog. Indeed, over the past year, we've secured orders from seven bus OEMs for more than 1,600 fuel cell engines, totaling around 130 megawatts for city transit buses across Europe and North America. This is roughly triple the number of engines currently in operation today in those regions. Notably, these orders include the largest fuel cell bus contracts on record in both Europe and North America. For example, early in 2024, Celera signed a long-term supply agreement for 1,000 fuel cell engines. A new flyer in North America increased its order significantly, doubling from the previous year with a purchase commitment for 200 fuel cell engines slated for delivery in the North American market in 2025. We also are collaborating with Gillick, another leading heavy-duty transit bus manufacturer in the U.S., to expand their zero-emission bus lineup. We move next to truck. Now, the truck market is disappointed with adoption timelines being materially pushed out. There's also been several business failures of smaller integrators of zero-emission trucks, which has caused challenges in this market. While we continue engagements with multiple large truck OEMs, as they consider long-term development and commercialization of fuel cell trucks, we don't anticipate any material volumes in the truck market in the near term. Turning next to rail, we're excited, indeed very excited, about the market opportunity in the North American freight rail market, which is a market defined by long, heavy, high-powered trains operating on non-electrified, long-distance routes. Hydrogen fuel cells present a transformative opportunity to replace traditional diesel engines with cleaner, low-emission powertrain solutions. CPKC, a leading North American rail operator, is at the forefront of this innovation, leading the way in the adoption of fuel cell-powered locomotives. In December, Ballard signed a landmark long-term supply agreement with CPKC to provide 98 fuel cell engines totaling approximately 20 megawatts for delivery in 2025. This order represents the largest 10 fuel cell engine contract ever placed for use in freight locomotives globally, underscoring the significant role Ballard is playing in this transition to sustainable and low-emission freight rail technology. We also marked additional engine sales for passenger rail applications with eight megawatts to Stadler to support low carbon transit in California, rounding at a positive year of order intake for the rail vertical. Also want to highlight in Germany, six Siemens Murillo Plus H trains powered by Ballard fuel cell engines have recently entered into passenger service in the Berlin area. We moved to stationary and similar to the rail sector, while the stationary market remains in its early stages of adoption, we made significant progress and saw notable advancements throughout the year. We secured a 15 megawatt order from a repeat customer, specializing in renewable off-grid power generation. Additionally, we formed a strategic partnership with Vertiv to develop a backup power solution for data centers. Co-development work is underway and tracking to plan. In Q4, we divested our small backup power business, which was non-core to our strategy going forward. This allows us to focus more sharply on high power station applications aligned with our core product strategy. We next provide some comments on the status of hydrogen policies in the dynamic US market. First, from September to January, the U.S. Department of Energy was extraordinarily busy with various funding awards related to the hydrogen industry, including hydrogen hubs, grants, credits, and loans. And second, in early January, the Department of Treasury and IRS released, at long last, the final rules for the 45V Clean Hydrogen Production Task Credit. These rules were an improvement from the JAFT proposed in December 2023. But fortunately, following that and with a flurry of executive orders from the White House, what we've seen is a temporary pause on IRA and IIJA funds, including the issuance of new awards and the disbursement of federal funds under open awards. Now, we've seen a strong reaction to this proposed pause, including legal challenges. These developments likely mean the US hydrogen fuel cell industry will experience continued policy uncertainty for the foreseeable future. Of course, we're closely tracking the dynamic tariffs context and the implications for our business. Now, a few final comments before I hand the call over to Kate to walk through our financial results. In 2024, while our financial results, including revenue and margins, face challenges from broader industry headwinds, We made significant progress in several important areas, including order intake, product shipments, operating cost reductions, and product milestones. We started 2025 with an exciting position for expected deliveries for the year. Our 12-month order book stood at 98.9 million, up 48% compared to the prior year. Based on our order book and sales activity, we expect a solid year for production and shipment of fuel cell engines for the bus, rail, and stationary markets in 2025. Our 2025 focus is on our customers and our controllables, including prioritized product development and product cost reduction programs, while also maintaining disciplined spending and balance sheet strength for long-term competitiveness and sustainability. With that, I'll now pass the call over to Kate.