Ballard Power Systems, Inc. Q1 FY2025 earnings call

• In the first quarter, made progress against controllables like customer deliveries, operating costs, and product development. Revenue increased 6%, engine shipments up 31%, gross margin improved 14 points, and total operating expenses down 31%.
• Tariffs: Uncertainties remain, but expected policy changes not likely to materially impact 2025 business. US sales expected to be ~20% of 2025 revenue, increased tariff cost on US products expected to be passed to customers.
• Bus segment: Encouraged by demand growth, contributing 81% of Q1 revenue, up 41% Y/Y. Market leader in European and North American transit bus markets. Ended Q1 with $158M order backlog. Order intake in Q1 was soft but progress on sales opportunities in rail, stationary, and marine.
• Financials: Q1 gross margin negative 23% but improved 14 points from Q1 2024. Total operating expenses $25.5M, cash operating costs $23.2M, both down. CapEx $2.7M in Q1, with 2025 CapEx guidance $15M-$25M.

In the first quarter, Ballard delivered $15.4 million in revenue, up 6%. The bus vertical drove strong growth, increasing by 41% during the period, but other verticals decreased. Fuel cell product sales revenue made up 94% of total revenue. Fuel cell engine shipments were up 31%. Gross margin improved by 14 points. Total operating expenses were down 31%. The bus segment contributed 81% of Q1 revenue, up 41% year-over-year. Q1 order backlog was $158 million, including a 12-month order book of $92.4 million.

• 2025 revenue indexed to second half. Total operating expenses guidance $100M-$120M, ~30% reduction midpoint from 2024. CapEx guidance $15M-$25M.
• Continue to focus on customers, new order intake, on-time delivery of quality products, gross margin expansion initiatives, and prioritize product development and cost-reduction programs.

• Uncertainties related to hydrogen policies and trade tariffs.

Q: Do you have any update on the Caterpillar and Microsoft collaboration, or any future data center partnership in sight?

A: Still in early stages with Cat and Microsoft, converting from trial to next stage likely takes a year or two.

Q: How is the cost per kilowatt for the customers looking? And what's impacting that specifically?

A: Sales price pressure in China, Europe, and North America. Cost side, key variables are fuel cell stack and balance-of-plant components. Project Forge to reduce bipolar plate costs, expected to be fully implemented by end of 2025.

Q: On your sales pipeline, where are you seeing the most activity? And how do you sort of see that playing out throughout the year?

A: Most activity in bus segment, both Europe and America. Also rail, stationary, with marine as third. Bus market has repeat orders, rail and stationary have lumpy projects.

Q: With the restructuring you've gone through, can you talk about the process, and what compromises you've had to make to achieve your targets? And have you had any impact to your product cost-reduction initiatives, or have you given up any fundamental R&D initiatives?

A: Prioritized and sequenced product development programs, deprioritized truck market engine investment, focused on bus market. Preserved core MEA R&D, reduced activity on some balance-of-plant components. Progress made on cost-reduction plans, Project Forge to reduce bipolar plate costs.

Q: Understanding that the tariff situation remains very fluid, I'm just curious if there are any actions, or updates we should be looking for, from you all maybe later on this year with regards to supply chain movement, or material sourcing?

A: Mitigation actions taken, like accelerating component movement to US, transitioning suppliers. No major updates expected later this year.

Q: Looking at the relatively light CapEx spend for the first quarter here, I guess, how should we think about the cadence of that, kind of moving through the remainder of the year?

A: Project Forge is an $18M program with trailing costs in 2025, and typical maintenance CapEx. No material one-time CapEx spend expected through 2030 and beyond. Midpoint of CapEx guidance range is reasonable for modeling.