Thank you for standing by. This is the conference operator. And welcome to the Ballard Power Systems’ First Quarter 2016 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Guy McAree, Director of Investor Relations. Please go ahead Sir.

Thanks very much and good morning everyone. The purpose of today’s call is to discuss Ballard’s first quarter 2016 financial and operating results. And with us today we have got Randy MacEwen, our President and CEO and Tony Guglielmin, our Chief Financial Officer. We are going to 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. So please refer to our most recent annual information form and other public filings for our complete disclaimer and related information. On today’s call, Randy is going to review the company’s continued progress and the execution of our business strategy through the first quarter of 2016 and Tony will then discuss Q1 performance across key financial metrics. Following that we will open up the call for questions Just wanted to note first that Ballard is going to be attending a number of investor conferences over the next several months including the Oppenheimer emerging growth conference in New York City on May 17, company’s 44th annual technology media and telecom conference in New York on June 1, as well ROTH second annual [indiscernible] in London on June 21. You can check our website for complete list of upcoming investor events at which we’re going to have a presence. With that I’ll turn the call over to Randy.

Thanks, Guy and welcome everyone to our Q1 2016 earnings conference call. Today’s call takes place with a compelling backdrop. Last week, the [Rhodes] political leaders from 175 countries gathered the United Nations in New York to sign historic [indiscernible]. We continue to believe that the macro drivers are growing more than populations, climate change, air quality and energy security support balanced business plan. We discussed this during our 2015 yearend earnings call in February. We also discussed our successful delivery of a number of landmark achievements during 2015 and each of our two growth platforms, power products and technology solutions. This two platform approach provides our business model with diversification, resiliency, technology and innovation leverage along with cost leverage. In 2015 we made measured progress in key aspects of our customer centric business plan, indeed last year\s progress and achievements positioned us strongly for growth and approved financial performance in 2016 and beyond. We began the year with a record $58 million committed order book for 2016, which exceeded last year’s revenue. In the first quarter of 2016 we realized the first installment of this positive momentum. Revenue grew 76% year-on-year, gross margin was also up improving by 900 basis to 20%. Let me speak to some of the Q1 specifics beginning with our power products platform where we focused on four market segments. We started with the heavy duty motive market where we offer fuel cell engines for buses and light rail trains. As a reminder last year we introduced our seventh generation heavy duty product, the new HD7 velocity power module, which represents a cost reduction of more than 30% from the previous generation product and a cost reduction of approximately 65% over the past six years. And we also announced the planned, development and 2016 deployment…

Thanks Randy and good morning everyone. I am going to provide a very brief review of key financial metrics for the first quarter. The top-line revenue was $16.3 million in Q1 in Q4, up 76% year-over-year the result of 111% increase in power products revenue, including revenue from Protonex and an increase of 38% in technology solutions revenues. Of the four power product markets revenue improved significantly in three with heavy-duty motive up 91% to $3.3 million, $2.6 million contribution from Protonex a new market since Q4 last year and material handing up 59% to $4.1 million. Telecom back up power was down 45% contributing only a modest $0.3 million. As I noted in our last call there is some additional complexity in understanding and tracking metrics for our heavy-duty motive product portfolio since we now have a an HP product portfolio consisting of modules, parts kits as well as stacks at a variety of different power labels and this was the case in Q1 where we shipped modules part kits and stack including customers in China. Turning to gross margin, gross margin in Q1 was up significantly year-over-year by 900 basis points to 20% reflecting a shift in product mix towards higher margin heavy-duty motive, technology solutions and portable power products. And as a reminder for the full year we expect to achieve gross margin in excess of 20%. Cash operating cost were up 19% in the quarter to $9.4 million, this increase though was entirely attributed to the inclusion of the operating cost for our Protonex subsidiary. Going forward into 2016 and into 2017, we expect to see lower quarterly cash operating cost as we realize the benefit of the cost saving initiatives taken in Q1. For the full year we continue to expect cash operating cost in…

Thank you. [Operator Instructions] The first question today is from Rob Brown with Lake Street Capital Markets, please go ahead.

On the bus business, I think there is 300 plus units sort of in the backlog, how many of those have been delivered thus far and what sort of the plan over the next couple of years?

So Rob, just to put things in prospective the 300 fuel cell bus project is with one customer and that project is expected to see deployment in 2 cities, the cities of [indiscernible] and Guangdong province. We have delivered to that customers both modules and kits, in the first quarter we delivered 28 fuel cell engines in total.

Okay and this project grows out over the next 12 to 18 months, is that right?

Yes, they have received product as early as last Q3 and product in Q4and putting our first 30 kilowatt systems. They have already integrated a number of engines into buses and have done some testing as well on this 30 kilowatt engine that we shifted in December. In fact, they have been very kind and are delivering to Ballard a fuel cell bus that they have integrated that are dominating to Ballard and we shipped here and expected to arrive in 2 or 3 days. So Ballard will have one of those busses here for customers and partners and investors to see as well.

Okay, great. And I think you said there was other opportunities in China, you were pursuing, could you update us on the scope of those and when, how the cadence, decision get made there?

Yes, as you know it’s very politically driven, so the Mayors and Secretaries and Vice-Mayors for cities are very involved in a lot of key, I’ll call it economic development and growth decisions as well as their quality decisions. So, we’ve seen strong level of sponsorship and support in a number of different cities. I will say the industry is, well it’s fairly small with the number of players that are in markets and adjacent markets that are looking to move in fuel cell space as well. But what’s been surprising for me beyond the very strong political support that we’re seeing is the very high level interest that we’re seeing from the bus companies. You have got major bus companies like King Long and [indiscernible] that are actively looking at fuel cell bus deployments. You got in addition to that a number of automotive companies that are in some ways playing catch up on fuel cell space for automotive applications, but are now looking very aggressively at, I will call them commercial trucks as well as specialty vehicles. So we are seeing a lot of activity in China, much stronger activity level in the past quarter than ever before on the coding side and the number of LOIs that we signed up that we need to convert into contracts. So we are working hard to do that. We do see realistically a couple of major initiatives being announced in 2016.

Okay, great. And then last question switching to the Protonex business, power product is I guess getting to a program of record. Can you just give us a sense of kind of unit opportunity there, how that sort of turns out in 2017?

So, there is an opportunity currently in front of us that we’re highly confident we’re in, but until that happens we are reluctant to provide the unit numbers, but it will be the largest opportunity that Protonex is positioned to win. We have 4,500 units in the field which is an extraordinary installed base, the largest market owner share, market share in this fast growing market. I think it would be very easy for us to see us duplicate the existing market share literally another 4,500 units in the next year.

Okay, great thank you, I’ll turn it over.

The next question is from Carter Driscoll with FBR, please go ahead.

Good morning, guys. In terms of what you guys have shifts starting from 3Q last year into China. If any of these buses hit the road yet?

They are not in revenue service yet, Carter so we have buses that have been integrated and are being road tested, but not ready yet in commissioning service as part of the time line there as well, will be the hydrogen filling infrastructure and that will be a key aspect of this, very important piece in China as we move forward. What’s encouraging is that the system integration work has gone very well, we have been highly engaged with three different systems integrator in China and have been very impressed with the work that they have done and the collaboration that they have with Ballard. So I think we have seen very promising first steps on the system integration piece which was a risk item we were concerned about and we are seeing daily and weekly through daily interaction with the partners there that are up to the challenge.

And do you think the road testing information or maybe once it's actually deployed that information would be more important as a showcase for potential new wins within the China market? Is there any differentiation I guess I am trying to say between road test and when it actually hits the road we collect information differently and then would you apply potentially differently or market it differently to potentially new OEMs?

I don't know the road testing necessarily is going to provide a lot of value in terms of marketing, actually having the buses visible and there that obviously provide value. The reality is this technology is proven out so there is no new work to be done to satisfy my mind, our key customers there that we have products that can meet their requirements so it's really about the system integration aspect of this and making sure the system integrator there have the ability to take the world leading fuel cell engine and to integrate those effectively and efficiently with these buses and then road testing in my mind is more function of has the system integration gone well.

And then, shifting gears little bit I think if remembered correctly you talked during the last call about potential engaging in a new agreement with plug, if I am correct in assertion, can you talk about any progress there and then the work you are doing on the OEM side could that have any impact on the negotiations you have with Plug if at all?

So, we have a long term supply agreement with Plug that was put in place in September/October timeframe in 2014 so there are no active negotiations for a new supply agreement we have a supply agreement in place where both parties are operating well under the supply agreement as you saw from the first quarter results.

Okay. I just had in my mind that I thought you guys are talking about maybe an extension beyond that next agreements, I was just remembering that and then shifting gears on the order book if you can give an update on that or is it something you like to keep more on an annual basis?

I appreciate the question so effectively we didn't provide guidance in 2016 that was a conscious decision obviously. What we did provide at the start of the year was where our order book was. So people had a good data point to help them in their get their own comfort level with what type of growth we might see this year it's not something we are looking to do on a quarterly basis at this time we may revisit that next year, but right now we think that given the continued volatility in the business it's probably not necessarily meaningful metric on a quarterly basis.

Again where you stand in the deployments with the India telecom operator?

So, we have two telecom operators that we have deployments with here in India that are substance, so we had a large order with Aditya Birla as well as a large order with RJIL, Reliance. We spent quite a bit of time in 2015 delivering against those orders as well as putting in place the ecosystem and all this work is I think have been quite valuable as we talk to potential strategic partners or acquires of that business in terms of not just a robust install base with great customers, but also having the ecosystem in place so that work has been done. Deployments units have been delivered and ruled out into the field and those installations have gone very well.

Okay. And then just lastly maybe question for Tony you talked about I think cash operating cost a target of about $35 million for this year maybe kind of the cadence should that kind of follow roughly as a percentage basis or the forecast on the top-line and then any expected future charges are related potentially the telecom business you communicated this time?

Yes, thanks. Again looking at our Q1 cash out cost $9.4 million as I mentioned again with the actions we are taking in Q1 we would expect this Q2 op cost through the balance of the year drop as a result of not carrying of course the ongoing cost. So when I talk about a 35 million roughly for the year think about something in the 8 to 9 range for the balance of the year and foreign exchange of course these are largely in Canadian dollars will move that around. But I would expect step drop down in Q2 and kind of remain at that level through most of the year there wouldn't be any increasing pressure on OpEx with revenue, I think we’ve got the right cost base now fairly significant revenue growth without having to that cost base.

And Carter, your second comment was just, would we expect to see additional charges later in the year in telecom backup power. We obviously took a charge in the first quarter of $1.1 million.

Yes, thanks Randy. We will get with the two, the restructuring and of course the impairment so we still have, we took a fairly large number of employee base we still have some core capabilities that we are retaining in that business so how we resolve conversations with strategic partner could minimize any future severance obviously if in that scenario. But with regard to $1.2 million that was an impairment charge related specifically to intangibles and assets so we wouldn't anticipate we don't anticipate in the additional impairment charge based on the information we have today so I think buy and large, we should be done on charges in Q1.

And Carter it's possible as Toni alluded to it's possible it could be some additional restructuring charges later in the year in telecom backup power but from an impairment perspective that was I think fully observed in Q1.

Excellent I appreciate answering that question. I’ll get back in queue.

Thank you.

The next question is from Craig Irwin from ROTH Capital Partners. Please go ahead.

Good morning and thank you for taking my questions. So Randy in your prepared remarks you talked a little bit about the cost out success over the last couple of years can you talk specifically about heavy duty whether or not this cost out has maybe held some of the pipeline conversion order momentum that you are starting to see now and can you maybe share with us approximate ranges where you think you would reduce cost over the next year or two and what that might mean for conversion rates at that time?

Sure. So I think there are a couple of key areas we are looking at continued cost reduction. There will be no surprise to you one of them obviously is continued design improvements both at the stack level as well as the module level and we have programs under way to accomplish cost reduction as well as continued performance improvements so we are working both durability and performance as well as cost down. We are very pleased with the way those programs are progressing and expect to see fairly significant cost reduction just on design alone in addition to that we will continue to work to supply chain very aggressively and we are now for the first time in our history starting to see some scale developed at our HT module business. I profiled opportunities in the US, opportunities in Europe and of course opportunities in China. We haven't seen this opportunities previously and so this is the first time we are able to with a legitimate sales order book and pipeline start to approach the supply chain in the material way. In addition to that as we continue up for program to localize assembly of modules in China and localize supply chain in China there is an extraordinary opportunity we believe not just to drive cost down in the China market but to take some of the supply chain opportunities global. So I think we are going to be talking about a step change of cost looking both at design and supply chain localization we expect to see some great progresses here but I think 2017 and 2018 is when you see the real fruit and that's going to position us I think to be very strongly talking about a story a few years from now where Ballard fuel cells engines and buses that use our engines are looking at a very strong economic value proposition against common technology.

Great. Thank you for that so my question, my second question is related to the potential acquisition outlook at your analyst day you seemed to indicate that this could be an avenue to maybe accelerate growth some diversify and maybe strengthen the company’s prospect in different markets. Can you update us on the number of companies maybe that you have evaluated what sort of process you have and whether or not you think you are likely to complete an acquisition during the current calendar year?

Sure. So in the first quarter we actually reviewed five different M&A opportunities at the executive team level and there are two of them we think are worth continue review and merit additional investigation. Nothing advanced to this stage, but we continue to attract opportunities and frankly we have got fairly tough filter to get through and that's cleans out quite a few opportunities very quickly which is good because what we don't want to do is invest time and energy and opportunities that aren't going show the type of financial results that we are looking for as well as the strategic fit. So we have I think a very good process both at the executive level as well as the board level. We have a clearly defined M&A acquisition criteria and we are working up program here and I expect to see a development in 2016.

Great and last question if I may, so this year we are going to really start seeing what would be several thousand consumer vehicles on the road smaller vehicles. Can you say whether or not there is an element of interest or maybe the interest in catching up on the heavy duty side given the consumer, vehicle producers are assuming to -- little bit faster at the moment?

Yes, I think credit has to be given to a number of the major auto companies for deploying this year fuel cells vehicles and record volumes so you have Toyota likely to deploy between 2000 and 3000 fuel cells vehicles this year. Honda should be 300 range. Those are record numbers in the history of fuel cell industry and I do think there is a knock on effect for other global auto OEMs to look at their programs and accelerate their programs and there is a knock on effect for other vehicles as well and I think one of the really intriguing things is the continued investment and collaboration that's occurring in California, in Germany and Japan around fueling infrastructure and as fueling infrastructure gain scale in those three markets I think we are going to see larger deployments and those will be really great test cases and I think that's going to lead to acceleration not just in pure commercial consumer vehicles but in commercial vehicles as well where fleet fueling or centralized refueling I think offers a unique opportunity.

Maybe I can, I think part of the things we are seeing as well just to pick up on your demand market adaption is speaks a bit to the increasing demand for power range I mean historically up until a year ago we really focused on the plus market so I think what you are describing we are starting to manifest itself now even in smaller commercial vehicles range extender smaller buses and that's probably what’s driving our demand in that 30 and 60 kilowatt. So I think it is creating a larger pull not just in historical heavy-duty trends but in a broader range of commercial vehicles as well.

I think both in consumer vehicles as well as commercial vehicles and buses you are seeing to is that the market is realizing some of the very clear limitations of battery technology.

Interesting, you would mention battery technology that sort of dovetails to one of the same system, people talk about as a potential driver for the consumer vehicle push many OEMs have been spending tens of millions of dollars to acquire carbon credit to the open market can you maybe discuss the potential for fuel cell buses heavy fuel cell vehicles to earn carbon credits and whether or not this could be a simulator of your adaption rates and market like California and the other carbon states as far as an economic simulator?

Yes, I mean, I will call it carbon tax philosophy has it really worked its way through a number of jurisdiction to programs that have carbon equivalent cost so there are certain jurisdictions where carbon credits for example have value to relative modest. I think that's an opportunity going forward as some of the externalities of using fossil fuel become embedded in the financial models and are reflected in stronger carbon tax but I think you can use China and some ways as a proxy. So in China today you have got a million dollar R&D subsidy for fuel cell buses and in Shanghai it's $1.1 million and those subsidy programs are in place through 2020 so I think there is an excellent opportunity where you see the limitations of battery electric buses and now the every two years there is 20% reduction in the subsidy program there for batter electric buses. You are seeing the market realize those limitations of range and recharge time and are embracing a new technology that not only provides the benefit of clean technology but frankly provide some of the benefits of diesel technology in terms of fast refueling and the ability to have a range that satisfies the transit requirements.

Thanks again for taking my questions. I will hoop back in queue.

Thank you. Operator The next question is from Amit Dayal with [indiscernible] Capital. Please go ahead.

Thank you, good morning. Most of my questions have been asked but just touching on China again how many customers do you have there now and in relation to these new initiatives that are coming on are these with the existing customers or these potentially new customers?

So it's a combination of both. We have quite a list of potential partners in China, bus OEMs system integrator cities that are real proponents for this. We have got auto companies that are increasingly engaging with Ballard on programs so there are a number of different opportunities for us in China nothing we can identify today in detail but a very, very excited and confident in our ability to convert some of the great work we have done over the last 18 months into promising opportunities long term.

Great. I guess I was trying to see level of maybe right in the year or the next into 24 months?

Yes, so part of our business model as you know is to provide a license model in China so we currently have in China two partners that have Ballard licenses for the assembly of modules in China and we are working to secure additional licensees similar outcomes I think in terms of the model as well as the size of programs and we hope to be able to position to announce each one of those this year.

Got it. On the margin side it looks like product mix is going to be supported relatively well with the heavy-duty line of offerings. Could we expect these 20% margins become a bit more consistent this year than last year?

Yes, so I think there is certainly the heavy-duty motive segment in terms of both of the contribution to revenue but also margin is going to be certainly more predictable than it's been historically where it's largely been driven around the European or US programs so we would certainly expect a bit more stability or predictability in margin but again to be honest we do have we still have a fairly diversified portfolio so there will be some movement but again we are certain we talk about 20% plus for the full year we are hoping to be able to achieve that our certainly our goal is to achieve that every quarter and with some upward momentum so yes, I would look for a bit more predictability.

Got it. What is the margins on Protonex line of offerings and are you expecting similar margins or even margins improvements if the Boeing business comes through?

Yes, unfortunately we are getting obviously customers sensitivity we wouldn't be in a position where I am afraid we can't be in position to disclose margins specifically. But the nature of their business is they have a business that provides fundamentally equivalence in terms of tech, what we would describe as technology solution so they do a combination of technologies solutions and power products so it overall it is a higher margin business but it's still it's a competitive market a market that Protonex have to be very disciplined in pricing so it is helping our overall profile but I wouldn't be able to comment specifically on margins in the business.

Understood. And just finally, on the fork lift related initiatives with these OEM are these in the US or abroad?

Forklifts OEM yes, at this point there we are not obviously, we are talking to a number of them and it would be a global opportunity. So we had some – we have done some work in the US we had conversations in US and out as well in Europe for example.

Understood. Thank you. That's all I have.

The next question is from Jeff Osborne with Cowen and Company. Please go ahead.

Yes, good morning guys. Just a couple of questions one on the strength of material handing this quarter was that predominately from re-stack or are these new units going out the door from your parking?

Yes Jeff, it was very much not this similar to previous quarter it's really a combination of both so there is good growth in both so I would say one didn't dominate or with the other it was the combination of both.

Got it. And then on the China opportunity I know there has been a bunch of questions on this and Tony you mentioned in your prepared remarks but just given it's ramping up any kind of commentary you can help us model that business in terms of the mix between kits and modules and revenue differential between the two and I assume the gross margin similar but maybe I am mistaken on that any kind of guidance or commentary that you can share would be helpful?

Yes, so at this point we are we would kind of highlighted the challenge I will say at this point Jeff we are still thinking through the best way to communicate around that so I will have to come we will come back on the best way to articulate that but there is no question that for example in the first quarter we it truly was a mix of all three part of the challenge is with the limited customers base that we do have at the moment we are a little bit restricted from a customer confidentiality point of view but it is something we are working on. I will say just to your second point margin yes certainly margins are attractive, but there are even different margin within modules kits and stacks as well so to your question, we will continue to think on the best way to communicate that.

Is there way you can rank order of the three which is the highest and lowest margin without giving numbers just?

I would say quite buy and large the highest value add product is the fully assembled module so and that would apply not just to China but certainly to the US and Europe so in the US market and in the European market we are still continuing to deliver the HD7 fully assembled module such with the highest value add is obviously stacks would be probably at the other end which is as you kind of unbundle it so I think from ordering it would be modules down to stacks.

Got it. Last question I had is just on Protonex Randy alluded a sizable opportunity in front of them it was confusing do you need the program records status to win that opportunity or could that come in before that achievement of milestone is reached.

There is no linkage between those two. So they are independent.

Got it and I know program of record easiest the future Rps and what not but is there any historically company selling to the military in the past but is there concessions on pricing that you would make for getting that substantially much more volume and ease of transaction.

No we see the pricing and gross margin profile at least for the foreseeable future to be very comparable.

Got it. Perfect. Thank you very much.

Thank you Jeff.

This concludes the time allocated for questions. I will now turn the conference over to Mr. Randy MacEwen for any closing remarks.

Great and thank you for joining us today we look forward to speaking with you again in July when we will discuss results for the second quarter. Thank you.

This concludes today's conference call. You may disconnect your lines. Thank you for participating. And have a pleasant day.