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Ballard(BLDP) - 2024 Q3 - Earnings Call Transcript
BLDPBallard(BLDP)2024-11-05 17:51

Financial Data and Key Metrics Changes - In Q3, Ballard reported total orders of 14.8million,adecreaseof4514.8 million, a decrease of 45% year-over-year due to slowing customer demand [14] - The gross margin was negative 56%, which is 45 points lower compared to the same period last year [15] - Total operating expenses were 54.9 million, up 58% or 20.2millionyear−over−year,primarilyduetoarestructuringchargeof20.2 million year-over-year, primarily due to a restructuring charge of 16.1 million [16] - The company incurred approximately 147millioninnon−cashimpairmentcharges,including147 million in non-cash impairment charges, including 40 million of goodwill and 107 million of property, plant, and equipment (PP&E) [19] - Cash operating costs in the quarter were 28 million, and the company ended the quarter with approximately 635.1millionincashandcashequivalents[17][19]BusinessLineDataandKeyMetricsChanges−Productsalesaccountedforapproximately93635.1 million in cash and cash equivalents [17][19] Business Line Data and Key Metrics Changes - Product sales accounted for approximately 93% of total revenue, continuing an increasing trend as the company transitions to a commercial products company [14] - Bus revenue increased by 33% to 11.2 million in the quarter, while other verticals saw decreases [14] Market Data and Key Metrics Changes - The company removed certain previously booked orders from its order backlog due to heightened concerns regarding market adoption risks [9] - New order intake was disappointing at only 7.1millionduringQ3,butapickupinnewordersisexpectedinQ4[10]CompanyStrategyandDevelopmentDirection−Thecompanyinitiatedaglobalcorporaterestructuringtoalignwithdelayedmarketadoption,whichincludesworkforcereductionandrationalizationofproductdevelopmentprograms[5][6]−TheTexasgigafactoryexpansionprogramhasbeenrepositionedtoanoptionalityplan,withafinalinvestmentdecisiondeferredto2026[7]−Thecompanyremainsfocusedondevelopingnext−generation,low−costfuelcellproductswhilemaintainingdisciplinedspending[12]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedadifficultmomentinthehydrogenandfuelcellindustryduetoanuncertainmacroeconomicandgeopoliticaloutlook,leadingtoamulti−yearpushoutofhydrogenprojectdevelopment[4]−Thecompanyexpectsitsglobalrestructuringtoreducetotalannualizedoperatingcostsbymorethan307.1 million during Q3, but a pickup in new orders is expected in Q4 [10] Company Strategy and Development Direction - The company initiated a global corporate restructuring to align with delayed market adoption, which includes workforce reduction and rationalization of product development programs [5][6] - The Texas gigafactory expansion program has been repositioned to an optionality plan, with a final investment decision deferred to 2026 [7] - The company remains focused on developing next-generation, low-cost fuel cell products while maintaining disciplined spending [12] Management's Comments on Operating Environment and Future Outlook - Management noted a difficult moment in the hydrogen and fuel cell industry due to an uncertain macroeconomic and geopolitical outlook, leading to a multi-year push out of hydrogen project development [4] - The company expects its global restructuring to reduce total annualized operating costs by more than 30%, with substantial savings realized in 2025 [8] - Management expressed high conviction in hydrogen and PEM fuel cells playing an important role in decarbonizing heavy mobility and stationary power applications [12] Other Important Information - The company is conducting a strategic review of its China strategy, including the Weichai Ballard joint venture, due to continued policy challenges and underperformance [6] - The company has secured new orders from New Flyer for 200 fuel cell engines and a repeat order from a European bus OEM for 80 fuel cell engines [11] Q&A Session Summary Question: Order environment and activity in heavy-duty markets - Management noted muted order intake for Q3 but expressed optimism about new order intake for Q4, particularly in bus, rail, and stationary markets, while the truck and marine markets are facing challenges [21][22] Question: CapEx expectations - Management indicated that the low to mid end of the current guidance range for capital expenditures is a reasonable expectation for 2025 [23] Question: Impact of U.S. election on adoption timeline - Management stated that the business plan is resilient to changes in administration and highlighted expectations for policy implementation on 45V by the end of the year [25][26] Question: Insights on order backlog and market trends - Management characterized the broader market trend as deferred market adoption due to policy uncertainty and noted a relatively high market share in bus and rail applications [32][33] Question: Customer deployment phase and order volume - Management reported securing approximately 1,600 fuel cell engines for buses in Europe and North America over the last 12 months, indicating a shift from demonstration to real deployments [39] Question: China JV and receivable write-off - Management confirmed that all options regarding the Weichai-Ballard JV are on the table, including hibernation and exit, and discussed the prudent decision to take an impairment on a receivable due to disagreements on milestone developments [45][46] Question: Restructuring and product development focus - Management emphasized a shift in focus towards next-generation products, particularly in the bus market, while reducing investment in legacy products [48][49] Question: Pricing trends and cost per kilowatt - Management indicated that pricing trends vary by application, with costs per kilowatt ranging from 700 to over $1,000 depending on the application [72]