Ballard(BLDP) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q1 2023, Ballard Power Systems reported revenues of $13.3 million, with approximately 70% coming from Heavy-Duty Motive applications [17][19] - The company experienced continued gross margin pressure, attributed to a shift in revenue mix, low absorption of manufacturing overhead costs, and increases in supply and labor costs [18][19] - Total operating expenses were reported at $37.5 million, with capital expenditures of $11.6 million for the same period [19] Business Line Data and Key Metrics Changes - Revenue from the bus vertical increased sequentially, with order backlog for bus orders up almost 30% compared to the previous period [7] - The truck market saw a sevenfold growth outside of China compared to Q1 2022, although revenues in this segment were flat due to declining revenues from China [8][9] - The rail market is expected to see significant activity in the second half of 2023, with anticipated deliveries to Siemens and Stadler [10] - The marine vertical is experiencing strong customer interest, with a backlog of close to $5 million expected to be delivered this year [10] - The stationary power market saw a 25% increase in backlog, driven by a follow-on order for 3.6 megawatts [11] Market Data and Key Metrics Changes - Europe accounted for approximately 62% of the total order backlog at the end of Q1 2023, continuing to be the largest geographic contributor [14] - The U.S. is expected to see significant changes due to major policy announcements, including the implementation of the IRA bill [15] - The Chinese market is facing challenges due to a complicated policy environment, leading to a year-over-year decline in sales volumes [16][17] Company Strategy and Development Direction - The company aims to commercialize PEM fuel cell technology across multiple market applications, focusing on sectors where fuel cell technology offers the strongest value proposition [5][6] - A strategic shift is underway to report revenues based on key end markets, including bus, truck, rail, marine, stationary, and emerging markets [6] - The company is committed to strengthening its U.S. platform and exploring opportunities for manufacturing capacity expansion [33][34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growing customer engagement across verticals, supported by a constructive policy backdrop [5] - The company anticipates that the first half of 2023 will represent approximately 30% of full-year revenues, with a more significant revenue contribution expected in the second half [12][78] - Management highlighted the importance of achieving a total cost of ownership crossover as low-cost hydrogen becomes available, which is expected to drive market adoption [25][76] Other Important Information - The company ended Q1 with $864 million in cash and no debt, indicating a strong balance sheet [19] - The MF Hydra, the world's first liquid hydrogen-powered ferry, has entered passenger service in Norway, showcasing the company's advancements in the marine sector [11] Q&A Session Summary Question: Insights on pricing strategy and long-term gross margin targets - Management indicated that pricing strategies are designed to compete against both fuel cell providers and broader zero-emission vehicles, with a focus on achieving a total cost of ownership crossover [23][24] Question: Capital raising plans and shelf filing - Management views the recent shelf filing as a housekeeping matter, indicating that significant capital raising is unlikely unless extraordinary circumstances arise [30] Question: Investment opportunities in China versus North America and Europe - Management remains committed to the Chinese market but is also exploring opportunities for investment in the U.S. and Europe due to strong market and funding opportunities [32][34] Question: Market share expectations for bus orders in Europe - Management expects to maintain a market share of over 85% for bus orders, despite increasing competition [35] Question: Competitive position and strategic plan adjustments - Management emphasized the importance of powertrain integration capabilities gained from the acquisition of BMS, which enhances competitive positioning [46][48] Question: Hydrogen infrastructure and its impact on order growth - Management clarified that current bus orders are primarily based on on-site refueling rather than public refueling infrastructure, which is still developing [50] Question: Cost of hydrogen and its impact on market unlock - Management indicated that a delivered hydrogen cost of $5 per kilogram would unlock significant market potential across various segments [76] Question: Revenue expectations for Q2 and China market growth - Management does not anticipate significant revenue growth in Q2, with a focus on back-end loaded revenue for 2023 [78]