Release Date: March 13, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ballard Power Systems Inc (BLDP, Financial) achieved a record-breaking year for new order intake in 2024, securing approximately $113 million in new orders.
- The company saw a 30% increase in fuel cell engine shipments, marking the fourth consecutive year of growth.
- Ballard Power Systems Inc (BLDP) reported a significant reduction in operating costs, with a global restructuring expected to reduce annualized costs by more than 30%.
- The company launched its ninth-generation high-performance fuel cell engine, FCmove-XD, which offers improvements in reliability, durability, and efficiency.
- Ballard Power Systems Inc (BLDP) ended 2024 with over $600 million in cash and no bank debt, indicating strong financial health.
Negative Points
- Ballard Power Systems Inc (BLDP) reported a 42% decrease in Q4 revenue compared to the same period last year, reflecting broader industry challenges.
- The company faced a negative gross margin of 13% in Q4, with full-year 2024 gross margins decreasing by 11 percentage points to negative 32%.
- There is continued policy uncertainty in the US hydrogen and fuel cell industry, impacting market adoption and financing environments.
- The truck market has seen adoption timelines materially pushed out, with several business failures of smaller integrators causing challenges.
- Ballard Power Systems Inc (BLDP) has deferred any final investment decision on the proposed Texas gigafactory to 2026 due to delayed market adoption.
Q & A Highlights
Q: How does the order book look into 2025, and is there continuing activity despite uncertainties?
A: Randy MacEwen, CEO, noted that the order backlog is $173.5 million, with significant portions in the bus and rail markets. He expects the geographic split between Europe and North America to continue. There are opportunities expected to close in April or May, but historically, Q4 is a large order intake period. The company aims to secure long-term supply agreements with customers, which may result in orders being fulfilled over the next year or two.
Q: Where is the demand growth in the stationary business, and what are the focus areas?
A: Randy MacEwen, CEO, highlighted growth in weak grid or microgrid applications, such as filming sites and EV charging. The data center market is still early stage, with ongoing development plans with partners like Vertiv. The focus is on applications typically 100-200 kilowatts and up, with some customers looking at opportunities in the 1-megawatt plus range.
Q: What percentage of the backlog consists of long-term platform customers versus new customers?
A: Randy MacEwen, CEO, stated that about eight customers account for 70-80% of the business, all of which are repeat customers. The company has been successful in transitioning customers from development to trials and scale deployments.
Q: Can you discuss the impact of industry rationalization on customers and the supply chain?
A: Randy MacEwen, CEO, mentioned that last year saw some order book dropouts due to customer insolvencies. However, the current order book customers have a better liquidity profile. Some suppliers are concerned about low utilization, but Ballard has revalidated commitments with key suppliers. Industry rationalization offers competitive opportunities as some competitors with low market share have exited.
Q: What are the priorities for the $15 million to $25 million CapEx guide for the year?
A: Randy MacEwen, CEO, explained that a key component of the planned CapEx is the completion of Project Forge, budgeted at $18 million over three years. Beyond that, the company anticipates modest CapEx spending, primarily for maintenance and testing infrastructure improvements.
Q: How does the availability of hydrogen impact your customers, and what are your thoughts on gray and blue hydrogen?
A: Randy MacEwen, CEO, noted that there is increasing support for blue hydrogen, especially in the US. The focus is on deploying vehicles and stationary applications with low-cost hydrogen, transitioning to lower carbon forms over time. The company is monitoring the Clean Hydrogen Production Tax Credit's impact on the US market.
Q: Can you unpack the gross margin outlook for this year, and is achieving positive gross margins a priority?
A: Randy MacEwen, CEO, emphasized that contribution margin improvement is a high priority, with strategies to enhance pricing and reduce variable costs. While fixed production overhead costs have limited adjustment levers, volume increases will aid gross margin expansion over time. The company expects a step-wise improvement in gross margins in 2025.
Q: Are there any M&A opportunities from industry rationalization, and what criteria do you use to assess them?
A: Randy MacEwen, CEO, stated that they have not found attractive opportunities from companies filing for bankruptcy. The company is cautious about investments that would increase cash burn and prioritizes cash flow-positive opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
