Thank you for your patience. 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 this call is being recorded. After the presentation, there will be an opportunity for questions. I will now turn the conference over to Mr. Sumit Kundu, Manager and Investor Relations. Please proceed.

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 and geopolitical industry context, we made important progress against our controllables, including our customer deliveries, our operating costs, and our product development programs. Compared to the 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 the bus segment, 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 can 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 opportunities, 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 those related to Project Forge. Q1 CapEx was 64% lower compared to Q1 2024. Our capital expenditure guidance for the year is between $15 million to $25 million, also reflecting an approximately 38% reduction at the midpoint, compared to 2024 guidance. 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 in our spending, and maintain 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. 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 the 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. On the sales price, I would say there's significant 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. On the cost side, the key variables for a fuel cell engine relate to the fuel cell stack plus the balance-of-plant components. We continue to do important work on reducing the cost of the stack and reducing the cost of the balance-of-plant components for a full engine. 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, 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 seeing the most activity? And how do you 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 is in the bus segment for sure. Both in Europe and America, we see customers there with repeat orders over the last year or two, and 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 significant deployment in the U.S. market and are looking to add a significant number of fuel cell buses to their fleet, which is encouraging. So the bus market is certainly a key contributor in the sales pipeline. But we do also have significant lumpy projects in rail, and stationary, and I would say kind of a distant third would be marine. 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. Stationary, a number of different applications we're seeing interest in, particularly off-grid or weak grid scenarios, where customers are looking for remote sites or construction or event-type power requirements or even EV charging. Those are the applications where we’re seeing the most uptake in our sales opportunities right now.

Great, thank you for that color. On the bus market that's got the most sort of maturity of deployments, are you starting to see cases where you can sketch out the value proposition economics? Where do you see the most functional deployments and data?

Yes. 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, and all those metrics. There are quite a few buses that will be entering service over the coming 12 to 18 months. What we’re seeing is that the key variable on customers having an improved total cost of ownership is really the cost of the fuel. That's a variable we don't have much control over. We 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 total cost of ownership 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? Have you had any impact on your product cost-reduction initiatives, or have you given up any fundamental R&D initiatives?

Yes. Great question, Rupert. When looking at cost reduction, the biggest question is what are you going to stop doing and what compromises are you making. We believe that much of the value creation that occurs at Ballard is in our technology and engineering. We've tried to, as much as possible, protect the core IP and the core road map that relates to our core products. Thus, we've prioritized and sequenced product development programs. Previously, we did a number of different programs in parallel; now we're going to more of a sequential approach. We've deprioritized investment in fuel cell engines related to the truck market. Our focus is on ensuring we have higher-performing, lower-cost modules for the bus market, which we plan to continue to win in. We have made some compromises in R&D, but we've focused on preserving core MEA R&D activities where we believe we have a competitive advantage. So there have been compromises, now concentrating on fewer programs and looking at sequential product development.

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

Yes. We think we've made a lot of progress on that front. Certainly on the MEA front, we've realized pretty significant reductions. Project Forge, as I mentioned earlier, will come online soon and dramatically reduce the cost of bipolar plates. Project Forge is very important as it not only significantly reduces the cost but also scales the production of next-generation graphite plates, reducing the cost of the plates by about 70% and increasing production capacity by about ten times. We expect to see a step-change in our plate production starting next year. After MEAs, bipolar plates are the next largest cost item in the fuel cell stack, and we’re on track.

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

Yes, thanks, Rupert.

The next question will come from Henry Robert 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. For illustrative examples, as a one-time measure, we accelerated the movement of some components and materials into the U.S. market, before the tariffs were implemented. There are suppliers that we're looking at transitioning, but this comes with complexity and timing. I don't think there's any one change that's material by itself, but a couple of them together will be quite helpful. I expect it to be more of the same that we profiled today, with no major update on this front later this year.

Yes. Understood. Thank you for that. And then, maybe just a quick housekeeping question regarding the relatively light CapEx spend for the first quarter. How should we think about the cadence of that through the remainder of the year?

Yes. One thing to understand is, going back a few years ago when we first considered Project Forge, this was an $18 million program. We are only now seeing the trailing costs occurring in 2025. For the foreseeable future, at least through 2030 and beyond, we don't have any material one-time CapEx spend during that time period. There will be a burn-off of this Project Forge in 2025, which is front-end loaded, plus typical maintenance CapEx for our facilities in Vancouver. Kate, do you have anything to add?

No. I think, Henry, for modeling an outlook for the year, taking the midpoint of the guidance range would be a reasonable expectation.

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.