Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems First Quarter 2025 Results Call. As a reminder, all participants are in a listen-only mode, and the conference call is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Mr. Sumit Kundu, Manager and Investor Relations. Please go ahead, sir.

Thank you, operator, and good morning. Welcome to Ballard's first quarter financial, and operating results conference call. With us on the call today, are Randy MacEwen, Ballard's President and CEO; and Kate Igbalode, Chief Financial Officer. Given that our 2024 year-end earnings call, was only eight weeks ago, we will keep today's scripted remarks relatively brief. 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. I'll now turn the call over to Randy.

Thank you, Sumit, and welcome, everyone, to today's conference call. In the first quarter, amidst an uncertain macroeconomic, geopolitical industry context, we made important progress against our controllables, including our customer deliveries, our operating costs and our product development programs. Compared to prior year, 2025, Q1 revenue increased 6%, engine shipments were up 31%, gross margin improved by 14 points, and total operating expenses were down 31%. We're starting to see the positive financial impact of the corporate restructuring we initiated in September last year. We expect to realize further reductions to our operating costs, and reduce cash utilization over the remainder of the year from this restructuring. In addition, to realizing the benefits from the 2024 restructuring, we're actively assessing opportunities for deeper cost rationalization in 2025. Now before we get into the commercial highlights, we'd like to make a few comments regarding tariffs. While uncertainties around evolving global tariff policies remain, expected policy changes, are not likely to materially impact our business in 2025. We're closely monitoring tariff developments that, may impact the sale of our fuel cell products, including into the U.S. We've reviewed the bills of materials, for each of our fuel cell engines and assessed the potential tariff impact, based on the country of - origin of each BOM component. We expect sales in the U.S., to represent roughly 20% of our 2025 revenue. Based on current information and following certain mitigation actions, we expect an increased tariff cost of about 20% on products being sold into the U.S. market, for which we expect to fully pass the incremental costs on to our customers. Moving next to bus. We're encouraged with the demand growth in the bus market, which contributed 81% of Q1 revenue, up 41% year-over-year. We continue to be the market leader for supplying fuel cell engines to bus OEMs, in the European and North American transit bus markets. We believe there's a growing recognition by transit bus operators of the value proposition of fuel cell buses. We ended Q1 with an order backlog of $158 million, including a 12-month order book of $92.4 million. As discussed on many previous calls, market adoption remains early in our target applications, with the transition from customer trials, to higher volume deployments over time. Accordingly, our business remains project-based. This means new order intake, is subject to significant variability quarter-to-quarter and be lumpy. After securing record new order intake of $75.4 million in Q4 of 2024, order intake in Q1 was soft. Notwithstanding, we continue to progress significant sales opportunity, which we expect to convert to closed orders over the coming quarters, including opportunities in rail, stationary and marine. As we look to the remainder of 2025, we'll continue to navigate uncertainties related to hydrogen policies and trade tariffs. We'll continue to focus on our customers, new order intake, on-time delivery of quality products, gross margin expansion initiatives and prioritize product development and cost-reduction programs. With that, I'll now pass the call over to Kate.

Thank you, Randy. In our seasonally slow Q1, Ballard delivered $15.4 million in revenue, up 6% driven by strong growth in the bus vertical, which increased by 41% in the period, but largely was offset by decreases in other verticals. Our fuel cell product sales revenue made up 94% of the total revenue, compared to 88% in Q1 of last year, once again emphasizing our shift into a commercial products company. Fuel cell engine shipments were up 31%, compared to Q1, 2024, representing 14 megawatts of fuel cell deliveries. Similar to prior years, we expect 2025 revenue, to be indexed to the second half of the year. Although Q1 gross margin was negative 23%, we realized a 14-point improvement, compared to Q1, 2024. Gross margin remains negative, as we continue to be impacted by relatively low revenue, and absorption against our manufacturing overhead costs. The 14-point improvement was primarily driven, by lower manufacturing overhead costs resulting from our 2024 restructuring activities. Total operating expenses of $25.5 million and cash operating costs of $23.2 million, were down 31% and 22%, respectively. The reduction in total operating expenses reflects reductions of 28% in research and product development, 32% in general and administrative, and 23% in sales and marketing expenses. Our total operating expenses guidance for 2025, is between $100 million and $120 million, reflecting an approximately 30% reduction at the midpoint, compared to 2024. Capital expenditures totaled $2.7 million in the quarter, primarily for planned investments in production and test equipment, including related to Project Forge. Q1, CapEx was 64% lower, compared to Q1 of 2024. And our capital guidance - capital expenditure guidance is between $15 million to $25 million for the year, also reflecting an approximately 38% reduction at the midpoint, compared to 2024 guide. Notably, we are actively reviewing and considering various options, to reduce both our operating cost structure, and our capital expenditure plan for 2025, which may result in revisions to our guidance ranges. Importantly, we ended Q1 with $576.7 million in cash, no debt and no requirements for near or midterm financings. We will remain disciplined, but we will remain - we maintain disciplined spending, and balance sheet strength for long-term sustainability. We believe our balance sheet strength represents another significant competitive advantage for Ballard, compared to other pure-play PEM fuel cell competitors. With that, I'll turn - it over to the operator for questions.

Thank you. [Operator Instructions] And the first question will come from Saumya Jain with UBS. Please go ahead.

Hi, good morning. Do you have any update on the Caterpillar and Microsoft collaboration, or any future data center partnership in sight?

Yes. Saumya, first of all, thank you for the question. I would say that's still kind of in with Cat and Microsoft had some announcements related to that last year, including winning a DOE award. But I think converting it from a first trial, to next stage is going to take likely a year, or two before we see some progress against that.

Got it. Thank you. And then how is the cost per kilowatt for the customers looking? And what's impacting that specifically?

Yes. So the cost per kilowatt, there's two variables that, I want to highlight: first is the sales price and then the second is the cost. And on the sales price, I would say there's - particularly in the China market, there's a lot of pressure on the selling price in the China market. I would say in Europe and North America, we're seeing pressure there as well both from a value proposition for the customer as well as competitive pressures. And then on the cost side, the key variables there for a fuel cell engine, relate to the fuel cell stack plus the balance-of-plant components. We continue to do a lot of important work on reducing the cost of the stack, and reducing the cost of the balance-of-plant components for a full engine. And we've talked about some of the product cost-reduction initiatives we've been engaged in over the last number of years. And one of the key ones, in my opinion, on the stack side is Project Forge that Kate alluded to in terms of the investment we're making there. We expect to see pretty significant reductions in our bipolar plate costs, and that project should be fully implemented by the end of this year. So we expect to see some enhancement there. But as a trend, I would say the overall selling price, is relatively flat this year, compared to the prior year, and we expect to see the costs coming down later this year.

Thank you.

The next question will come from Rob Brown with Lake Street Capital Markets. Please go ahead.

Good morning. On your sales pipeline, where are you - kind of at this point, where are you seeing the most activity? And how do you sort of see that playing out throughout the year?

Yes. Rob, thanks for the question. Certainly, I would say where we see the most consistent, and repeat business opportunities in the bus segment, for sure. Both in Europe and America, we see customers there with repeat orders over the last year or two, but going forward as well. In fact, just about two weeks ago, we had an end user, a transit operator in our office here in Vancouver. They have a pretty significant deployment in the U.S. market, and are looking to add a significant number of fuel cell buses to their fleet, which is very encouraging. So the bus market is certainly a key contributor in the sales pipeline. But then we do get significant lumpy projects in rail, in stationary, and I would say kind of distant third would be marine. And so rail and stationary, we see lots of opportunity there, for validating value propositions with customers and longer term, moving to a consistent cadence. But right now, very lumpy. On the rail side, we continue to see opportunity in the freight locomotive market in North America, as well as some commuter rail opportunities in the North American market as well. Stationary, a number of different applications we're seeing interest in, and particularly some what I call off-grid or weak grid scenarios, where customers are looking for remote sites, or construction or event-type power requirements or even EV charging. And those are the applications, we're seeing kind of the most uptake in our sales opportunities right now.

Great, thank you for the color. And then on the bus market that's, got the most sort of maturity of deployments, are there - are you starting to see cases where you can get the value proposition economics, and kind of value proposition sketched out? I guess, where do you see the most sort of functional deployments and the most data?

Yes. So we have just under 600 fuel cell buses operating today in Europe and North America, with very good data coming back from the field in terms of uptime, availability, reliability, safety, all those metrics, of course. And what I'd say is that - and by the way, there are quite a few buses that will be entering into service over the coming 12 to 18 months. So that's very encouraging to see that. And there, what we're seeing effectively is that the key variable on customers having an improved total cost of ownership is really the cost of the fuel. And that's a variable we don't have a lot of control over. We do expect to see by 2030, more access to low-cost, low-carbon hydrogen in both the North American and European markets, at a price approaching kind of TCO parity, but it still is a premium, compared to diesel buses today.

Great, thank you. I'll turn it over.

Thank you.

The next question will come from Rupert Merer with National Bank. Please go ahead.

Hi, good morning, everyone. With the restructuring you've gone through, can you talk about the process, and what compromises you've had to make to achieve your targets? And have you had any impact to your product cost-reduction initiatives, or have you given up any fundamental R&D initiatives?

Yes. Great question, Rupert. So I think anytime you look at a cost reduction, the biggest question, is what are you going to stop doing and what are you compromising, or what are the puts and takes and the trade-offs. And we certainly believe that much of the value creation that, occurs at Ballard is in our technology and our engineering. So we've tried to, as much as possible, protect the core IP. And obviously, the core road map that relates to our core products. And so basically, we've prioritized and sequenced product development programs. I would say previously, you would have seen us doing a number of different programs in parallel, and now we're going to more of a sequential approach. With the push-out in the time line for adoption, particularly in the truck market. We've deprioritized investment into fuel cell engines, at this time that relate to the truck market. So our focus is very much on making sure we have higher-performing, lower-cost modules for the bus market, a market that we're winning in and a market, we plan to continue to win in. So winning in the bus market is critical. And as some of these other markets start to scale longer term. We'll be taking the products that we're developing for the bus market, applying them to some of these other markets. And similarly, as we kind of look at the larger products for stationary and rail and the truck market, making sure that the balance-of-plant components, to the extent that can be harmonized with the smaller products, there's some leverage there. So there certainly has been some reduction in R&D. And I think we focused on making sure we're preserving the core MEA R&D activities, where we think we have a competitive advantage, and less activity perhaps on things like the balance-of-plant component, where we think the supply chain has been a little bit more matured, over the last two years than previously. So there certainly have been some compromises. One of the key ones, though, is really focusing the product road map, and doing fewer programs and looking at sequential product development programs, rather than in parallel.

So would you still be on track, with your cost-reduction plans from a few years ago?

Yes. So that's one of the areas, we think we've made a lot of progress on. Certainly, on the MEA front, we've realized pretty significant reductions there. Project Forge, as I mentioned earlier, will come online. It's pretty well almost finished installation right now, and that will dramatically reduce the cost of the bipolar plates. And just as a reminder for people, Project Forge is kind of this really important plan. Where we look at not only materially reducing the cost, but also scaling the production of kind of next-generation graphite plates. And it kind of reduced the cost of the plates, by about 70% and increases the production capacity by about 10 times, while also significantly reducing production takt times. And really, the throughput is enhanced, but the - some additional things like kind of reduced energy demand and elimination of wastewater consumption from plate manufacturing. There are a lot of benefits from this project. So we expect to see kind of a step-change in our plate production starting next year. And after MEAs, bipolar plates are the next largest cost item in the fuel cell stack. So from an MEA and a bipolar plate product cost-reduction perspective, no impact from our program plans there. And then I think the balance-of-plant components, much of those have been specified, not just for products that we have in the field, but for our next generation, what we call our small core product. That will significantly lower the cost of engines, and enhance our margins.

Thank you, Randy. I'll leave it there.

Yes, thanks Rupert.

The next question will come from Jordan Levy with Truist Securities. Please go ahead.

Hi all, it's Henry on for Jordan here. Thanks for taking my questions. Understanding that the tariff situation remains very fluid, I'm just curious if there are any actions, or updates we should be looking for, from you all maybe later on this year with regards to supply chain movement, or material sourcing?

Yes, Henry, first of all, thanks for the question. There are a bunch of mitigation actions we've already taken into account. So just as a couple of illustrative examples, kind of as a one-time measure, we did accelerate the movement of some components and materials into the U.S. market, before the tariffs were implemented. And then secondly, of course, there are suppliers that we're looking at transitioning. Some of that comes with some complexity and some timing, of course. I don't think there's anything - any one change that's material by itself, but a couple of them together will be quite helpful. And then, of course, just I think the key is the whole market just understanding that there's going to be some pass-through here of tariffs cost through the value chain. So I don't expect to have any major update on this front later this year. I expect it to be kind of more of the same that we profiled here today.

Yes. Understood. Thank you for that. And then, maybe just a quick housekeeping one from me. Looking at the relatively light CapEx spend for the first quarter here, I guess, how should we think about the cadence of that, kind of moving through the remainder of the year? Thank you.

Yes. Maybe I'll just make a comment, and then Kate can follow-up as well. I think one of the things to understand as well is we did - you go back a few years ago when we first started thinking about Project Forge, this is an $18 million program. We're just seeing - now seeing the trailing cost of that occurring in 2025. And just from a - as you look forward for the foreseeable future, in my opinion, at least through 2030 and beyond, we really don't have any material kind of one-time CapEx spend during that time period. So there's really kind of a burn-off, if you will, of this Project Forge in 2025 as well - and that's really front-end loaded, and then as well as typical maintenance CapEx that, we have here for our facilities in Vancouver. Kate, I don't know if there's anything additional you want to add to that.

No. I think, Henry, for the purposes of kind of modeling an outlook for the year, I think taking kind of the midpoint of the guidance range, would be a reasonable expectation and just sort of run rating that across the quarter. To Randy's point, there really isn't any kind of material expectations, for outsized spend in one quarter versus the other.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Randy MacEwen, for any closing remarks. Please go ahead, sir.

Thank you for joining us today, and we look forward to speaking with you next quarter.

This brings today's meeting to a close. You may disconnect your lines. Thank you for your participation, and have a pleasant day.