Q4 2020 Ballard Power Systems Inc Earnings Call
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Mr Relations. Please go ahead.
Thanks, very much and good morning, everyone welcome to Ballard fourth quarter, and full year 2020 financial and operating results conference call.
With us today on the call, we've got Randy Macewen, our president and CEO, and Tony Googling, and our 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 most recent annual information form and other public filings for our complete disclaimer and related information.
So today, Randy is going to provide his perspective on <unk> progress throughout 2020 as well as our focus for the current year. Tony is then going to review Q4, and full year financials, followed by a Q&A session I'll turn the call over to Randy.
Thanks, Guy and welcome everyone to today's conference call I'd like to start today's call by thanking all of the members of Ballard global team and the net.
Really proud of how our team responded to the global pandemic, we're guided by our purpose to deliver fuel cell power for a sustainable planet.
By our cultural values in every decision we make we put the safety health and wellbeing of our employees customers and partners first and we demonstrated once again Ballard resilience and ability to adapt with both care and speed.
I wanted to provide a brief brief summary of Q4 and full year 2020 results.
Revenue was $28 $6 million in the final quarter of the year with total 2020 revenue of $103 $9 million consistent with our internal projections with the impact of COVID-19.
Full year 2020 gross margin was 20% adjusted EBITDA was negative $38 $9 million year end cash reserves were $763 $4 million and we ended the year with a 12 month order book for delivery in 2021 of $83 $5 million.
Wow Power's operations continued uninterrupted through the year some customers suppliers partners and end users were forced to shut down temporarily at points during the year and some also deferred capital expenditures so.
So while our sales placed pipeline was very robust growing 55% in 2020, reflecting the continued increase in market interest order flow was muted.
Looking forward to 2021, the impact of the pandemic continues to be uncertain.
As a result, and consistent with our practice in the early stage of market development and adoption, we're not providing specific financial guidance for 2021.
What I do want to share with you is how excited and confident I am about our business about the important work we are undertaking in 2021 and our long term future.
Customer engagement in all of our medium and heavy duty motive market segments bus truck rail and marine.
Record levels.
We're well positioned with technology products field experience customer relationships partners brand and financial strength.
As reviewed in our September Investor and Analyst day, we have a clear strategy and deliverables in 2021, including on technology innovation product cost reduction capacity expansion are way tried Ballard JV and our relationship with Mali.
So the company has never been in a stronger position than right now at this very moment, we're talking big problems decarbonization of mobility in large attractive addressable markets bus truck rail and marine.
We're making solid progress in each of these market segments I believe we'll exit 2021 with a growing sales pipeline and order book that will start our ramp for scaling with the steepening growth curve between 'twenty 'twenty four and 'twenty 30.
Importantly, we have a strong cash position.
During Q1, 2021 we completed a further equity transaction that added incremental net proceeds of approximately $528 million to our cash balance, which currently exceeds $1 $2 billion.
This positions us to aggressively pursue our two themes acceleration and expansion.
These two themes cut across three specific areas for planned deployment of our capital.
The first is product innovation that will help accelerate market adoption by levering next generation stacks and modules for bus truck rail and marine applications, including expanding the range of power product levels available in our portfolio and continued cost reduction.
Secondary involves investments in the expansion of production capacity and localization.
We're currently finalizing the expansion of EMEA production capacity at our Vancouver facility.
And we have established gigawatt production capacity in China through our joint venture with Wade shy.
We are now carefully considering further localization opportunities in China as well as the potential to deepen our manufacturing presence in Europe.
And finally, we plan to invest in M&A.
We have a growing pipeline of corporate development activities. Our focus is on opportunities that help to simplify the customer experience by reducing adoption friction points and reducing costs.
We also see M&A as a path to more fully participate in the secular growth of the hydrogen economy and continued strengthening our competitive position in the market.
At the macro level. The pandemic appears to have strengthened global resolved to confront the climate crisis. Indeed.
Indeed, the decarbonization agenda has gained remarkable momentum in the past year.
There are now close to 50 countries with carbon pricing initiatives in 75 countries with net zero carbon emission targets.
Notably the growing importance of hydrogen in the future energy mix continues to be signified by supportive policy measures around the world.
There are now 32 countries, representing over 70% of global GDP that have announced hydrogen road maps.
The CEO, let hydrogen council after being launched by only 13 founding members in 2017 now has 109 member companies.
The group has escalated its advocacy work to raise the profile of hydrogen and a growing number of sizable corporate investments joint ventures collaboration and green hydrogen projects are being announced seemingly almost daily in our industry.
Yes.
Now in California Transit agencies began filing zero emission bus rollout plants as required by carbs innovative clean transit program.
And in 2020 Carb introduced its landmark advanced clean truck regulations that mandate the scaled adoption of zero emission commercial trucks in that state.
In addition, 14 other states signaled their support in 2020 do an Mou supporting a target for 30% of new truck purchases being zero emission by 2030.
In China, the government updated its fuel cell policy in September last year, which we expect to have a significant impact on commercial activity going forward and I'll comment further on this in a moment.
In 2020, Bloomberg any F projected that clean hydrogen could reduce greenhouse gas emissions by up to 34% over the coming decades at a manageable cost.
Its report concluded that renewable hydrogen compared to pre produce for as little as 1.6 dollars per kilogram in most parts of the world before 2050, making it a highly competitive fuels globally with falling hydrogen costs, enabling fuel cell market penetration along the way.
During 2020, we made considerable progress in the execution of our growth strategy, while working to transparently provide stakeholders with insights into our business, including strategy and current market position.
We share details under six times increase in EMEA production capacity module Assembly capacity in our Vancouver facility. In addition to commissioning our joint venture facility in China, and we shared our planned reduction in fuel cell stack and module product cost by more than 70% by 2024.
We also detailed the estimated $130 billion annual market for engine sales in the bus truck rail and marine segments by 2030, which represents a multibillion dollar revenue opportunity for Ballard.
Importantly, during our Investor and Analyst Day 2020 last September we also emphasize the significance of ESG reporting and Ballard commitment to it.
<unk> the issuance of our first ESG report with the company's 2019 annual report in April last year, and our second ESG report that will accompany that 2020 report later this month.
We're excited with our goal to achieve net carbon zero at Ballard by 2030 as well as our continued work on diversity and inclusion.
Now I'd like to briefly review specific commercial developments in key geographies during 2020, beginning with China.
As we previously shared the wage high Ballard joint venture is now operational during 2020 the facility construction and commissioning activity was completed to enable bipolar plate production stock production along with module Assembly.
Furthermore, Ballard products manner manufactured the JV passed a series of quality audits. So that the joint venture is now qualified supplier to a number of bus and truck Oems in China, including Oems within the <unk> group.
China's state government has set a target of 20% of all vehicle sales being new energy vehicles by 2025 growing to 50% by 2035.
In parallel the government is targeting that fuel cell electric vehicle deployments, reaching 1 million in the 2030 to 2035 timeframe.
In support of these targets China's government updated its fuel cell policy last September with a focus on a number of hydrogen demonstration clusters.
Numerous applications for demonstration reagent sales were submitted to the national government and we anticipate the selection of initial demonstration questions to be announced soon.
We expect this announcement to help unlock considerable pent up demand for F. C vs. As a market slowed over the past year awaiting regulatory clarity.
Now I recently returned from an important six week trip to China.
What I can report at this time is that the way Chi Ballard joint venture operation is very impressive. We believe this is now the largest fuel cell production facility focused on the bus and commercial truck markets.
Supported by our Ballard team, our JBT team has done an exceptional job with our infrastructure and with production capabilities, including optimized optimizing production equipment and processes over the past six months.
We're now seeing production yield metrics at the JV already similar to yield results in Vancouver.
The JV has also made important progress on localizing a significant portion of the bill of materials of our new joint venture modules. We expect this work will translate to exciting cost reductions at the module level.
In addition to meetings with chairman Tan of way shy in important strategic initiatives to further strengthen our business in China and also had the opportunity to meet with key government officials in policy Influencers as well as new vendors emerging on the supply chain side.
I also saw many fuel cell buses and trucks on the road, while I was in China and with Ballard technology inside.
I also rode the world's first operating fuel cell tram line with five CRC trams powered by Ballard engines, which started operation more than a year ago.
At the current time Ballard products are inside approximately 1100 buses and 2200 trucks in China, representing a market share of about 45%.
Ballard has an industry, leading 70 million cumulative kilometers of on road vehicle experience that Ballard has achieved to date.
Ballard was also very active in Europe last year and into 2021 and.
In 2020, we announced a key strategic collaboration with Mali, a major tier one supplier to the transportation industry for the development and industrialization of advanced fuel cell engines to power various classes of trucks initially classes six to eight in Europe.
<unk> expertise in powertrain design and mechanics, together with Ballard fuel cell technology, and Knowhow creates a formidable partnership to address requirements of a zero emission heavy duty truck market in Europe.
We are currently working with Molly on design of a prototype 240 kilowatt engine for the heavy duty commercial truck market, which we expect to have ready for testing by the end of this year.
In Europe's bus market through 2020 and to this point in 2021, we've received orders for a cumulative total of 135 modules under the Jive funding program.
Turning 65 modules with Wright bus for buses to be deployed in a number of UK cities 60 modules from Solaris for buses to be played in in the Netherlands, Germany, and Sweden, and 10 modules prevent who'll for buses to be employed in the Netherlands.
In 2020, we delivered 29 of these 135 modules.
I would note in summary at Ballard share of the fuel cell modules for all buses deployed in order to date under the Jive program now exceeds 85%.
And the train segment of Europe, our work with Siemens mobility on development of a 200 kilowatt fuel cell engines for the Marine L. Plus eight train is on track and we understand that Siemens is now quoting this train to its customers.
In addition earlier this year, we announced an order from our Cola energy in the UK to power its passenger train which is planned for demonstration during cop 26 in Glasgow.
In Europe's Marine segment, we launched our FC wave 200 kilowatt modular engine last year and our Marine Center of Excellence is now in operation at Ballard Europe's facility in Denmark.
And finally in the backup power segment last year, we announced the sale of our initial 500 air cooled FC Gen 10, 20 fuel cell stacks to add core NFC energy with a potential for up to 1500 stocks and systems at radio tower sites in Germany.
We also announced a collaboration agreement with <unk> Tec Nordic for backup power solutions focused on countries, such as Norway, Denmark and Iceland.
In North America early this year, we announced an Mou with chart industries for joint development of an integrated system solution that includes a fuel cell engine with onboard liquid hydrogen storage and vaporization.
The ability to equipped vehicles with a liquid hydrogen supply whether it be in a bus truck train of marine vessel will address very long haul use cases since liquid hydrogen provides two to three times the energy by volume as compared to compressed hydrogen.
And earlier this week, we jointly announced with Canadian Pacific that Ballard will be supplying one two megawatts of fuel cell product for Cps pioneering hydrogen locomotive program to power the first ever fuel cell powered line haul line haul freight train.
C P with its fleet fleet of 1300 locomotives has made a strong commitment to sustainability, including a vision that includes sustainable freight transportation.
Once the fuel cell free trade is operational C. P plans to conduct rail service trials and qualification testing to our valued the technology's readiness for the freight rail sector.
This exciting program with a major North American transcontinental railway will expand our work in the rail segments from trends in China in passenger trains in Europe to freight trains in North America.
In addition to these activities in our key geographic markets, we have been experiencing increased customer interest in other geographic markets. For example, in Australia, New Zealand and India.
In Australia last year, we shifted we signed an Mou as a consortium partner to establish the <unk> bus project for the evaluation and deployment of fuel cell electric buses for use in public transit in that country.
Fcb's offer an excellent option for public transit in Australia is challenging conditions and green hydrogen from renewable energy will offer a flexible scalable and low carbon fueling solution at bus depots.
And I was just in Australia earlier this year Ballard signed an Mou with global energy ventures to design, a multi megawatt power solution for its C. H two ships a tanker size marine vessel that will store and transport hydrogen from Australia to other parts of the globe consistent with Australia as ambition to become a net supplier of high.
And to the world.
So 2020 was a critical year in the hydrogen fuel cell industry.
And here at Ballard, while meeting operating challenges posed by the pandemic, we made significant progress on critical strategic initiatives to become to position the business for growth over the years to come.
We have a range of zero emission mobility opportunities that we believe present large attractive market opportunities for Ballard technology and products over the long run with a strengthened balance sheet, we're increasing our investments in 2021 to seize these opportunities.
In 2021 will increase our investment in talent competencies technology innovation product development and customer experience related to our core markets of bus truck rail and marine will continue to invest in our strategic partnerships with wage hung in China and Molly in Europe.
We will also consider investments and further production capacity of localization in key geographies as well as strategic partnerships and acquisitions.
Before finishing I would like to address the CFO transition at Ballard.
As you would've seen in yesterday's press release, Paul Dobson will be joined the company as senior Vice President and Chief Financial Officer effective March 29th.
Paul has 25 years of global financial operations, and leadership experience, including as CFO and interim CEO at Hydro, one one and as CFO and direct energy.
His skills and experience will serve Ballard well as we seek to scale our business over the coming decade.
At the same time to Tony Google men will be staying on in an advisory role until may 31st.
Supporting the smooth transition of this role.
On a personal note I want to thank and acknowledge Tony as he moves into retirement. He served in the CFO role at Ballard for over 10 years, delivering significant value to the company, including through his professional leadership of our finance and administration functions is important strategic contributions and his leadership on numerous corporate and.
Transactions, everyone here at Ballard wishes, Tony well in his retirement.
And with that I'll turn the floor over to Tony to briefly review the financials.
Well, thanks, Randy and good morning, everyone.
Our topline revenue in Q4 was $28 $6 million down 32% year over year and on a full year basis revenue was $103 9 million down.
Down 2% from 2019 for.
For the full year power products revenue increased 19%, while technology solutions revenue decreased 20%.
Within power products full year heavy duty motive was up 35% to $47 $7 million. This was due to a year over year increase in product shipments to customers, particularly sales to the <unk> Ballard JV and the synergy Ballard JV in China.
We also saw higher shipments of backup power products to customers in Europe.
The decrease in technology solutions revenue to $45 3 million was due primarily to decreased amounts earned from the T X program with Audi The Siemens development program and the <unk> Ballard joint venture technology transfer program.
Gross margin was 20% for the quarter and for the full year declines of one point and each time period.
The Q4 and full year declines were the result of the decrease in total revenue and a shift in overall product mix.
Cash operating cost increased 25% in Q4 to $16 $4 million and for the full year increased 29% or $11 2 million to $50 million.
This was primarily the result of higher research and product development costs and next generation Mbas stacks and modules.
We do expect higher cash operating costs again in 2021, as we increase our investment in additional technology and product innovation and the development across our key product markets. The bus truck rail and marine.
Adjusted EBITDA in Q4 was negative $14 5 million compared to negative $7 million in the same quarter. The prior year of negative $38 9 million for the full year compared to negative $26 $6 million.
For the full year. This included Ballard $12 $6 million share of losses, and joint venture investments in China largely related to the way he joined Ballard JV.
Ballard's net loss in Q4 was negative $14 $4 million compared to negative $9 $8 million in Q4 last year and for the full year negative $49 $5 million compared to negative $35 $3 million in 2019.
Earnings per share was negative <unk> <unk> in Q4 compared to negative <unk> in 2019 and.
And for the full year EPS was negative <unk> 20, compared to negative 15 cents for the prior year.
Both the net loss and EPS numbers include the Ballard share of losses from our China GBS.
Cash used by operating activities was $6 $7 million in Q4, consisting of cash operating losses of $6 7 million and flat working capital changes.
For the full year cash used in operating activities was $42 $9 million.
Consisting of cash operating losses of $25 8 million and working capital outflows of $17 $1 million.
In terms of liquidity, we ended 2020 with cash reserves of $763 4 million up 417% from $147 $8 million at the end of 2019, and up 111% or $401 $7 million from the end of Q.
<unk> three.
These cash reserves reflected three equity transactions in 2020 to generated total net proceeds of approximately $695 million. These included throughout the market or ATM programs that generated net proceeds of $309 million as well as a bought fuel transaction that <unk>.
<unk> in Q4 and generated net proceeds of $386 million.
In addition, as Randy noted, we completed a further bonds yield transaction in the first quarter. This year generating additional net proceeds of approximately $528 million.
In addition to areas, where we expect to deploy capital in 2021 as outlined earlier by Randy. We also have a commitment to contribute $11 $4 million in 2021 toward our 49% ownership position in the weighted Jive Ballard JV.
At the end of 2021, we expect to have contributed a cumulative of $69 $1 million towards our total capital commitment of $79 $5 million per our pro rata ownership share.
Finally, we ended 2020 with a total order backlog of $117 8 million a.
A decrease of $10 $3 million over the order backlog at the end of Q3.
The 12 month order book at the end of 2020 was $83 5 million up $3 $9 million from the end of Q3 and.
And as Randy noted with the route we have a robust sales pipeline of qualified commercial opportunities up 55% from the end of the prior year.
Now before I turn the call back to the operator for questions I did want to say a couple of words about my pending retirement and this will be my last investor call as CFO of Ballard.
I first wanted to think and acknowledgment and many of you on the call today, who might come to know and work with over the past 11 years.
It's been a pleasure to get to know you and I do hope you can stay in touch.
I also retire with confidence knowing Ballard future is in good hands with a strong executive team and a dedicated workforce as well as a very strong balance sheet low.
Lastly, I will look forward to working with Paul on a smooth transition over the coming weeks.
With that let me turn the call back over to the operator for questions.
Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad.
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The first question comes from Sameer Joshi with H C. Wainwright. Please go ahead.
Uh huh.
Thanks for taking my call and Tony Congratulations on the good wishes for the retirement.
Thank you Sumit.
So most of my question.
About the same.
And the revenue contribution from that.
At what level of revenue contributions from China do you see your.
Equity distribution also breakeven does see it I think you had always glad a million of equity distribution losses from that JV, how should we look at 'twenty, one and should we expect that contribution to be a positive contribution this year.
Yes, Hi, spinners, Tony Yes, so youre right the equity contribution.
Isn't it was negative in 2020, and we expect it to be negative as well in 2021.
As Randy mentioned, we are expecting.
Fairly significant ramp up in deliveries from.
From the China, JV, but they'll likely take place in the more in the second half of the year. Once the policy framework gets finalized. So we don't expect 2021 to be a break the breakeven year for the joint venture largely as a result of the delay in the in the China policy. So I think realistically, we're looking more into 2022.
That we would expect to start to see the JV getting closer to breakeven based on continued ramp up. So 2021 will continue to be negative a negative contribution.
At a level not quite at the same level as 2021, but it will continue to be negative.
Understood.
Thanks for that.
You just mentioned the order backlog.
As of December 31st I assume was at $118 million, which was down $10 million year over year.
How does that compare and contrast with the.
On the <unk> pipeline is there.
He needs an article in Logan.
What's the reason for.
The drop in that backlog.
Yes, Sameer. Thanks for the question we have seen this very significant increase in customer interest really across the board. If you look at our sales pipeline up 55%.
A significant portion of that comes from the medium and heavy duty motive markets of bus truck rail and marine.
And relatively speaking a very good diversification across the markets as well as across the geographic markets too.
You know as I pointed out in 2020, we did see a number of customers defer capital expenditures and not signing orders as a result, and in some cases of COVID-19, a lot of organizations were reducing their capex budgets too.
Moderate our cash flow you would expect so I do think that had a fairly significant impact, but I think as we look forward what we see as the sales pipeline a significant part of that we would hope to convert into orders in 2021 and 2022. It is important to remember that.
Lots of times that the sales pipeline takes time from.
The time, we were.
<unk> received interest translate that through the sales force different grades.
<unk>, we have in the pipeline ultimately to order book because there.
It's a long sales cycle for these markets. So I think youll see some some very good movement in 2021 and ended 2022 as well.
Understood one last one before I step back in queue.
You listed a bunch of things.
Yes.
In New York.
That acquisition then.
Upgrades.
So should we what is the budget for these.
Our investments and is it mostly going to be operation operating expenses are there any capital expenses associated with this investment as well.
Yes, certainly on the product innovation side.
Referred to that that would be in the operating budget in terms of production capacity expansion of localization.
There could be additional capex spend as we look to deepen our manufacturing presence in China and Europe for example.
No dollar amounts specifically that we can share today.
And then as we look at M&A of course that would be investment of cash and potentially stock as well for potential transactions.
Got it thank.
Thanks, a lot for taking my questions sure.
The next question comes from Rupert <unk> with National Bank. Please go ahead.
Good morning, everyone and once again congratulations on your retirement, Tony you all the best Thank Rupert.
I'd like to start with the XP.
Expectations for R&D. This year can you talk about what we may see in our R&D expenditures and and if you can give some color on the activities are going to focus on this year and maybe expected deliverables you could see this year from your R&D program.
Sure Riverstone here, yes, so the R&D.
Total budget from like looking at 2020 over 21, we do expect to increase our investment in the Opex area, which as Randy was mentioned a moment ago, it's probably going to be up in <unk>.
$20 million plus dollars this year year over year. So it isn't just fairly significantly increased initial kind of flow through our cash opex and reported opex and that investment is across a number of programs certainly the work that we're doing on next generation high power density.
Modules focused particularly on the truck market. That's one particular area. We're also launching some next generation.
EMEA is in stocks this year, so it's across a.
Our range of power levels and across EMEA stacks and modules as I say with other with a focus particularly on the truck.
The truck market, so as I say think about potentially $20 million plus an increase in net.
Our investments in the cash Opex area this year.
Okay.
Include your activities with Mali.
Well that would include some of the development work, yes with moly that doesn't include any.
Any specific investments and if youre thinking about it.
As Ben discussed earlier about localization or joint venture that's all to come but yes. This would include the development work on this heavy duty truck program that Randy alluded to in his remarks, yes.
So in your Investor Day, you talked about a three year goal to reduce your costs by 70%. So is it fair to assume that you mean.
R&D expenditures. This year are in programs that are going to be over the next three years and maybe we shouldnt expect too many deliverables in the 12 month time frame.
Yes, when you when you look at.
A couple of things when you look at the Mbas and plate work that we're doing we saw some very good progress last year and in fact, our product cost reduction in 2020 was higher than our plan. So the actual realized cost reduction was higher than planned for.
At the stack level in 2020.
And when you look at.
The investments are.
In 2021.
There will be developments that are crystallized and we'll be able to share in 2021.
A significant portion of the additional spend incremental spend is really around acceleration and also around expansion of the product portfolio with different power ranges and remember now we're focused on bus truck rail and marine so each of these markets in some cases have different market requirements. So.
Really trying to address the unique market requirements at the module level, while continuing to drive standardization at EMEA played in stock level.
There will be announcements this year on product improvements on cost reduction at.
At the stack level and at the module level, but you are right some of the more earlier stage R&D activities.
Do take.
Crossover into multiple years, and certainly with the three by three plan our cost reduction for 70% cost reduction over that into 2024 timeframe. There are clear timelines and deliverables and each each year and I'm very confident about the progress we're making against that.
<unk>.
Okay, great. Thanks for the color and then secondly, just a quick follow up on China.
Closures to highlight as you still have some optimization work to do.
We're not shy of dollar JV on the <unk>.
On the production side, just wondering if you can give some more color on what activities you have left.
China.
Yes, so the key areas for optimization are really are around yields on fleet Assembly.
The production of plates, we just in December and into January have now achieved yield results that are consistent with what we're seeing in Vancouver are there are some.
Pieces of equipment that some suppliers are making some small changes to that should even help that further so I actually believe we will have higher yield from the <unk> Ballard JV then we will see here in Vancouver in the coming months. So thats very encouraging. These are minor adjustments, we're talking about here and nothing major in terms of <unk>.
<unk> our spend its really about fine tuning.
I think the more important really deliverable is the unlocking of that market to get the policy framework clear. So order flow can can be released in production can scale.
It sounds like you have some time for optimization, while youre waiting for those policies to come through.
Anyway I'll leave it there thank you very much.
Yes, Thanks, Rupert and one thing I would note too is looking at our own yield results.
In Vancouver over the last number of years, where we have the higher production runs higher volume production runs yield results are higher so.
Looking forward to seeing that occur in the JV as well.
Alright, thank you.
The next question comes from Pearce Hammond with Simmons Energy. Please go ahead.
Curious Hammond your line is live.
Sorry, I was on mute.
Thats on your 2020 accomplishments and Tony all the best.
In your retirement alright.
Great. Thank you.
In the earnings release.
Very clear.
Can expand your geographic focus beyond your three core areas of China, California in Europe. This year what markets are you looking at what are some of the criteria for entering those markets does it have to do with subsidies and market structure.
And then lastly would this be entering with a new JV partner or an existing partner. Thank you.
Yes, Pearce thanks for that so we are looking at a couple of new geographic markets I commented on some progress that we've already made for example in Australia, where we're seeing progress in New Zealand I think youll see something on that fairly soon and.
And India is a market that we're seeing very strong interest coming out of the hydrogen fuel cell space at this point and as we kind of look at markets. We think about whats the policy framework can support.
Those markets, what's the size of the addressable market, particularly for bus truck rail and marine.
And what's the competitive dynamics and how repositioning those markets. So those are a couple of things that we would look at whether we we say enter those markets, whether we do that independently or with partners.
Every market is different now India is a very unique market. That's a market I think we certainly would look at our collaboration there.
And but other markets like Australia, and New Zealand very easy for us to.
Set up an office with sales and support capabilities, our service capabilities in those markets as well.
Yes.
Morning.
Just to supplement to I think just.
If I could to Randy's comment too I think what we're also starting to see as well as the demand pull from some of our customers in some of the some of the newer markets that we're looking at many of these customers are global by nature, and so will end up being looking at new markets for things like the <unk>.
Mining mining in marine which are truly international market. So I think we'll we may find ourselves following some newer customer opportunities around the world because of where the customers are located as well.
That's great. Thank you for that color.
Then my follow up is.
You've talked a little bit about some other initiatives on fuel cell cost reductions.
But you've talked about but is there any specific like Technicolor scientific advancements that you'd want to highlight today, that's helping reduce fuel cell cost.
Yes, I think we went through this fairly significantly.
During the September Investor and Analyst day, when we looked at different operating sorry different technical parameters that we're looking at today tomorrow and even a number of years from now so things like current density power density operating temperature.
Free start capabilities the different.
Parameters that we currently have and what those targets will look like as we move out in time.
So a lot of activity underway a lot of exciting work that's been done in 2020 as an illustrative example, the ability for us to have senior plates.
To help improve power density was a pretty significant development for us in 2020, the ability to have new materials in some cases thinner materials or lower cost materials or materials with higher performance.
There's a lot of work that needs to be done and in many cases actually working collaboratively with the supply chain to help them with their specifications in order to improve their material set.
Excellent. Thank you for taking my questions.
Sure. Thanks.
The next question comes from Michael Glen with Raymond James. Please go ahead.
Hey, good morning, and congratulations Tony.
On the retirement.
Thanks.
Just to start with Randy you do seem to be speaking.
More favorably or optimistically.
For this China roadmap I'm, just wondering if there's anything in particular driving that and as we see that information come out or are there particular aspects of that roadmap.
Roadmap that youll be looking to seek.
Yes, I think there are a couple of important developments and even in December China released a policy document that.
Really goes to what they call encouraged industry. So.
The fuel cell and she has now been designated as an encourage industry, which is really really means that they're supporting the localization in China of international companies and those companies in theory should be treated very similarly to domestic players.
And you can do that without having a JV controlled by a Chinese partner and so as we think about.
Opportunities for continued.
Value chain expansion in China, that's a very encouraging development for us.
The other thing is just having spent six weeks in China, you get to see firsthand the momentum in that marketplace. While we clearly had a stall out in China over the last year because of the policy landscape that hasnt changed.
The enthusiasm and excitement in the number of companies that are now entering as supply chain potential supply chain partners and that to me was very encouraging because we are seeing.
Let me just use catalysts as an illustrative example, a number of new catalyst companies that are looking to move into this space and are working we're working with now collaboratively to help them.
Design, the appropriate catalyst that can dramatically improve.
Improved performance and lower cost so theres a lot of work going on in the supply chain.
That is very compelling and then actually seeing vehicles on the road, which you don't see anywhere else in the world in any scale at all visiting I think I was in 10 different cities, probably five cities other than I actually saw vehicles on the road. This is.
They are very compelling.
And so theres a lot of activity going on.
Got to meet with many politicians and policymakers at very senior senior levels.
And I have very high conviction level on.
The growth, we're going to see in the China market and a very high conviction level on the role that <unk> Ballard will play going forward.
Okay, and just any like specific aspects that you're particularly looking for as that as that.
Matt comes into farm is there is there are certain aspects that you're hoping will be contained in that.
Well I think.
They probably won't be any surprises in my opinion in terms of the next phase. The question will be which demonstrations are awarded initially and I think there's probably an understanding at this stage that at least three regions will be included we expect that to be Shanghai, Guangdong and Beijing.
And.
Those are the three regions, where youre seeing a lot of support in fact, Shanghai just recently issued.
Another policy document supporting the deployment in scale of fuel cell vehicles. So I think that's a very attractive marketplace.
And there are other policy frameworks that will be announced I believe in 2021 beyond this cluster demonstration that's being financed through the Ministry of Finance I think youll see other developments coming out of the Ministry of Science and Technology. For example that will support deployment of fuel cell vehicles.
In a very substantive way.
Okay and just.
In terms of the recent meetings that you had with <unk>.
With your with your JV partner like how have they given you any insights into how they view the ramp how they expect the ramp to take place.
In terms of volume and just in terms of something you mentioned last year on a conference call.
Did you happen to have the discussion with them about a potential IPO of the <unk> Ballard JV.
So we discussed both while I was there.
And we are you know theres a lot of interest right now in the China market for fuel cell and hydrogen companies coming to market.
Factors the company currently going through the IPO process.
We fire Shanghai Reinventing fire is currently going through the IPO process in China that's.
That's a very good test case.
We're studying that case with a lot of interest of course, so yes, I would say there is an alignment of interest and view on long term looking at the opportunity to IPO the vehicle.
When to do that and what the right circumstances are will be.
Things will continue to discuss on.
On the production ramp.
We have a couple of different scenarios for 2021, and 2022, depending on when and how the policy framework gets clarified and so.
Hopefully that will be soon Congress is meeting currently in Beijing right now there are expectations that coming out of Congress there should be more clarity on this when the policy gets announced.
Difficult to know for certain.
But if that gets announced soon I think that will add more certainty and then we can trigger one of our.
Different scenario plans that we have at the JV.
Okay. That's great. Thanks for taking the questions yes. Thank you.
The next question comes from Aaron Macneil with TD Securities. Please go ahead.
Hey, good morning, all policy around the liner listening congrats on the new role, Tony John and everybody else and congratulate you again on here.
In retirement.
Thank you.
Randy.
You referenced it in your prepared remarks, but based on the press release activity in Q1, it seems like the cadence and the magnitude of order flow has increased and.
And would you characterize this as sort of a lumpy.
Group of other announcements just based on pent up demand due to COVID-19 or can we view this kind of pick up in the first quarter or something.
More sustainable and indicative of some of the broader secular trends as it relates to.
Fuel cell commercialization.
Yeah, I think the history of the industry has been lumpy announcements very project based work right and.
And I think Youre right that we've seen here recently and increasing in cadence and I think relative importance of some of the announcements as well and the indicators at some of those projects could lead to longer term volumes as well.
When you're meeting with the Counterparties right now I just recently met with CP for example is and.
Got to hear directly from them their vision on <unk>.
Decarbonising locomotives and just the passion and the interest that the Counterparties have today is really quite different than you would have seen two or three years ago.
And.
That's reflective of.
At the board level these are important issues.
<unk> investing is really driving a lot of this as well in my opinion across a number of different markets.
So I think the commitment level to decarbonize is much stronger and the understanding of the role that hydrogen can play to Decarbonize is also much stronger.
I'd like to I'd like to hope that this is a <unk>.
An indicator of what will happen going forward, but I think history has taught me not to be so.
Bullish about that quite yet.
I do think that the sales pipeline rather than the announcement order the sales pipeline to me.
Is a.
More a stronger indicator of where the business is headed than necessarily the timing and lumpiness of press releases.
Understood and then I know this has kind of been brought.
Brought up already as well.
Can you say, how your backlog is broken down in terms of.
Fuel cell sales and then the technology solutions piece.
Are those different sort of buckets moving in different directions, right now like could you give us any sense of.
Kind of.
That looks like in more detail.
Yeah, I think actually in my mind that the sales pipeline is probably a better indicator of where the trends are as compare to the order book and if you look at the sales pipeline. It's interesting a couple of years ago, we targeted.
China have diversification of effectively 40% from China, Slash APAC, 40% from Europe, and 20% from I'll call. It North America rest of World and if you look at the sales pipeline.
Relative geographic split is very similar to that target we had set some years ago.
And then of course, we're seeing a very heavy weighting.
As you would expect.
Bus truck rail and marine we characterize those four markets in that order because we believe those are the that's the sequence of adoption for those markets bus truck rail and marine and we have what we call the scaffolding effect, whereas the bus market.
To see penetration and scaling.
And then the commercial truck market will add on top of that and as the bus and commercial truck market. Both scale. The rail market will add on top of that and sequentially with marine and what I'm, what's been surprising to me is the rail and marine market.
We will surprise to the upside we're seeing a lot of interest in those two markets.
That's showing up in the sales pipeline and customer engagement that isn't even reflected in the sales pipeline.
But I think for US progress in 2021 on the commercial truck market is critically important we're very pleased with the positioning we have in this market in China.
The fuel cell policy in China is weighted towards commercial trucks if.
If you look at the <unk>.
The number of vehicles with platforms that have Ballard technology certified in that market as well as the <unk> positioning in the truck market in China, that's very encouraging and then the progress we'll make with male in 2021 on the commercial truck market is critically important and then of course there are other activities that we have that there arent.
Those yet so.
I think the sales pipeline is probably a better way to think about it then the order book and that relative geographic split as well as a fairly heavy weighting on the four applications bus truck rail and marine and it really good diversification among those markets is showing up.
Understood, maybe I'll, just close off with a bit of an oddball question, but.
One of your competitors is essentially giving away warrants to its customers in order to incentivize spending.
For obvious reasons this is Bob.
A double edged sword, but as it relates to Ballard are you worried that investors may not be familiar with those details.
Of how that customer engages with major customers.
And how your backlog versus their backlog may differ or are you worried that this model will make that competitor a bit stickier with large potential customers or future customers.
Given our growing and fairly high profile reference base of work.
Yeah, I mean for us.
We're just going to focus on technology innovation product improvement.
Great customer experience.
And make sure we're positioned well in the markets.
I'm not going to second guess what that company did.
Doing very well in the forklift material handling market.
And.
They've done a very entrenched position.
Kudos to them.
Okay, Great. That's all for me I'll turn it over.
The next question comes from Greg Watson Koski with Weber Research. Please go ahead.
Hey, good morning, guys. Thanks for taking my question.
Just wanted to go off a point you just made Randy and seeing an acceleration in the marine market.
I'm just curious can you give us an update on the project.
Going with ABB and then secondly, just yeah.
From the marine market as a whole.
Can you give us your thoughts on it.
Timeline that we could see an acceleration.
Or larger capacity hydrogen carriers as well as the potential or hydrogen.
Hydrogen being uses propulsion for longer haul tankers cruise ships and container ships.
You see in the future, but your updated thoughts there would be great.
Yeah. So the focus in 2021 is to actually get the type approval for our FC wave product, it's a 200 kilowatt modular product.
This will be the first product first fuel cell product that I'm aware of that will have type approval, which means it's specifically designed to meet the rigorous marine.
Acquirements, we've seen a lot of interest from customers and now have.
I think close to 15 orders in the marine market. So it's very compelling.
<unk> had already and these of course are all demonstration projects right now it's very early stage. These customers want to sample these products trial them pilot done.
And then move like we did in the bus market from trials to larger opportunities.
So that's the timeline that we're on right now in terms of.
ABB ABB is a giant in the Marine segment, we're very pleased with the relationship we have with them in a number of these projects we have <unk> involved.
And we'll continue to look for opportunities to expand that relationship.
Work together in terms of.
Propulsive power for larger vessels in my opinion. This is many many years away.
We need to have a compelling hydrogen storage solution.
Costs need to come down as well on the on the product side.
And.
We need to have reliability that at much much higher intervals than we do today. If you look at reliability today for example in.
In 2020 during COVID-19, which was a challenging period, we had uptime or availability rates for vehicles in the field of about 97%.
What we'd like to see that is is we're going to continue to see that number improve where we've had.
Any any issues in the field typically it's been some of the balance of plant components things like compressors and hydrogen recirculation blowers and what we see is that the new suppliers companies like Molly that are entering into the market and looking at developing new balance of plant components with higher.
Reliability and lower cost is going to help address these markets, where reliability requirements need to be higher and we are talking about longer extended range requirements.
So I think those markets are a ways away I'm very encouraged by the work that charts doing.
Looking at.
Looking at liquid hydrogen and <unk>.
<unk>.
Talented company with a lot of innovation and very aggressive on the M&A and strategic collaboration front I think there'll be a key player in this market as well.
Great.
Helpful. Thank you.
And then along those lines.
Talking about the global energy ventures Mou It seems like Asia Pacific is at least the initial focus there.
But specifically to China, I'm wondering what kind of appetite you have seen from China and understanding that it still could be very much policy dependent but.
Is that something that you could ultimately facilitate or even more promote given your presence there.
Yes, great question.
I'm going to suggest probably 10 different meetings I was that.
During that six week period, where people raise the opportunity to collaborate with Ballard in the marine market.
Bianchi River Delta the Pearl River Delta has a number of.
Marine vessels of all different kinds.
With de Carbonization challenges.
I believe China will be a very attractive market for them for the marine segment.
It's an area of activity for us going forward.
Awesome sounds good all right, that's all I got and Tony wish you well in your retirement.
Thanks, Greg.
The next question comes from Rob Brown with Lake Street Capital markets. Please go ahead.
Hi, good morning.
Good morning.
A question on capacity additions I think.
Youre doing a <unk> capacity expansion in Vancouver, where does that give you in terms of revenue capacity and then maybe what's your thinking on adding capacity in Europe in particular.
In terms of timeline.
Yes, so the six Tony Here's where the <unk> capacity.
Expansion, we've discussed as per EMEA capacity.
And here in Vancouver.
And we see that EMEA that capacity investment taking us out through to about 2025, roughly before we have to increase capacity again, so I won't put I'll put a revenue target of revenue number on it because obviously a lot of those mbas or growing into our product and including some.
Shipments to China, but think about capacity through the mid part of the decade.
And then much beyond that we're kind of focused and I'll just focus on EMEA is the incremental cost to increase capacity again.
EMEA is relatively modest we're talking $10 million to $20 million due to increased capacity of a white magnitude on EMEA and <unk>.
Of course.
Longer term about EMEA localization and other markets. The bigger the bigger question I think there was a bigger capital question is more on capacity per stacks and modules. So China of course, we're well situated with the joint venture to satisfy that market with regard to our capacity.
Stacks and modules in other Vancouver, we're certainly capacity size for the next couple of years, but I think we are that's an area that we are looking I think we've talked in the past and one of our potential programs is localization of capacity in Europe as an area of consideration for stacks and modules. So I think it's safe to say because.
Now in 2025, we will need to make some additional investment in stack and module capacity.
Ex China, which has which is volume so and that's the order of magnitude on that.
Relative to replicate a facility to do that could be at a $100 million range for a stack and module Assembly facility, maybe a little higher but that's kind of how we think about capacity over the next five years.
Okay, great. Thank you for that color.
And then it.
Molly I think you talked about some product development milestones next year.
Could we see customer.
Project activity in 2021 or would that be thereafter.
Well, we're certainly involved in customer discussions already with Mali and end customers. So users Oems so.
I don't know what announcements.
The timeframe for announcements I think to be more cautious, we probably say 2022, because the product will be effectively unveiled in 2021.
And so a lot of important work going on to.
To get the product optimized for truck platforms as well as with the right balance of plant components for higher reliability and lower cost.
Okay.
Okay. Thank you I'll turn it over and best wishes I'll add my best wishes to Tony and his return.
Thanks, so much thanks, Rob Thanks, Rob.
The next question comes from P. J <unk> with Citi. Please go ahead.
Yes, hi, good morning.
Looks like some of your oldest Randy were slow to come in for Q due to Covid.
Do you think they were pushed into <unk>.
Simply one.
And order 50 buses from Wright bus and then more orders from grant hole.
Does that put you ahead of schedule didn't <unk> from whether you talk to your war.
And I guess related to that.
For all these buses in Europe, who is supplying hydrogen fueling and hydrogen refueling stations for this and are you limited by how quickly that hydrogen infrastructure, but it's up.
Yes, So let me take the first of all the questions on the order book.
I do think we should expect to be cautious still here COVID-19 has is not finished yet obviously and I think.
In terms of order inflow, we should be cautious for the next couple of quarters still.
But I think I'm very encouraged by what I've seen in aluminum more encouraged by the robust sales pipeline of qualified commercial opportunities we have.
In terms of supply of hydrogen fueling stations and are we limited by fueling stations I think it's important to remember we focus on these use cases, we have centralized depot refueling or don't need to have a distributed refueling infrastructure. So that's an important point to understand many of the end users are already used to have.
A diesel with fueling station at their site and so their operation isn't disrupted all theyre doing effectively is replacing a diesel refueling station with a hydrogen refueling station and so in terms of who is actually typically supplying that there were a number of different companies that have been doing that Lynn day <unk>.
<unk> Air products, the industrial gas Giants, then you have companies like shell and.
And BP that had been active in that market as well.
And then you have some additional players companies like rising in the U K that are supplying a hydrogen for bus and other applications. So a number of different players.
I think what's encouraging is that there is a universal conviction that the cost of delivered hydrogen will go down.
Circa 70% over the next decade.
Great. Thank you for the color.
And then I guess my next question is you know you're really good at making EMEA is an FC stacks.
Bob.
Good day, and that's the same technology for Electrolyze us and so would you potentially consider getting into electric lines of production in the future.
And that will give you some hydrogen capability as well to be a bit more.
Integrated.
Yes, so a very good point to clarify not only really good at EMEA is in place and stocks were also good at modules as well, but yes. You are right. There is some overlap because electrolysis and fuel cell technology are effectively reverse processes and to use some of the same materials.
Like membranes like catalysts like gas diffusion layers for example.
So theres a lot of merit to your to your commentary.
We are not looking at developing electrolysis Greenfield in house.
We would consider strategic collaboration and an M&A opportunities on the electrolysis side, but but we arent looking to set that up internally on a standalone basis.
Thank you very much.
Great. Thank you.
The next question comes from Craig Shere with Tuohy Brothers. Please go ahead.
Good morning, Congratulations on all the commercial progress lately.
Okay.
Just wanted to dig a little deeper.
Aaron's order flow and Greg's maritime questions.
If I'm understanding it correctly, the Canadian Pacific freight train in the global energy ventures hydrogen.
<unk> opportunities.
Like step changes from what you laid out in your September Analyst day, 2030 Tam outlook.
Of the multi fold increase in unit kilowatt requirements.
<unk>.
If these initial demonstrations work out.
Material can those markets become and how soon do you think we'll know if those demonstration projects are working out.
Yeah. So great question I think as we look at these markets. There is no doubt in my mind. These markets will be Decarbonize and then you say, okay. How can the rail market be Decarbonize analysis use locomotives in North America as an illustrative example, it's something like under 1% of locomotive.
<unk> is electrified in North America. So you'll have two options you can go with overhead catenary wire, which is very expensive or you can look at hydrogen.
My opinion, the only two viable options for Decarbonising mobility.
Rail mobility in North America for freight so I think the market opportunity is compelling.
And if you look at markets, where I think the price of <unk>.
Oil prices cotr pricing and cost will increase over time that could be quite additive to the model as well.
I think from a <unk>.
Market adoption perspective in our sequencing perspective, you should think about these pilot projects roughly taking a couple of years two to three years.
What I would suggest is you will see likely.
The CP locomotive demonstrated in 2021.
And then you'll see over a two year period that trial and results from that trial and what we've seen is that.
From the bus our experience from the bus market is at once users get comfortable with the technology comfortable with the safety protocols and comfortable with.
Working with.
New technology from an operator perspective like bus drivers or rail operators.
Usually they are very excited about it.
I think this is a <unk>.
Both of these markets, we characterize the size of those markets. During the September conference call. I think we were very conservative in that characterization.
What I've seen even since September suggest to me those numbers are probably up fairly muted.
Great.
And digging deeper into.
The fuel cell truck market.
It seems more than the others were just talked about the competition is just simply heating up.
Yeah.
Westport recently announced they are.
Hydrogen combustion engine effort.
It's working with Renault.
Daimler Cummins recently announced the link up.
Can you elaborate on your male relationship and what you view as your competitive positioning.
The pending hydrogen fuel truck marketplace.
So I think that's a fair observation we are seeing of course, many players rush to this market and why because it's an attractive addressable market that fuel cells are uniquely positioned to address.
And so yes, we are seeing an increased competitive landscape that validates.
Our thesis for some time on the attractiveness of this market.
I think it's important very important to understand is that Ballard has already proven the durability of our fuel cell technology in the field.
So as we mentioned earlier over 70 million kilometers of in revenue service of now 3300 buses and trucks in operation.
No one else no one else has that type of installed base for buses and trucks.
And if you look at some of the units we've had in the field operating in some cases over eight years, we have seen 38000 hours of durability on same fuel cell stack. So these are industry durability records and we're not talking about the passenger car market here, where you need five.
Maybe up to 10000 hours of durability, we're talking about a market, where you need 30% to 40000 hours of durability and so we've proven that out in the field not has allowed exercisers that concept.
I think as you look at it.
Brands looking to put technology.
Into their vehicles.
They're going to want to make sure they have not just safety.
And reliability, but also the durability for a total cost of ownership. So I think we have a significant advantage on total cost of ownership because of our durability proven durability and I also think if you look at the moly relationship.
And their positioning in the commercial vehicle market and what areas they have expertise and it's highly complementary.
To the work that we can do to increase performance and reduce cost on the stack.
And if you look at some of the balance of plant components that there.
Currently designing and will be launching an integrated into our.
Advanced fuel cell engine for the commercial truck market in Europe, I think it's a sighting exciting collaboration and if obviously compare it to other collaborations I think it should be very strongly positioned.
Right. Thank you and my last one.
The order book at year end was almost $118 million with 83 and a half to be delivered in 2021.
But since year end two point in prepared remarks, you announced the Canadian Pacific trade opportunity the global energy average interior opportunity the UK passenger trading opportunity and the bus orders with rifles, and Solaris and we're kind of just amazing just those combined might be 11 million.
And orders.
Could your order book for 2021 delivery already to be approaching $100 million right now as we speak.
Yeah to me what I would prefer to focus on is Directionally, what does the order book going to look like perhaps at the end of 2021, and I think with the sales pipeline activity. We have we expect to see some great conversion in 2021.
But I don't want to in any way suggest what the 2021 outlook on revenue is going to be just just because with COVID-19, and the early stage of the market.
Our position is not to provide financial guidance.
Okay. Thank you.
The next question comes from Jonathan Lamers with BMO capital markets. Please go ahead.
Good morning.
Most of my questions were asked.
On simplifying the customer experience could you expand on what the customers are looking for there.
What ballard would be looking to acquire or could develop in house.
Yeah. So great question, Jonathan basically what we wanted to do is simplify the ability for customers in.
And here I'm thinking of vehicle Oems and then ultimately end users, but at the vehicle OEM, how do they integrate a fuel cell module into their vehicle platform, how do they integrated into a powertrain and then onto the vehicle itself.
So today, our scope of work is typically to provide the fuel cell engine. They need do the vehicle OEM need to take that engine per.
Sure it up with a DC DC converter paired up with the storage solution integrated into an electric powertrain.
And then also make sure that the packaging for everything into their vehicle platform is effective and efficient as well.
And in some cases customers have that in house capability and other cases initially they are using cyst third party systems integrators.
And really what we wanted to do is simplify that experience for them to bring more scope and importantly to optimize the solution. So as an illustrative example.
By the way I Should've mentioned that package also includes batteries as well so as an example, what's the right.
DC DC converter for certain application, what's the right amount of fuel cells versus batteries for a certain application and use case duty cycle and so we wanted to provide more value and simplify that experience for the customer to reduce customer friction points and enable and accelerate adoption.
While also getting more value for Ballard in the process.
That optimization will also lead to my opinion to cost reduction.
Alright. Thanks.
And one question on China Randy.
You mentioned that your trip increased your confidence that the.
The <unk> JV will play a meaningful role.
As the market growth.
Did you uncover any updated sense on the competitive dynamics, whether the competitors products will meet the technical requirements needed to qualify for the subsidies as well as.
Salaries products Ken.
I would say it was the opposite I actually had the opportunity to meet with a number of companies that could be competitors to Ballard.
And came away.
Recognizing they have a lot of work to do to catch up.
Thanks.
For Tony.
On the technology solutions business. The Audi program appears to be winding down from a revenue contribution perspective are there any replacements for that business on the horizon.
Yes, and Youre quite right so the <unk> flow.
We've announced previously that program is starting to reach the end of its TFS.
Graham life and so yeah other revenue has ramped up.
I will go back to the pipeline and referring to the pipeline Randy mentioned earlier, we do have a fairly significant number of <unk> programs that are in the pipeline at the moment.
Hopefully, we'll be able to convert some of those over the course of the year. So nothing that I think we can point to or would want to point to at this particular point, but.
Lots of interest coming from different markets.
Kind of talked about some new and evolving and developing markets. Some of those could generate some additional engineering service NPS programs in some new markets. So hopefully we'll have more to we can talk a bit more specifically about some of these this year, but there is a decent amount of TFS in that pipeline that Randy mentioned.
Do you want to supplement or yes, I think one important point to is we've had a significant portion of our engineering labor force allocated against our technology solutions programs and for US the ability to actually reallocate some of that talent towards some of the in house programs, albeit.
Increasing our cost structure is I think a really interesting opportunity because this again feeds into the point about acceleration.
Okay, and one really basic question on the sales pipeline.
The dollar base for that 55 per cent increase.
Uh huh.
Like just a bit larger than the Companys consolidated sales.
How should we be thinking about that.
<unk> higher.
Yes, Okay, yes.
I'll leave it there thanks.
The next question comes from Mac whale with <unk> Securities. Please go ahead.
Thanks, guys for letting me ask the question I know, it's going on a bit long here.
Quickly.
Randy you talked about pent up demand in China, when the when the announcements come out do you think there is enough time left in 'twenty, one where you can deliver into that pent up demand. So that may be your your estimates of what the market would be in 'twenty, one might still be like you say a year ago might still.
Valid or do you can you not just catch up.
Great just a couple.
Yeah.
First of all.
We need to be.
Hi.
In some cases.
Policies may be structured.
Yeah.
Yes.
Okay.
Yeah.
Higher subsidies in order to get access to those subsidies.
They are alluded some sales in certain pockets as well so there could be a range.
In some case to use some other higher subsidies that might become available. So we'll have to see how the policy is structured and whether that is.
Rapid deployment first of all the second thing is that of course, the JV does have some inventory and really what we want to see of course initially.
More deployments out of the JV debt relieve that inventory and allow us to recognize.
Deferred revenue.
So that will be helpful.
And then of course, the third will be as we move through that inventory at the JV and then move into additional sales beyond that triggering more EMEA volume purchase orders from Ballard to support the JV activities. So that's the way I would think about it okay.
Okay.
Having followed the state for two decades now.
It's interesting the comment that you say about the competition not being ready I can wholeheartedly back that up if that matters to anyone but it's interesting to me I would say your position than its one in which.
You're willing to allow.
Alright.
Trade than in other way you can disagree, but it's almost as if your you are not that threatened by what you see.
Is there not a risk.
Got you that a customer try some competitor they come away disillusioned with the capability of yourselves and the industry loses.
Hey, believer as opposed to Ballard, losing a customer.
Could you not take your big balance sheet.
Pricing drive demand win big market share and dominate the industry and a high profit happy customers I'm just wondering how you see the balance sheet in that game.
Yes, I want to clarify something the question about competitors and where they what status there at all.
I again believe we have a strong leadership position in these medium and heavy duty motive markets.
And I was commenting specifically on some of the development activity company development activity and product development activity in China of course, there are other competitors Toyota Hyundai.
Daimler et cetera.
Again, most of them had been focused on the passenger car market are now pivoting and if you look at the timeline for example for cell centric, which is the JV between Daimler trucks and Volvo truck. The timeline is many years after our timeline with Mali. So we're I think we're well positioned there.
Of course, you have other companies Bosch for example is active and Cummings is active so there are credible competitors here I don't want to be.
Dismissive of the other competition to be clear.
But what I do think is that.
You mentioned, some customers potentially work with others and experience have bad experiences we have seen that over the last number of years and those customers are now with Ballard.
If I could.
There are quite a few examples of that particularly in the bus market, where they've tried others and there's a reason we have.
Over 85% market share.
Because not only we are providing a product that.
Has the highest performance in the field, but we take care of the customers from a customer service and customer experience perspective.
So.
I think.
As we look at opportunities going forward I think the commitment level from customers.
It isn't so.
Vulnerable that if they have a bad experience with a potential supplier thats going to turn them off the market I think it will enable them to turn to others and if they are having that experience as they are always welcome to come to Ballard.
Great. Thanks, Thanks, Randy.
And just.
Depreciation, but thats you Tony over the years.
With all your hard work and any insight so thanks and good luck. Thanks.
Thanks, Mike appreciate it.
This concludes the question and answer session I would like to turn the conference back over to Randy Macewen, the CEO for any closing remarks.
Great. So the call went a little longer today and I appreciate your patience for that so thanks to everyone for joining Paul Thompson, our new CFO effective March 29, and I look forward to speaking with you in early May when we'll discuss our results for Q1 2021.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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