Q1 2022 Ballard Power Systems Inc Earnings Call
Thank you for standing by this is the conference operator.
Welcome to the Ballard power systems first quarter 'twenty tweet you results conference call.
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I would now like to turn the conference over to Kate Charlton Vice President Investor Relations.
Please go ahead.
Thank you operator, and good morning, welcome to Ballard's first quarter 2022 financial and operating results conference call.
With us on today's call are Randy Macewen, Ballard's, CEO , and Paul Dobson 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.
We will keep our prepared remarks relatively brief to allow sufficient time for questions I'll now turn the call over to Randy.
Thanks, Kate and welcome everyone to today's conference call. We joined today's call with the continued confidence that our industry backdrop, and a growing global commitment to the energy transition.
Our climate crisis, coupled with the recent re prioritization on energy security are forcing administrations into action.
The European Commission is taking clear action to boost hydrogen technology scale up and deployment.
As a continuation to the Repower EU announcement earlier, this year, which outlined plans to quadruple the EU as previously planned hydrogen supply by 2030. The commission last week announced plans to increase its annual electrolyze or manufacturing capabilities tenfold by 2025.
This would increase annual green hydrogen production from one seven gigawatt to $17 five Gigawatts. We view this as an accelerant to support the adoption of fuel cell electric vehicles across Europe .
In the first quarter Ballard delivered $21 million in revenue and 19% increase from Q1 2021, while also securing new orders totaling $27 8 million.
This activity reflects an increase in our order backlog to $99 8 million at the end of Q1.
Our order intake was largely driven by increased customer activity in Europe in both truck and bus markets.
Ballard focus remains on the large addressable markets of medium and heavy duty mobility, including bus truck rail and marine as well as select stationary power generation markets.
These are the applications, where our hydrogen fuel cell technology has the strongest value proposition.
I'll briefly talk through our Q1 progress and highlights and key applications and regions.
We continue to see strong customer engagement in European and U S bus markets driven by repeat orders from key customers, including new Flyer and Solaris as.
As of the end of Q1 Ballard has deployed fuel cells across 17 different European countries and approximately half a dozen U S states.
We anticipate increased market expansion as European countries rollout strategies and policies to support inter security and decarbonization in the U S. The federal government increased low no funding for bus fleet operators to $1 1 billion six times that of the previous year to support zero emission bus rollout.
In the truck market, we continue to make progress with our partnerships today at the ACG Expo in California, Linamarin Ballard announced the unveiling of our concept hydrogen powered class II truck chassis.
The technology demonstration platform will be showcased this week and displayed in a Ram 2500 truck chassis.
Testing on the new platform is underway and will continue in 2022 and 2023.
Our development program with Moly continues on schedule with integration of Ballard fuel cell module and testing on the concept engine ongoing and expected to continue throughout the year.
It also continues to invest in partner with geographically diverse vehicle integrators to adjust different market demands and stages of maturity in the truck sector.
Today, we announced we better do a strategic collaboration with which the motor chemical water group and Bravo Transport services, which is Hong Kong Island.
Island Transit largest transit operator to accelerate the adoption of commercial fuel cell buses in Hong Kong.
Temple water owner of Bravo transport together with Ballard co investing funding for wisdom, a company that designs and manufactures zero emission commercial vehicles. These funds will support wisdoms expansion and development of its hydrogen zero emission fuel cell truck bus and special vehicle offerings.
For international markets.
Wisdoms hydrogen refueling vehicle product lines will exclusively deploy ballard's, leading Pam fuel cell technology with module supplied by the way <unk> Ballard joint venture in China.
As we discussed on the Q4 earnings call. We continue to look at new routes to market to accelerate adoption.
Leveraging parallel go to market strategies by partnering with both Oems and tier ones on the one hand and vehicle integrators on the second.
This collaboration announced today with wisdom is our first investment in a vehicle OEM and positions us to participate in the growing Hong Kong market, while supporting demand for products from the wage hike Ballard joint venture.
In rail we expanded our scope of work with CPA, Canada Ballard will support the expansion of Cp's hydrogen a locomotive program from one to three locomotives with expected delivery later this year.
In Europe , Siemens mobility completed the production of the purpose built 400 kilowatt Mario plus H train and last week announced its first rollout the train and if new infrastructure are intended to replace multiple unit diesel trains and commuter and regional transport and bring rail related Sidoti missions.
Two zero.
As a two car train the morale plus H has an operating range of up to 800 kilometers as powerful as its electric multiple unit counterpart, the top speed of 160 kilometers per hour.
One key element needed to make hydrogen technology competitive with diesel fuel and daily operation is a fast refueling process Deutsche upon who's been identified.
Hydrogen trains as an important technology in achieving climate neutrality has developed a new method that for the first time enables a hydrogen trained to be refilled as fast as a diesel powertrain.
The fast refueling of hydrogen trains will make the technology competitive and daily operation, particularly the demanding timing a regional passenger service.
Maria will begin operation operational testing on rail this year and is expected to illustrate and our demonstration service in that area in 2024.
We continue to see exciting momentum in the marine market.
Specifically in our current target markets of coastal and inland applications.
In the quarter, we saw growth in our maritime customer base as we received orders from new customers and a project expansion with an existing customer.
We also announced DNV type approval of our FC wave module just after quarter end.
This marks a significant milestone for us as Ballard is the first to receive type approval for our hydrogen and fuel cell from dnb.
Classification removes a significant roadblock and helping the marine industry deploys zero emission technologies and meet global emission reduction targets.
Lengthy and technically onerous approval process gives confidence in our products safety performance and durability for marine applications, and we will accelerate our customer approval time for proposed maritime projects deploying Ballard fuel cell engines.
In off road, a key milestone was also announced by Anglo American launching the world's first hydrogen powered mining truck.
The first of four 290 ton class hydrogen fuel cell mining trucks has now been launched at their local quanta Platinum mine in South Africa. Each mining truck employs a two megawatt hydrogen battery hybrid drivetrain, including 800 kilowatts of fuel cell power.
Each of these trucks when operating with with a diesel drivetrain used 3000 liters of fuel per day.
Converting these trucks the green hydrogen results in a significant reduction in fossil fuel consumption and emissions, particularly when extrapolated amongst amongst full mining fuel cell truck deployments.
As a part of this project onsite green hydrogen production storage and refueling infrastructure has been developed including the largest electrolyze are in Africa, and a solar plant to support the operation of a haul truck.
Years in the making this key project milestone is illustrating the importance of hydrogen and decarbonising heavy duty mobility and help companies like Anglo achieve their carbon neutrality goals.
With a goal of carbon neutrality at their operations by 2040.
And I'll start diesel emissions accounting for about 10% to 15% of their total scope one emissions Anglo plans to expand this initial pilot of four trucks to the entire fleet of 40 trucks at the mine over the coming years.
In stationary power generation, we increased our revenue 450% from Q1 last year for.
For select stationary power applications, we're able to leverage our FC wave technology.
While initially designed for the marine market. Our FC wave module is also being deployed in multiple stationary power applications increased demand from the stationary power market resulted in the largest number of FC module shipped in a quarter.
Now looking at other key geographic regions sales in the European market remains strong accounted for 45% of our quarterly revenue in North America. We continue to see an increase in sales up 47% from Q1 2021.
Strength in both Europe , and North America is primarily driven by follow on orders from key bus customers.
Okay.
In Q1, we saw a decrease in revenue contribution from China compared to Q1 last year. The lack of policy clarity for the implementation of the demonstration city clusters is being exacerbated by Covid restrictions and Lockdowns as we've been.
As has been widely reported many areas of China are seeing another wave of Covid. The recent lockdown in Shanghai and other key centers across the country have impacted business.
While our manufacturing facility in Weifang has not been shut down day to day business operations amongst companies and governments are seeing significant delays.
We're also experiencing shipment delays on our supply chain, but are working to mitigate the impact will continue about evaluate opportunities for Ballard and the <unk> Ballard joint venture to further strengthen our long term positioning across the cluster regions in the near term and post subsidy in the long term.
We've also noted an increase in interest and opportunity in emerging markets outside of Europe , North America and China.
Following the end of the quarter, we signed an Mou with <unk> fuel cell to accelerate fuel cell bus adoption with initial market focus in South Korea.
<unk> active in developing solid oxide fuel cells for stationary and marine applications recognizes <unk> fuel cells as the technology of choice for mobility applications and a new growth engine for their organization.
Under the Mou do sonne will integrate ballard's fuel cell stacks, it's hydrogen fuel cell bus powertrain and South Korea with an aim to have fuel cell buses on the road in the next two years.
<unk> is an experienced and capable organization with strong market position in Korea opening a new geographic opportunity for Ballard with a strong partner.
<unk> decision to utilize Ballard's pen technology is a strong endorsement of our industry, leading position capabilities underpinned by leading on the road experience.
We continue to deploy developed and prioritize strategic partnerships to expand our market penetration and accelerate the adoption of fuel cells across our medium and heavy duty mobility at stationary power market opportunities.
Shifting to more color on our financials.
In Q1, we experienced continued downward pressure on our gross margin. This compression is consistent with our 2022 plan, reflecting expected changes in our revenue mix selling prices and cost structure.
On revenue mix, we have a heavier weighting of moderate module product sales, including some new modules that are early volume production.
On selling prices, we've been pricing certain low volume customer pilot projects based on securing platform wins with strategic accounts.
On cost fixed overhead costs are elevated as we invested in advanced manufacturing and production capacity expansion.
Like others. We've also seen some inflationary cost pressures in our supply chain and freight costs.
While we expect compressed gross margins in the near term we are confident in margin expansion in the mid to long term driven driven by important progress on our product cost reduction program.
Also as higher production volumes and customers transition from pilot projects to commercial appointments and we continue to progress on our product development cost reduction program, we expect to see a concurrent gross margin expansion.
We ended the quarter with a strong balance sheet and cash position of $1 1 billion.
Last quarter, we initiated 2022 guidance on total operating costs and capital expenditures to provide clarity on our capital allocation plans and priorities our guidance remains unchanged and on track to spend between 140 and $160 million in total operating expenses this year and between $40 million to $60 million in cash.
Capital expenses, our strategy is to invest ahead of the curve.
Technology products capabilities and customer experience and we believe this will position the company for significant market share as the adoption of hydrogen accelerates over the coming years.
And on the technology and operational front, we continue to make important progress in our three vice restock cost reduction plan and remain on track to achieve our 2024 target.
Corporate development work continues to be a strategic priority in 2022, we are evaluating potential acquisitions investments and partnerships to improve our competitive positioning expand our product portfolio and solutions across the value chain simplify and enhance customer experience accelerate fuel.
Cell adoption target markets and facilitate business scaling.
<unk> business model is designed to leverage our core fuel cell technology across multiple large and attractive addressable applications in medium and heavy duty mobility, including our key use cases and bus truck rail marine and off road as well as stationary power market.
<unk> we.
We believe this business model will provide us with a long term scale and unit volume advantage, which will translate to a cost advantage and complement ballard's technology leadership and vertical integration.
We believe this business model provides dollar with a compelling revenue scaffolding effect as well as diversification resiliency in our revenue streams for the long term across products applications regions and customers.
So where are we today.
<unk> sits at the convergence of highly supportive drivers with a disruptive fuel cell technology with.
We see a context with powerful market drivers.
Increasingly supportive policies, the continued and expected growth of secure and low cost renewables and.
An encouraging outlook for the adoption of green hydrogen.
Growing market and customer engagement is all stakeholders lean into the energy transition.
Improving customer economics, given higher costs for carbon based fuel.
Platform wins and progress on pilot projects with strategic accounts across all of our verticals.
Growing field deployments, leading field data complementary strategic partnerships and a strong balance sheet supporting our increased investments.
It's an exciting context as we continue to make important progress across our business to fully realize our purpose to deliver fuel cell power for a sustainable planet and create value for our stakeholders, including shareholders customers and employees.
With that I'll turn the call back to the operator for questions.
Thank you.
Now begin the question and answer session.
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The first question comes from Rupert <unk> with National Bank.
Please go ahead.
Okay.
Your line is now open.
Okay, sorry technical difficulties.
With the the wisdom deal that you announced today can you talk about how that has come together and is there an existing relationship between way shy in this group.
Yes, Robert Thanks for the question is actually interesting context on how this came together so.
Effectively we've been looking at the Hong Kong market for some time.
And as you know actually in your own personal experience a previously Rupert the Hong Kong market has been looking at hydrogen fuel cell technology for 25 years.
And so spending time with the Hong Kong transit operators area, including Bravo we.
We were introduced to wisdom as a company that would be very well positioned to be a supplier of fuel cell buses to the Hong Kong market.
So through that introduction with temporal water is now effectively a controlling shareholder both a bravo and his wisdom.
We saw this opportunity to really embed Ballard fuel cell technology into these platforms that will be designed for buses and trucks by wisdom for international markets, including Hong Kong and I think we'll see very important progress in the Hong Kong market.
In the coming 12 to 24 months.
So as Wayne Chai involved directly in this other than say through the Ballard Wade Jurney joint venture.
Yeah. So this is a company wisdom that manufacturers their buses in China.
So and the founders of the company have prior experience in the wage hike organization. So they are well known to wage high.
And I think this is a great opportunity for the <unk> Ballard joint venture to have the opportunity through Ballard to effectively see product moving into international markets.
Okay. Just one final follow up on essence whats the timeline on this they have any expectations for say first deliveries of prototypes and then potential commercial deployment.
Yes, we'll wait for a wisdom to take the lead on their public disclosure, but youll see I think an important demonstration project in 2022.
Excellent I'll leave it there thank you.
Yes excellent. Thank you.
The next question comes from Aaron Macneil with TD Securities.
Please go ahead.
Hey, good morning, all thanks for taking my questions.
Quick question on one of your partners.
We announced a big reduction of their full year EBITDA guidance.
And cited issues like shortages of microprocessors.
I guess I'm just wondering is this microprocessor issue pervasive across all of your best customers or do you see it as an isolated incident and.
Additionally, like when do you typically recognize revenues.
Wellness.
Shortage impact your near term revenue.
Yeah, Erin thanks for the question.
First of all I think it's important understand that whether its bus truck rail marine all the applications.
There are supply chain impacts impacting all verticals and certainly Paul and I. Just spent a couple of weeks in Europe and met with a number of bus OE Oems as well as customers and other verticals and on the bus side. There are two key takeaways for me one was the very strong sentiment.
That we are seeing from those Oems for the adoption of fuel cell buses. They are selling both battery electric and fuel cell electric typically and they're seeing growing demand for fuel cell buses based on real world experience from some of the transit operators.
And I would say the sales activity are at record levels for the bus Oems as they look to deploy zero emission and particularly fuel cell. So that came through very loud and clear with all of the bus Oems that we met the second thing we heard was that.
We're all struggling with the supply chain.
And it's not just microprocessors, it's even in some cases could be hoses or or a very modest part of the bill of material of their bus that we're having impact on delivery schedules. The second part of your question in terms of when do we recognize revenue we typically for bus customers recognize revenue.
When we ship the product and the ownership of that asset turns over to that customer.
So.
I would say that there have been delays in the bus market on a couple of fronts. One is just the.
We've seen ongoing delays.
For transit operators to conclude their tendering processes and their government funding arrangements and then as.
The bus Oems look to deploy a number of them have had challenges on the timing of the projects with the supply chain and this could be exacerbated when you look at what's happening in China currently and many of these.
Customers of ours do have.
Components that they're procuring from China.
Understood.
Randy This is kind of an oddball question. So so bear with me, but you mentioned the trend towards a heavier weight of product sales.
Like in general.
As this industry moves closer to commercialization partners and collaborators are less likely to sort.
Sort of fund your development initiatives through the technology.
Solutions revenue pathway like we've seen in the past with audience.
<unk>.
We've also seen you invest more in R&D. So my question really revolves around whether or not this.
Revenue stream is sort of a relic of the past are.
If we might see it come into play in the future and is it deliberate on your part to sort of maintaining control over the intellectual property or.
Just a decreased willingness of your partners to fund the R&D, yes.
Yeah, Aaron I think youre touching on a couple of key points. So one is we made a conscious decision.
We invest strategically and own the IP and be able to sell that technology to a number of customers rather than have it being owned by one customer and respecting market opportunities. So that that's a strategic choice I do think we're going to see opportunities in what I'll call later stage markets for example, aerospace.
Where we don't see near term deployments of that type of technology. So those are the type of opportunities where I think you can see TFS activities being engaged but I think the trend clearly is towards Ballard moving to <unk>.
Situation, where the revenue is dominated in heavily weighted by product sales and Thats always been the plan.
And I think the transition of TFS is a smaller percentage of revenue.
We will also see a transition of the Ts revenue to newer later stage markets as well.
Okay perfect. That's all from me I'll turn it over.
Thank you Eric.
The next question comes from Craig Shere with Tuohy Brothers.
Please go ahead.
Good morning.
So Robert covered a lot.
The wisdom deal.
Do you have any indication of total prospective investment.
The size from Ballard.
Yes, I'm not sure whether wisdom will be announcing anything in terms of the size of the investment round that they are completing in things like valuation et cetera for us. This is not a material investment and we're a minority investor here and wisdom.
Gotcha.
You made reference to the stationary power sales picking up I guess, you're up the way it is.
Now moving into that market.
Well look to be the best.
Quarter in some time.
Do you see this foreshadowing.
More material.
Actual commercial traction not just you know.
Does this work but potential.
To help stationary power leads the charge off on the top line over the next 18 months.
Yeah, Great question, Craig and I think Theres, a couple of things I'd highlight about stationary power, it's the opportunity for us to get more leverage off the same technology and products that we're designing for these medium and heavy duty motive applications with strong value proposition. So we like that aspect of the business model. The second thing about stationary.
Power is that it can it can be there can be very large deployments of stationary power.
So we do see as we move out to 2025 and 2030.
Stationary power, becoming a significant standalone revenue and profit stream for us in the future.
So I do think we will see because stationary power projects can be relatively lumpy or large in scale moving forward.
We will see some volatility I think quarter to quarter in the stationary power market segment, but I think the trend we've seen here recently is indicative of.
New market opportunities, where we can deploy this technology and there's a number of market segments and stationary power.
That are now looking at hydrogen fuel cells.
Really for the first time and so it's a I think it's pretty exciting for us to have this business model and I think it will contribute significant aggregate revenue, but it will vary quarter to quarter.
Great. Thank you.
The next question comes from Leo Mariani with Keybanc.
Please go ahead.
Hey, guys wanted to follow up a little bit on some of the comments around the margins.
Historically, I guess balances had pretty decent gross margins and kind of posted the negative margin here really for the first time.
In many years.
Just I think maybe it cost me a little by surprise here and can you maybe just talk a bit more about your strategy. It sounds like you're kind of selling some of your products.
Below cost in order to kind of grab market share.
And maybe just talk about like is that something that's more of a short term strategy, where you're doing it for a couple of quarters and you think that as we get to the end of the year or next year that kind of flips and you'll start seeing better margins, just maybe explain that limit.
Charlie It's Paul here, So, yes, theres a couple a few different dynamics happening some of which we've mentioned some perhaps not but really the change in revenue the revenue mix more towards products and away from TFS that is having some downward pressure on the margin Ts margins. It's Scott.
Such higher contribution margin than power project products traditionally so that's having an effect. There is also pressure on the contribution margin in both actually power products and PFS as well from from some supply chain higher labor inflationary pressure higher materials costs freight and <unk>.
As we've talked about these in prior quarters, we are still seeing some of that I think the team is actually doing quite a good job managing it and we're building some inventory qualifying new suppliers to help manage through that.
So we've seen some lead times and delivery times get pushed out a little bit in some costs rise but not.
Not by a huge amount so.
So team is doing a really good job there, but overall the biggest the biggest impact is really the impact of higher fixed overheads.
And that increased by about $2 4 million from Q1, 'twenty, one which is about 11 points of gross margin. So that is quite consistent with what we've disclosed before about spending overall and spending ahead of the growth curve to scale up production in anticipation of higher volumes.
Consistent with the guidance, we've given on on higher spending so we are seeing.
Going into the gross margin more upfront investment in people processes and most of our key operational areas to support that growth and advanced manufacturing in operations and facilities as well.
So that's really the biggest thing the other thats half of that sort of the increase in fixed overhead the other half of the fixed overheads as the the non recurrence not receiving COVID-19 subsidies, which we received in Q1 last year.
It was also a small amount of some rent sub leases, which hasn't been renewed as well and thats really the other and then there is also a little bit of increased depreciation for more spending on fixed assets. So as Randy mentioned in his remarks, all of that was as expected and so given those kind of trends and drivers of net increased investment we're.
<unk>.
The gross margin percentage to sort of being the single digits.
This year and so the expansion we are quite confident is going to come when we see higher sales volumes and so those costs spread over higher higher sales and so we are confident that that is going to occur as sales and volumes ramp up.
Leo maybe just to address your question on the customer side and I think it's important to understand kind of where we are as an industry.
Lots of 50 countries now that have hydrogen strategies and roadmaps, but that hasnt translated to clear policy nudges and leavers or early adopters to see a value proposition. So there is a gap in the cost structure today and the value proposition in low vol.
Williams and normally or what we seen in solar and wind and even battery electric.
A number of markets is that theres been policies leavers that help support early adopters to get their deployments out.
And we haven't seen the hydrogen strategies translate yet to those leavers it'll happen, but it hasn't happened yet and so we've consciously over the last six months as we've looked at.
Platform wins and securing customers.
Key brand customers that dominate the verticals that they're in.
We've consciously made decisions to work with our customers who have lean economics on these projects.
To get these projects onto the road.
Have their end users' experiences technology.
The OEM design their platforms around Ballard fuel cell technology, whether that's in bus truck rail and marine.
And as we do that.
We've seen pricing pressure in order to make that happen. So very conscious decision on our part to do that I think it is going to benefit us long term with these platform wins, we as we've said many times before I believe that once we're in these platforms, we're very sticky.
Okay. That's very good color for sure and then just with respect to.
The revenue trend here, which all generally expect maybe your first quarter revenue to kind of beat the low for the year and you think you've kind of slowly creeps up as we get into the second half or any anything you can sort of comment on kind of qualitatively about your revenue direction here.
Yes, I think the history really over the last 10 years supports that.
We typically have a lower portion of revenue in each one in a higher portion of usually 40 60 something like that.
Going to see something similar here this year I think based on the data points we have.
But certainly we can we'll provide additional color at the end of Q2 to see if there's any shift in that.
Okay. Thanks, guys.
Great. Thank you.
The next question comes from Jonathan Lamers, with BMO capital markets.
Please go ahead.
Good morning.
Randy on the Lindmark Valor concept vehicle.
Shown at the <unk> Expo this week.
What needs to happen before the partnership can begin a commercial relationship with an OEM to produce vehicles.
Okay.
Yes, great question.
This is a pretty important expo the ACG Expo in long Beach. This.
This week, where we're going to highlight that <unk> Ballard concept class II powertrain and the Ram 2500 chassis.
We see that there is a market opportunity for high utilization light duty class III trucks.
And particularly those that return to base and can use centralized depot refueling, we're thinking here about work trucks for towing and hauling and powering et cetera, and so I think <unk> taken a very good look at this market opportunity and is also investing in technology.
Technology like its conformable hydrogen storage tank technology, that's being integrated into this platform.
I think what we're going to see us.
Testing in 2022 and 2023.
<unk> of that testing with Oems.
With Lamar and the OEM, particularly led by Lindmark and started to look at getting some of these products into the customer hands and looking to design the <unk> Ballard.
Concept class II powertrain into a number of different vehicle platforms, that's going to take a number of years vehicle Oems. So if you look at kind of the design cycle. Its not something that we will see a quick turnaround, but I think this is a longer term market opportunity that we see as very attractive and importantly, with a partner.
Thats very committed.
Okay.
Okay. That's clear thank you.
The next question comes from Michael Glen with Raymond James.
Please go ahead.
Hey, Randy.
You've spoken in the past about a revenue inflection point for the business, taking place say 2024 and beyond what when you look at everything taking place right now how has that influenced your own view on on when we should think about that revenue inflection taking place.
Yes, so Mike I think that revenue inflection point.
We've seen a number of factors that further support and strengthen that inflection point.
<unk>.
Outlook when.
When I think about what's happening across all the verticals bus truck rail marine now stationary applications that we're seeing in some off road markets.
These some of these customers in pilot projects and opportunities are progressing the way we had always contemplate I will give you. The example of statements were for three and a half years, we've been working very closely to develop this fuel cell engine for the Siemens Mario plus H train is now launched and we will see more.
Activity from Siemens this year on that front.
At Trans conference there'll be actually visually demonstrating the strain so I think it's a very.
I would say representative sample of the progress that we expected to see across the different verticals. So.
So we do see the.
And users with high interest I can tell you in the truck market the end user.
Demand is.
Much more intense than the vehicle Oems in terms of the investment that we're making so that's why we're collaborating with these truck outfitters and early stage partners to accelerate market adoption. So yes the long.
That's a long version the short Virginia, Yes, we see this inflection point occurring in that 2020 for 2025 timeframe with a very steep.
Growth curve through 2030. So this is very exciting in my opinion and I think the fact that we see this occurring across multiple verticals and multiple geographies with a variety of blue chip customers provides a lot of support to that foundation.
And just to go speak about competition have been a bit there have been quite a few companies pursuing a fuel cell development programs. So for example, you spoke about the <unk> win can you talk about what that process was like how many companies you.
We're competing with in terms of aligning yourselves with Doosan and hub.
What was that process did you see a real step up in competition versus prior processes, you've been a part of.
Yes, so Michael I think all of these different verticals that we're talking about the vehicle Oems are very sophisticated.
So.
Think about CP as an illustrative example, as an end user or.
Or think about.
The Cat Microsoft project.
Or think about Siemens that I, just referred to our partners and marine like ABB almost all the customers that we're working with are very sophisticated.
And do their homework and diligence on the technology.
Test product.
And look at the data on field deployments.
<unk> is very sophisticated on fuel cells.
And we're very excited about this partnership with <unk>.
And yes, they went through their process.
Assessing ballard technology against others.
I think we'll let them comment publicly on.
Any more details on that process, but what I'd say is for US is that this provides a lot of leverage because <unk> is effectively going to be using stacks that we're already designing and manufacturing for our own fuel cell engine. So there'll be designing their engines in the controls strategy for their engines in the Korean market bus market around our stock.
Technology. So it gives us a lot of leverage and opens a new geographic market and I think there'll be lots of other opportunities for Ballard and <unk> to collaborate based on I think very strong.
Goodwill that's being developed between the two companies so.
Having them as a strong partner in that Korean market.
And then validating through a very structured disciplined process, the Ballard technology and field experience I think speaks volumes to where they see us.
But to your point it is increasingly a competitive market. We believe we have a lead and we're working hard to extend that lead with improved technology and lower cost.
Yeah.
Thanks.
The next question comes from Sameer Joshi with H C. Wainwright. Please.
Please go ahead.
Hey, Andy.
Hey, Paul.
In the press release.
Can you talk about development of next generation fuel stocks and engines also different target markets.
Speaking a little bit more on that.
These developments at the stack level multi level.
Development yet.
Yes, so we continue to make investments.
In existing stack and module platforms. While we're also designing next generation stacks and next generation modules for these markets that we've talked about these verticals of bus truck rail and marine.
And where we see the ability to use that same stack technology.
In different verticals for example off road for example, stationary power, we look for that leverage. Additionally.
So we're just talking here about higher performing products in most cases actually higher power output products as well.
And we're focused on all of the things we always have been so high power density high efficiency.
The different power ranges across these different market segments, and getting leverage off those power ranges across the market segments.
And more standardized products, including more standardized balance of plant components things like compressors humidifiers etcetera. So.
So that's what we're working on and we see a product roadmap, which I think will share more on later this year at our Investor and analyst day that will position us very strongly across these verticals and across these geographies.
Got it thanks for that.
And then just one on revenues.
You have 64 points higher than 65 million.
Of your backlog that you expect to deliver.
For this year.
Is there any chance that you may be able to accelerate or augment.
So because of the immediate issues in Europe .
Yes, Sameer, we see both.
We certainly see opportunities to accelerate the order book for deliveries. This year, we also see some delays potential risks as well so we.
We will see how the next quarter and the next.
Before before our call.
For Q2, we can provide some update there, but both I think on the puts and takes will have more to say at the end of Q2, but right now, it's clearly theyre accelerant opportunities and clearly there are some risk opportunities.
As projects invariably are taking longer.
Just on that front I would highlight the supply chain the lead times for a number of materials as moved out significantly this isn't just for us.
Across the industry, but also for our customers and their vehicle platform. So I think that's going to be an important fact to watch over the next.
Three of three to four months.
Okay. Thanks for that.
I'll take my other questions offline.
Thanks Samir.
The next question comes from Rob Brown with Lake Street capital markets.
Please go ahead.
Alright.
My question is on the CP rail project expansion.
How is that sort of whats the expansion kind of trying to address and what drove that expansion.
Sort of how is the next step of that project development.
Yes, good morning, Rob Thanks for the question and so when we started out with CP. They started out looking at what I'd call.
Line freight locomotives actually transporting goods on long lines, what they've added is two additional color market segments. So switchers and <unk>. So we now have three different locomotives all diesel powered that theyre transitioning to hydrogen fuel cell technology, and so I think it will be <unk>.
<unk> in 2022, and 2023 as they validate that technology in these three different.
Local motive designs to.
To look for an opportunity to start displacing what would typically be a diesel refurbishment with our hydrogen and fuel cell refurbishment.
So that's kind of the expansion and CP is has a very high level of commitment to look at how to Decarbonize.
I would say that the number one ghd emission profile, they have and thats the use of diesel fuel.
So we're very excited about this market opportunity and I believe this is a market that can only be served.
By hydrogen fuel cells.
Okay, great. Thank you for that and then and then in terms of the EU market development.
I know you've hit your partners and your working toward things.
When do we sort of start to see.
The next steps in terms of.
Demonstration vehicles, and then ultimately OEM kind of.
Product Rollouts, how does that timeline look at this point.
Yes, great question, we're seeing pretty significant activity I would say on bus truck and rail I think youll see developments. This year in terms of additional market opportunities and translate into order book.
What we're finding is really exciting is the very strong posture from the bus Oems.
And there are long term market opportunity as well as near term.
Some projects that we're seeing that have over 100 fuel cell buses being planned for deployment.
So we do see this moving to hundreds and thousands.
In the sales pipeline and eventually to the order book and eventually to revenue.
And again that posture that we're seeing is stronger than it's ever been so we're very.
Encouraged by what we're seeing on the market front.
Similarly on the truck market I think in 2022, and 2023 youre going to see a number of.
First time fuel cell truck deployments in Europe with Ballard technology.
With a number of different partners. There. So we're pretty excited about the market opportunity on the truck side, that's going to take longer than the bus market to move to scale.
But we've got to get these demonstration projects out and I think you'll see more announcements from Ballard and partners on this front in 2022.
Great. Thank you for that I'll turn it over.
Thanks, Rob.
Once again, if you have a question. Please press Star then one.
The next question comes from Alex Kenya, with Wolfe Research.
Please go ahead.
Thanks, and good morning.
Just a question maybe thinking about the European opportunities here I know that they're due for a more detailed update on this free power EU strategy that they kind of came out with a couple of months ago.
Are there are there things that are most important to you that we should be looking at are most focused on with respect to maybe the hydrogen components of that.
All of that.
Policy statements.
Yes, so Alex a couple of points. This reap power EU plan for affordable secure and sustainable energy.
Has some very interesting leavers and theyre not just around hydrogen, but also around acceleration of permitting of renewable energy projects.
And just think about the trend of the adoption of renewable energy. Obviously this has scaled significantly over the last decade, but it's still.
I would say very low volume compared to what we're going to see going forward.
So renewable energy in many jurisdictions is the lowest cost new electric power going onto grids.
It's supporting the greening of grids and supporting.
The opportunity for electrification of mobility as well for battery electric so I think the opportunity on renewable energy.
Is critically important of course, you need high volume storage to support renewable energy, we see hydrogen playing a very key role there what I would say about the repower EU on the hydrogen front.
Is that the.
Hydrogen accelerator program to accelerate the adoption of green hydrogen in my mind.
We've been talking over the last year really about somewhere around 100, maybe even a 150 gigawatts.
Greenlee electrolysis based hydrogen production by 2030.
The 2025 numbers would have been fairly modest what we're seeing is an acceleration for 2025 and in my mind. The most important variable that can help the adoption of fuel cell vehicles. In volume is is access to low cost green hydrogen.
<unk>.
The developments here are very encouraging and I have been saying this for some time to to investors that I believe we will see green hydrogen production at volumes much higher than our contemplated in plan currently just given the level of activity that's occurring across the hydrogen industry globally.
And thats going to.
Decarbonize industrial applications Decarbonize.
Energy market opportunities, but I think going to provide a lot of green hydrogen.
Capacity for the deployment of fuel cell vehicles in Europe . So in my mind. That's the most important lever that we can see is to remove this chicken and egg conundrum. That's been talked about for 20 years and of course, we're focused primarily on applications. We have return to base, our centralized depot refueling, but the opportunity for <unk>.
Long haul truck.
Where you have <unk>.
<unk> corridors that will be required and the support for green hydrogen production and the support for our Buildout of hydrogen refueling infrastructure I think it will support that longer.
Truck market freight truck market that we're very excited about as well.
Great. Thank you very much.
Yes.
And this concludes the question answer session I would like to turn the conference back over to Randy Macewen CEO for any closing remarks.
Great. Thank you all for joining us today, and Paul Kate and I look forward to speaking with you next quarter. Thanks again.
This concludes today's conference call.
May disconnect your lines.
Thank you for participating and have a pleasant day.
Yes.
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Okay.
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