Ballard(BLDP) - 2023 Q2 - Quarterly Report

Q2 2023 Performance Overview This section provides an overview of the company's second-quarter 2023 performance, including management commentary and key financial highlights Management Commentary Management emphasized strategic progress, a growing order book, and re-evaluation of China manufacturing plans towards potential US/EU expansion - The company received $25.1 million in new orders during Q2, contributing to a Power Products backlog that is up over 140% year-over-year[2] - Ballard is re-evaluating its previously announced MEA localization plan in China due to policy uncertainties and market delays, now analyzing manufacturing capacity expansion options in the US and/or EU, with a decision expected in early 2024[2] - The company anticipates sequential quarterly revenue growth in the second half of 2023 compared to the first half, along with continued growth in the order book to support 2024 revenue[3] Financial Highlights Ballard reported Q2 2023 revenue of $15.3 million, a 27% decrease year-over-year, primarily due to a 39% drop in Heavy Duty Mobility revenue, with gross margin worsening to (21%) and Adjusted EBITDA slightly lower at ($35.9 million), while the order backlog grew to $147.5 million Key Financial Metrics Q2 2023 Key Financial Metrics vs. Q2 2022 | Metric | Q2 2023 | Q2 2022 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $15.3 M | $20.9 M | (27)% | | Gross Margin % | (21)% | (11)% | (10) pts | | Total Operating Expenses | $37.5 M | $38.5 M | (3)% | | Adjusted EBITDA | ($35.9) M | ($35.0) M | (3)% | | Net Loss | ($30.1) M | ($55.8) M | 46% | | Loss Per Share | ($0.10) | ($0.19) | 47% | Revenue by Segment Q2 2023 Revenue by Segment ($M) | Segment | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Heavy-Duty Mobility | $8.5 | $13.9 | (39)% | | Stationary | $3.5 | $3.8 | (6)% | | Emerging and Other Markets | $3.3 | $3.3 | -% | | Total | $15.3 | $20.9 | (27)% | - The 39% decrease in Heavy Duty Mobility revenue was driven by lower revenues from bus, truck, and rail verticals, partially offset by higher marine revenue[6] Order Book and Backlog Order Backlog Movement in Q2 2023 ($M) | Description | Amount | | :--- | :--- | | Backlog at End-Q1 2023 | $137.7 | | New Orders in Q2 2023 | $25.1 | | Orders Delivered in Q2 2023 | $15.3 | | Backlog at End-Q2 2023 | $147.5 | - The 12-month Order Book stood at $85.9 million at the end of Q2, marking an increase of $12.0 million or approximately 16% from the end of Q1 2023[6] - Order backlog growth was primarily driven by increased orders from North America and Europe, which now represent close to 80% of the total backlog[6] Detailed Financial Summary This section provides a comprehensive financial summary table for the three months ended June 30, 2023, comparing key metrics against the same period in 2022, detailing revenue by sub-segment, profitability measures, and cash flow information, highlighting a 29% improvement in cash used by operating activities Q2 2023 Financial Summary (Millions of U.S. dollars) | | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | REVENUE | | | | | Heavy-Duty Mobility | $8.5 | $13.9 | (39 %) | | Stationary | $3.5 | $3.8 | (6 %) | | Emerging and Other Markets | $3.3 | $3.3 | - % | | Total Revenue | $15.3 | $20.9 | (27) % | | PROFITABILITY | | | | | Gross Margin $ | ($3.2) | $(2.2) | (45 %) | | Gross Margin % | (21 %) | (11 %) | (10)pts | | Adjusted EBITDA | ($35.9) | ($35.0) | (3 %) | | Net Loss | ($30.1) | ($55.8) | 46 % | | CASH | | | | | Cash used by Operating Activities | ($27.7) | ($39.0) | 29 % | | Cash and cash equivalents | $815.1 | $1,002.6 | (19 %) | 2023 Outlook This section outlines the company's financial projections and guidance for the full year 2023 Full Year Guidance The company reaffirmed its full-year 2023 guidance, expecting Total Operating Expense to be between $135 million and $155 million, and Capital Expenditure to be in the range of $40 million to $60 million 2023 Full Year Guidance | Metric | Guidance Range | | :--- | :--- | | Total Operating Expense | $135 - $155 million | | Capital Expenditure | $40 - $60 million | Non-GAAP Financial Measures This section details the company's non-GAAP financial measures and their reconciliation to IFRS equivalents Reconciliation of Non-GAAP Measures This section provides a reconciliation of non-GAAP financial measures to their nearest IFRS equivalents, detailing adjustments made to Total Operating Expenses to arrive at Cash Operating Costs, and to Net Loss to calculate EBITDA and Adjusted EBITDA for Q2 2023 - The company uses non-GAAP measures such as Cash Operating Costs, EBITDA, and Adjusted EBITDA to assist investors in assessing operating performance, excluding items like stock-based compensation, depreciation, amortization, and unrealized foreign exchange gains/losses[15][16] Reconciliation of Total Operating Expenses to Cash Operating Costs (in thousands) | Description | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Total Operating Expenses | $37,518 | $38,461 | | Less Adjustments | | | | Stock-based compensation | ($3,094) | ($2,780) | | Depreciation and amortization | ($2,267) | ($2,491) | | Other adjustments | ($602) | $1,117 | | Cash Operating Costs | $32,915 | $32,073 | Reconciliation of Net Loss to EBITDA and Adjusted EBITDA (in thousands) | Description | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Net loss | ($30,096) | ($55,791) | | Depreciation and amortization | $3,286 | $3,441 | | Finance expense | $264 | $308 | | Income taxes (recovery) | $98 | $88 | | EBITDA | ($26,448) | ($51,954) | | Further Adjustments | | | | Stock-based compensation | $3,094 | $2,780 | | Finance and other (income) loss | ($11,865) | $13,123 | | Other adjustments | ($680) | $1,050 | | Adjusted EBITDA | ($35,899) | ($35,001) |