Q2 2022 Ballard Power Systems Inc Earnings Call
Thank you for standing by this is the conference operator welcome to the Ballard power systems second quarter 2022 results Conference call. As a reminder, all participants are in listen only mode and the conference is being recorded after depressant.
Patients there will be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal, an operator by pressing star and zero.
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 second 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.
I'm also excited to announce we will be hosting our investor day. This fall on November 20, <unk>, we look forward to hosting you in November .
Today, we will be making forward looking statements that are based on management's current expectations beliefs and assumptions concerning future events.
Well 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.
I'll now turn the call over to Randy.
Thank you Kate and welcome everyone to today's conference call.
The first report that during Q2, we welcomed David Mucci Chara as dollars, New Chief commercial officer with global responsibility for sales marketing product line management and customer care.
Higher to joining Ballard David was most recently vice President Global sales M&A and marketing of Magna electronics. He brings a depth of expertise and strong track record in leading global commercial teams with over 25 years of sales leadership experience from the automotive industry, including with Zeta FERC Lee.
Here in TRW.
His skill set will be highly valuable to Ballard as we grow sales and transition into a commercial scale deployment, David is already having a positive impact on our commercial activities.
Now getting into the quarter.
In Q2 Valley delivered $29 million of revenue and secured new orders totaling $12 3 million.
This activity translates to an order backlog of $91 2 million at the end of Q2.
This was softer than planned as a number of expected sizeable orders have shifted out.
We remain excited about our expanding opportunity set across our various applications and regions as reflected in the significant growth of our sales pipeline.
We're experiencing record levels of customer engagement.
Progressing through demonstration programs with multiple platform customers and fully expect to execute on important platform wins in the next 12 months.
Our market focus remains unchanged targeting 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 the value proposition is strongest for our hydrogen fuel cell technology.
I'll provide a brief update of highlights and our progress on our key applications.
We continue to see progress for fuel cell adoption for bus applications in Europe and the U S.
Our ongoing work with our bus OEM customers and transit operators to pilot small bus fleets and demonstrate our fuel cells ability to meet customer needs is paying off.
Europe is now entering its next stage of deployment with certain cities moving from a handful of fuel cell buses to now over 100.
As examples recently public transport.
Transport transit operators in Cologne, Germany, and West Midlands, as UK announced plan to deploy additional hydrogen fuel cell bus bus fleets of 100 and over 120 buses respectively.
We are confident Ballard will be positioned to participate in supporting these plans through our strong customer and end user relationships.
In the United States due to the significant increase in federal low no funding, we're seeing higher customer engagement in California, and other states, including a 300% increase in the number of loan applications for fuel cell buses.
The Federal Transit administration announced funding in March for $1 1 billion each year for the next five years, we've been working closely with our partners on applications and expect this just to support growth in the U S fuel cell bus market.
In the truck market, we continue to make steady progress with our partnerships our development program with Mali remains on schedule and integration of Ballard fuel cell module and testing on the concept engine is ongoing and expected to continue throughout the year.
Consistent with our previous messaging, we're leveraging our parallel go to market strategy partnering with both Oems and vehicle integrators to enable Ballard to support end user demand in the near mid and long term and accelerate the adoption of fuel cell electric trucks.
One of our European up Fitter partners quadrant is planning to unveil a zero emission trucks powered bus powered by Ballard fuel cell engine at the I E 2022 show in Hanover in September .
In rail we are on track with key customers in Europe , and North America.
Over the past four years, we've been developing a 200 kilowatt fuel cell engine to support Siemens mobility in the development and commercialization of a two car commuter train that combines innovation with sustainability.
Siemens is now commercialized the morale plus age which is a highly advanced second generation hydrogen train featuring acceleration of up to 1.1 meters per second squared and a top speed of 160 kilometers per hour.
The train has the lowest lifecycle cost on the market and can be refueled in just 15 minutes.
We're thrilled that in June seamless mobility announced the first fleet order of its memorial plus age trains for the Berlin Brandenburg Metropolitan region.
The seven train fleet to be powered by 14 200 kilowatt fuel cell engines is expected to be commissioned and operated.
Network in late 2024.
By switching from diesel to hydrogen we're expecting to see reduced annual C. O two emissions by around 3 million kilos, and save $1 1 million liters of diesel we're excited by the long term partner shipped with Siemens as a platform rail customer.
And in North America, as we look at the locomotive market, we continue to support CP rail as it progresses on its hydrogen locomotive program.
We're excited to report that CP is progressing on hydrogen infrastructure.
<unk> is planning to construction of two hydrogen production and fueling facilities in Calgary, and Edmonton, Alberta with EPC partner Atco.
The hydrogen infrastructure at HCP site will include a one megawatt electrolyze or compression storage and dispensing for locomotive refueling.
Construction of the facility is expected to begin this year with production and supply of hydrogen being provided two locomotives in 2023.
We also see continued momentum in the marine market, specifically in our current target markets of coastal and inland applications.
We see strong engagement from existing and prospective customers for marine applications. Following our achievement of DMD type approval for FC wave product in the quarter.
We've seen a growing opportunity pipeline for these markets and believe our technology.
Our type approval achievement will set us apart from competitors.
In stationary power generation, our total order backlog has increased 36% year over year. This is indicative of growing market opportunities as companies identify hydrogen fuel cells as a competitive alternative to traditional diesel technologies.
Our focus applications for stationary power include backup power for data centers like the project underway with cap and Microsoft grid storage applications and captive power for mines or construction sites. We're increasingly confident in the outlook for this segment of our business as we gained meaningful customer traction.
On large order volumes in our sales pipeline.
Now looking at our key geographic regions.
Our European revenues increased 25% from the first quarter. This year as we saw in Europe increasingly prioritize energy security and decarbonization.
Q2 was a very busy quarter for European policies as the EU doubled down on investments and new initiatives to boost renewables and hydrogen as evidenced by the Repower EU action plan and banning of internal combustion engines for cars by 2035.
Post quarter, we continue to see additional policies and funding announcements to support Europe's energy transition.
Such initiatives include the approval grants totaling over 5 billion Euro for 41 large scale hydrogen related projects across the continent, and many others to be rolled out over the coming months.
This is going to be a catalyst in the European market to drive down the cost of low carbon hydrogen we are confident Ballard technology in.
And competitive positioning, including our partnerships position us well in multiple markets across the continent, and we expect Europe to continue to be a rapid and growing adopter of our hydrogen zero emission fuel cell technology.
In North America, we saw the continued trend of increased sales with revenue up nearly 30% quarter over quarter and year over year for the region.
We anticipate the U S inflation reduction act, which was passed by the Senate This past weekend.
To have a significant positive impact on the broader clean energy industry, the hydrogen industry and Ballard.
The act includes nearly 370 billion for domestic energy production and manufacturing energy cost reduction as well as lowering national carbon emissions by 40% by 2030, there are provisions for $3 billion in funding for zero emission equipment and technology at ports 1 billion for clean heavy duty vehicles, such as <unk>.
And garbage trucks as well as hydrogen fuel incentives extending expanding of electric vehicle investment tax credits and introducing hydrogen production tax credits of up to $3 per kilogram.
The combination of policies to decrease the cost of infrastructure vehicles and hydrogen fuel are expected to be catalyst and lowering the total cost of ownership of hydrogen fuel cell technology and accelerate the uptake and pace of adoption.
Our competitive Tcl is a critical driver to the commercialization of fuel cells.
Specifically fuel costs or estimate your account for between 30% and 70% of the Tcl depending on application.
This means the production tax credit our low carbon hydrogen could reduce the tcl a fuel cell technologies to at or below the cost of incumbent fossil fuel technology.
Amidst this strong U S industry backdrop, we continue to invest in our U S platform. We're.
We're growing our current team and capabilities in the U S, including our manufacturing footprint in Oregon.
New facility is anticipated to be in operation in 2023, and will support our customers who secure by America funding by manufacturing our newest generation fuel cell module. The FC move HD plus in the United States.
In Q2, we saw.
We saw a decrease in revenue contribution from China compared to Q2 last year, we await further policy clarity as <unk> policy planning the cluster in which the <unk> Ballard JV facilities included has been impacted by Covid with lengthy lockdowns, including in Zhengzhou.
Throughout the quarter many regions throughout the country were impacted by Covid restrictions and Lockdowns, while their manufacturing facility. In Weifang has stayed open day to day business operations amongst companies and government bodies continues to see delays.
Despite the recent challenges China is faced we are confident in the mid and long term outlook and continue to evaluate how best to position expand our operations to take advantage of the of the policies and long term market capture.
In Hong Kong, we observed growing support for fuel cell buses this quarter, Hong Kong launched its first ever hydrogen fuel cell bus. This double Decker bus was built by our partner Wisdom Motor company and powered by our <unk> Ballard fuel cell module.
This demonstration showcases our fuel cell technology capabilities to meet one of the world's most demanding operating environments comprising of steep road grades high passenger loads the need for fast refueling and the requirement for significant air conditioning.
Wisdom provided the bus to fleet, operator, Bravo, who operates over 1700 buses and carries over 1 million passengers daily rather.
<unk> long term vision is to operate a fleet of zero emission fuel cell buses shipped.
Shifting to our financials in the quarter.
We saw further gross margin compression in Q2.
The downward pressure was driven by a combination of a shift in revenue mix the impacts of pricing strategy higher fixed overhead costs higher warranty adjustments increase inflationary supply costs as well as negatively impacted by net inventory adjustments.
With volume.
Cost reduction and improved pricing dynamics, we expect to see margin expansion in 2023 and 2024.
Recognizing a challenging and uncertain macro economic outlook, we've decreased our planned investments in 2022.
We're revising our total operating expense and capital expenditure guidance downwards.
Total operating expense guidance has been revised from $140 million to $160 million to $130 million to $150 million.
Capital expenditure guidance has been lowered from $40 million to $60 million to $30 million to $50 million.
With a balance sheet of $1 billion in cash we continue evaluate corporate development opportunities.
We've been active in our opportunity evaluation of acquisitions and investments we remain disciplined on execution to ensure we make the best strategic decisions for value creation.
Our opportunity valuation remains focused on expanding across the value chain, simplifying and enhancing customer experience accelerating fuel cell adoption in target markets and facilitating business scaling.
We have high conviction in the long term opportunities for hydrogen and fuel cells and are encouraged by the growing importance governments and customers across the globe are placing on acceleration of the energy transition.
We see converging trends driving the energy transition, including net zero ambitions low cost renewable energy and energy security.
Ballard's resilient business model World class fuel cell talent diverse market exposure across applications and regions advanced technology continued innovation strong partnerships and customer relationships relationships and solid balance sheet set us up for success with that.
That I will turn the call back over 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, you will hear a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please.
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We'll pause for a moment as colors join the queue.
Yeah.
The first question is from Aaron Macneil with TD Securities. Please go ahead.
Hey, good morning, all thanks for taking my questions Randy as it relates to the inflation reduction Act. How are you thinking about the 60 to $3 per kilogram.
<unk> incentive in the $40000 per commercial vehicle tax credit in terms of.
Good mean for U S bookings activity over the next 12 months I guess.
More specifically do you think that incentive is enough to get some of the customers you're engaging with over the line and moving towards a formal order.
Yeah, Erin Thanks for the question I think we view this as a major catalyst in the U S market. It wasn't too long ago, maybe two years ago, where the U S market really was not a high priority for us in fact, we had really characterize the U S market as a California market that has clearly changed.
Over the last year of course, where we're not quite there there is still some work to do.
Later this week I think to see this pass of course.
But I think the combination of lowering the cost of low carbon hydrogen as well as supporting early adopters with a cap of capex cost for vehicles.
I think are very powerful tools, we've seen similar tools be successful in the U S. Before.
And we're expecting this to be a significant accelerator not just for the bus market, but for the truck market as well.
We're looking at not just fleets with opportunities.
Opportunities to refuel.
Tethered refueling stations, but also longer term for corridor refueling infrastructure.
Okay.
Understood and in terms of my follow up.
I'm just wondering if you could give us a bit more detail on the guidance revisions in terms of what sort of specific activities or initiatives were canceled or deferred.
You know.
The spending ranges.
Iron It's Paul here. So, yes, we did lower slightly our guidance on both Opex and Capex and as we stated in responding to a challenging macro environment. I mean, you will have noticed that.
So we have been ramping up our costs $38 million total costs.
In Q2 14 million higher than in the prior year.
And.
Last year, you can see that the pace has been from last year to continue at the pace has been increasing.
We're investing as we've stated in the research and development product development next generation products.
<unk> placed stacks modules are also focused on cost reduction product cost reduction as well as scaling up our production and manufacturing scalability facilities and market development also investing in Europe .
And the U K with our corporate development activity as well.
So yes, we did say that we are we will be reducing it and when we say a challenging macro.
The outlook that encompasses a few different things not only encompass as sort of a prudent.
Any sort of lower priority.
Less essential spending that we have so really scrutinizing the prioritization.
But that is by no means is a is a message that we are backing off on our commitment to scale off.
And invest in our products, we think that's extremely important, especially as we talk to customers and secure larger orders they were looking for us to be able to.
The best technology being able to produce it at scale and at quality and so we will continue to focus on that so but there is maybe a few areas, where we could cut back without without impacting our objective, but the other area too is as we acknowledge also that there are some supply chain challenges.
Could we see could persist into 2023, so while we are ordering parts and.
Production equipment and as such it is taking longer.
Lead times are getting pushed out due to supply chain challenges, which will impact the spending in the year.
And it also the final areas. It also acknowledges the reality of us of US Onboarding really well qualified people we've done a great job this year and scaled up I think by about 80 people, mostly in engineering, but it is slightly behind the pace. We thought we would be at we'll continue to press forward and.
But for those people, but it is a reality of the environment. We're in so taking taking that all together.
We see our spending to be slightly less than the guidance that we provided on both opex and capex.
Understood. Thanks, guys I'll turn it over.
Thanks Erin.
The next question is from Rupert <unk> with National Bank. Please go ahead.
Good morning, everyone.
A follow up on the hydrogen PTC outlook, you talked a little about the potential for heavy duty trucks in the U S. I'm wondering though that does this change the value proposition and some of your other target markets in the U S too.
Anticipate you could see an acceleration in power markets for example, or even interest in rail and hydrogen in the U S.
Rupert I think Youre right. This is going to support adoption across a number of market applications.
On the rail market, we had been looking at the locomotive market with CP, obviously in Canada, but more broadly we are seeing a lot more interest from rail operators to Decarbonize and.
In North America for freight market, you really don't have opportunity for catenary wire infrastructure. So in my opinion, the only option there is fuel cell technology.
With this change with the production tax credit and the <unk>.
Total cost of ownership and for this application locomotives youre looking at a.
Fuel is the number one cost.
Rail application. So we do see that strengthen the value proposition. There is work to do over the coming years to validate the hydrogen fuel cell value proposition, but certainly the hydrogen PTC outlook is strong as we look forward in that market.
Then I think the other market we are quite excited about for the long term as well is not just transit buses, but coaches and so the opportunity to see.
Lower cost fuel, which is important to coach.
The total cost of ownership as well will.
We will be valuable so it won't be just trucks, but we'll see.
<unk> operators.
Coach operators and the rail market as opportunities as well for the U S market.
How about the power market do you see any growing opportunities for either energy storage or backup power.
Yes, so for the backup power market I don't see the PTC to be a big catalyst in my opinion.
These are typically applications that don't consume a lot of fuel so its more about having resiliency and zero emission.
And in some cases the ability for accelerated permitting.
So I think those are stronger drivers on the PTC.
There are of course, some stationary applications, where you will see more primary power where fuel can become.
A larger portion of the Tcl.
That's still I would say work in progress in terms of developing those markets for the U S.
I don't believe it there thank you.
Thanks Richard.
The next question is from Chop off spring with Cowen and company. Please go ahead.
Hey, good morning, Randy I was wondering if we could dig into the gross margin pressure in the past couple of quarters, you've had a bit of a laundry list of items. The two I wanted to try to focus on and how they sort of unwind themselves.
The warranty charge you mentioned and then also the pricing.
Strategy can you just touch on what the pricing philosophy has been over the past 12 to 18 months, that's flowing through the P&L now and then how that sort of unwind itself as we look at expansion into 'twenty three 'twenty four.
Yes, Jeff Thanks for the question, maybe I'll start off and then Paul can supplement.
Maybe I'll start with the pricing strategy I think what we're seeing as we move to our next generation of product.
And part of that next generation of product was to introduce new pricing strategy to secure orders.
And transition customers to that new technology.
So that I would say is a primary driver of that pricing.
Challenge at the same time of course, our late last year and early this year, we've seen some inflationary pressure on the supply chain side and so as we execute against those orders.
And as some of the supply chain costs have gone up a little that's impacted of course.
Our cost side of that equation. So what we do see is as these were talking about early.
Volumes for these new products as we move to higher volume for these products.
And as we adjust pricing based on the supply chain changes as well.
We do expect to see.
Changes in the gross margin profile and some gross margin progression in 2023, and 2024 I think one of the things that's important to understand of course is that with the investments we've made in our manufacturing capacity and still low volumes.
Our overhead absorption is still diluted at this point.
Paul you want to comment a little bit further on on the warranty yes. So on the on the warranty I mean, the impact in the quarter actually wasn't wasn't that.
Severe it is and it sort of looks like it's amplified because of the size of the revenues, we did book extra provisions and you'll recall from prior quarters for.
And to some issues we saw in the loss of some of our products make good progress on resolving.
A lot of those and are now fully provided we believe were fully provided to resolve that issue with customers. It's important that we have enough warranty provision and stand behind our products as customers try them out soon and we rolled them out so the warranty impact was was.
I would characterize as relatively minor in the quarter.
And we don't see that changing much in going into the second half of the year either.
Got it that's helpful. Maybe just one quick follow up.
Following Randy maybe you Havent had enough coffee, but.
The move towards the new platforms, why why do you need to discount did you have to do that like when you move from the Moc nine two.
Subsequent platforms in the past or is this really just an issue.
Going from sort of tech solutions platform development.
Monetizing.
That way to true commercial terms.
With the move HD platform or something else I'm, just trying to understand why or why not.
Our platform gets more energy dense you need to lower the cost.
Yeah, no. It's a discussion we've had with particularly with the bus Oems for some time.
Leaning forward on our cost structure to make sure that the total value proposition for the bus operators and the Oems work as well.
And it's not just us it's been doing that we've been seeing other participants in the value chain supporting this day to get these demonstration fleets out in the marketplace.
So I would say that's part of it the other is just.
There is a cost required for these operators to transition from one product to the next product and part of the way to help incent them to move to that next product.
Is the pricing strategy.
Got it that's all I had thank you.
Thanks, Jeff.
The next question is from Michael Glen with Raymond James. Please go ahead.
Hey, Randy just during your opening comments you I sort.
Sort of missed it but can you just touch on youre going to.
Tablets from manufacturing in the U S. Can you just give some thoughts on timing.
When that happened I, just clarify what you are looking to build down there.
Yes. Thanks, Michael. It's this is really kind of our initial manufacturing facility that we look to set up in the U S. In Oregon, where we already have a relatively small engineering team that will help support.
This build out of our facility, it's a relatively modest investment initially so about 4 million U S dollars.
And the ability to manufacture up to about 2500 modules per year.
And we expect that to be online and operational in Q1 2023.
Okay.
And.
A follow up there was over in China.
I saw that Alfred Wong.
Managing director of China into the CEO of China Road, I'm, just trying to understand a little bit better.
Particular reasons for that move.
Indicative of something.
And the Chinese market.
Yes, so a couple of things there one is that Alfred was a managing director for Asia Pac and so we moved him to CEO for China. So very much focused on the China market, rather than Asia Pac coverage.
Secondly.
Our organizational structure, we made some changes to be more regional closer to the customers.
So this is part of it and part of the Alpha it's a career arc as well.
Okay.
Thanks for taking my question, yes, Thanks, Michael.
The next question is from Craig Shere with two Oh. He brought there. It's please go ahead.
Alright, thanks for taking the questions.
So.
There was kind of revenue softness in the quarter.
Both stationary power in material handling.
Do you see that as a bit of an aberration.
What are the specific prospects over the next 12 months.
Yeah, Craig Thanks for the question.
I don't think we should expect to see any major increase on the material handling side over the next 12 months.
But the stationary power market is proving to be very active in our sales pipeline a lot of engagement there.
In Europe in North America, and I expect some very positive developments on the stationary power market.
Over the next 12 months.
Great. Thank you for that and.
Yes.
Mentioned, all your kind of opportunity rich with all of these.
Pilots demonstration studies joint ventures and such.
Are there some specific mile markers, you could share about when we might hear or that specific.
Feedback in a particular area.
As far as you know.
Vehicles are rail and marine.
Over specific quarters over the next 12 to 18 months like first half next year, we should hear this or just some kind of timing feedback mile markers.
Yeah, I would say on the rail market in Europe with Siemens obviously they've.
We have now secured their first commercial order.
So we do expect to see more progress on that market over the coming 12 months I think.
You'll likely see orders on that front.
In the marine market Youll see some markers in terms of actual deployments hitting the water, which is very important to see those products getting demonstrated so for example, nor led in Norway, we expect to see progress there.
These are really important to have the first deployments. So not just the sales of the engines, but getting them into into our vessels.
And actually powering provided propulsive power for those vessels for a period of time as well. So I think by the end of 2023, and we should have three or four different marine projects out of show.
Really good progress on water.
And then I would say in the truck market. These parallel paths that we have both with Mali.
We see I think significant technical milestones by the end of 2023 and starting to engage with OEM customers and then in parallel with the I'll call them the up Fitters the systems integrators vehicle integrators.
Like <unk>, where you see them.
Demonstrating our unveiling a truck with a fuel cell engine from Ballard and then moving to a sales long term sales relationship with these type of customers and we see that with others as well, including wisdom motor out of China.
Thank you.
Yeah.
Okay.
The next question is from Chris <unk> with B Riley Securities. Please go ahead.
Hey, Thanks for taking my question here.
Can you talk you talked a little bit about kind of the core.
Orders will be lumpy.
Quite where you wanted to could you talk a little bit about where the push push out as well.
Global order levels.
This primarily China.
The other kind of activities are either European Buster Red bar, there you thought might be starting to here.
I just wanted to get a better sense of the disconnect between order kidney versus what sounds like continued acceleration of the pipeline.
Sure.
Pipeline.
Could be inflection points.
Yes, Chris Thanks for the question certainly on the bus side, we had expected to receive orders for those two cities that we mentioned with the 100 and over 120 fuel cell buses already this year, they've taken longer for a variety of reasons, including funding and fueling infrastructure delays.
But those are still very much strong sales leads for us and we expect to convert those.
So that's one example, another example would be on the rail side, we expected to have larger orders with some customers there announced will already.
We will see that I believe in the second half of the year.
And then I.
I do think some of the stationary power markets that we've been.
We're working with customers on for some time these are large.
You know really chunky opportunities project opportunities.
And there is some complexity to some of them and so it's just a matter of supporting our customers.
Through there.
Project development cycle.
And moving to orders. So some of these names has taken longer than we expected.
And we're still very much.
There is still all live in high probability opportunities none of them have disappeared.
Very much a timing issue but.
We expect to see very good progress over the coming 12 months.
Got it Okay. That's helpful. Maybe just within the backlog could you break it down a little bit more body, who either segment or end market or geography, it sounds like institutionary powers growing but.
I wanted to get a sense of.
Yes.
How that shifts in the mix as well as kind of.
Customers.
Yes.
Yes, I'm just trying to find the data oriented we've seen the stationary backup or the <unk>.
<unk> market total backlog increased 33% year over year for Q2.
I don't have my finger on the bus market at the moment.
But a lot of the order intake I think 60% of the order intake in Q2 was for Boston station Eric.
Including some new customers as well so seeing positive very positive growth in.
In those segments.
Okay.
More from here, just trying to see kind of fits and starts.
Throughout the time there.
Kind of both marketed and Covid.
Civic shutdowns were recently can you talk a bit about what the visibility looks like cleared through the second half.
In China.
Yes, just to supplement that the question about the backlog as well one of the things that I really like about our backlog and notwithstanding it's not us.
Firm right now as we'd like to see.
As well as our sales pipeline is the diversification, we see in there across multiple applications multiple regions and customers. So there's a lot of richness, we see in the order backlog and sales pipeline, I think which differentiate us from a number of other players in the fuel cell space. So I think that's something important to highlight I don't think theres been any real.
Major regional shift.
Over the last quarter or so.
And to your point about China, very frankly, it candidly still limited visibility for the back half of the year I would note. There are today, just under 11000 buses and commercial trucks operating in China.
About 3500 of those vehicles have Ballard fuel cell technology insights of over 30% market share and over 125 million kilometers of on road service for the Plumb those vehicles, so very significant.
A data point for Ballard in terms of real world experience in the China market and the other thing that's interesting in China is there still are notwithstanding the policy uncertainty there's still quite a few.
Hydrogen refueling stations getting built out so today, there's over 200, I think around 203 hydrogen refueling stations completed and operational in China, but another 63 under construction no doubt theres been significant delays on those 63 four.
A variety of reasons in the China market.
That's a very encouraging that the fueling stations continue to get built out notwithstanding a policy uncertainty.
So I think we'll have more to share at the end of the year. There is a lot of work.
Had a question from Aaron on an Alford and.
In China. He has just arrived in China, and its actually going through the quarantine period right now and has a number of important meetings coming up in.
In the China market.
Okay. That's helpful. Thanks.
Thanks, guys.
Yes.
Okay.
The next question is from Rob Brown with Lake Street Capital markets. Please go ahead.
Good morning.
I just wanted to follow up on the European bus order activity, what's sort of driving that increase in units being deployed in or is that happening I guess or is there a sales pipeline in other cities.
Kind of change in order.
And order rates.
Yeah, Rob Great question I think this is really a situation where youre seeing those transit operators that have trialed fuel cell technology.
In some cases trial battery electric technology and have seen the challenges with.
With both technologies and the opportunities with both technologies and are deciding for their roots for their duty cycles and load profiles that fuel cells.
Meet the market requirements and so that's the transition I think thats occurring are those those operators that have seen the reliability and durability proven out have seen the performance of the vehicles in the field.
Now our ASP.
Amping up their zero emission requirements and selecting fuel cell technology and this is not limited to these two cities, where we now have visibility on over 100 fuel cell buses. There are a number of other cities that are really scaling up.
Their plants in the European market I think the macro context in Europe .
It's only going to accelerate this over the coming years.
Okay. Thank you I'll turn it over.
Thanks, Rob.
The next question is from Greg <unk> with Weber Research. Please go ahead.
Hey, good morning, Randy.
First question is on getting customers over the line is infrastructure. The biggest gating factor there like you just kind of touched on with buses.
Or is it mostly wrapped up in supply chain or maybe something else.
Yeah, so it varies by market application.
But what I would say is where you have funding government funding requirements tied to deployment, that's often a pacing item.
And then hydrogen refueling infrastructure I would say those are the top two.
Got it okay. Thank you and then back to the PTC does that at all change your outlook on getting into electric <unk> and then if so can you remind us.
First priority would be to do that organically or potentially inorganically.
Yeah. So I think we were expecting a lot of people were negative on the whether or not this type of bill would come back to some type of slimmed down build back better Bill was this IRR would come through we we actually thought that this would come through this year. So we werent surprised by it.
So I would say our view on <unk>.
Where we have the ability to help the design of Emea's to improve performance and lower costs in in house, the design and production of any Ace. We think we can be additive to intellectuals there company.
What we've seen is that there are scarcity of opportunities in the market. They are all in my opinion fairly fully priced in many cases.
So it's been challenging to find opportunities that meet our investment criteria.
The other thing is that we aren't interested in being a supplier of hydrogen fuel.
More really looking at that equipment, the sale of the Electrolyze our equipment.
I would say this is something that is would be a nice to have but is not required or customers are not demanding from us that we come to them and support their electrolyze or green hydrogen production needs.
So.
I would view it as a.
If we found the right opportunity with there at the right value.
And we can add value from.
From a technical perspective.
Those those characteristics would lead to success without those characteristics are I don't think we will see us moving forward in that direction.
And we wouldn't do this organically you'll see a number of companies have been moving from are adding.
From their fuel cell technology, whether it's a perm or even solid oxide, adding to their activity set electrolyze. There's our view is that that's a fairly significant and demanding exercise.
And there is not a full 100% overlap in terms of the technology.
And so.
For us focusing on the fuel cell market opportunity and driving success. There is important. So this would only be a an M&A opportunity not something we do organically.
Go ahead, thanks, Randy yes.
Yes, Thanks, Greg.
Okay.
This concludes the question and answer session I would like to turn the conference back over to Randy Macewen CEO for any closing remarks.
Great and thank you everyone for joining us today, Paul Kate and I look forward to speaking you with you in the next quarter. Thanks again.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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