Ballard Power Systems, Inc. Q2 FY2025 earnings call

• Marty Neese shared his background in leadership roles in EMS and clean tech, emphasizing execution, service, innovation, and brand. - Ballard is transitioning to a product company and aims to be cash flow positive by end-2027, focusing on execution, service, innovation, and leveraging its brand. - Q2 performance was solid with revenue growth, improved gross margin due to restructuring and reduced onerous contract provisions. - Secured a large marine order, progressing on Project Forge, and seeing traction in bus, rail, and marine markets.

Total revenue for Q2 was $17.8 million, up 11% year-over-year. The heavy-duty mobility market contributed $16.1 million. Gross margin improved to negative 8%, up 24 points compared to Q2 of last year. Total operating expenses were $31.7 million, down 12% year-over-year. Excluding initial restructuring and related charges, operating expenses decreased by 28% compared to Q2 of 2024. Adjusted EBITDA was negative $30.6 million, a 13% improvement from the prior year. Cash used by operating activities was $20.3 million, a 42% improvement versus Q2 of last year. The company closed the quarter with $550 million in cash and cash equivalents, no bank debt.

• Full year capital expenditure and operating expenses, excluding restructuring charges, are expected to be at the low end of 2025 guidance ranges. - Restructuring charges will be updated as part of Q3 reporting, and the company will adjust operating expense and capital spend guidance accordingly.

• Uncertainty in market adoption, changing regulations, tariffs, and delayed adoption in certain sectors. - Potential backlog adjustments and pieces of the business viewed as suboptimal or unattractive.

Q: Just on the markets seeing near-term activity, what are the near-term markets pursued and how approached with new cost structure?

A: Rail, marine, bus markets are pursued; bus market in NA and Europe has traction due to TCO.

Q: Color on the marine order announced after quarter end?

A: Order had a 2-year sales cycle, uses FCwave product, and marine market has potential with route optimization and hydrogen infrastructure growth.

Q: OpEx cadence and restructuring charges in Q3?

A: Most July restructuring charges were in Q2, bulk in Q3; recent restructuring expected to reduce go-forward operating costs by 30% with most realized in 2026.

Q: China activities and outlook?

A: On materially a pause in China, not investing in demand side but using supply side for cost reduction.

Q: Fuel strategy consideration?

A: Thoughtful partnerships on fuels are important for total cost of ownership end-to-end, and partnerships with molecule producers are welcome.