Ballard Power Systems Inc. (BLDP) Q1 2018 Earnings Report, Transcript and Summary

Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems' First Quarter 2018 Conference Call. As a reminder, all participants are in listen-only mode and the conference 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 Guy McAree, Director of Investor Relations. Please go ahead.

Thanks very much, and good morning, everyone. The purpose of today's call is to discuss Ballard's first quarter 2018 financial and operating results, and with us is 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. Please refer to our most recent annual information form and other public filings for our complete disclaimer and related information. So this morning, Randy is going to review our strategic progress in the first quarter, and then Tony will review Q1 financial results and we'll open the call up for Q&A after that. Just before we get start-up a brief notes, Randy is going to be participating at the Reach China Investment Conference in Shanghai on May 22, as well as the Cowen 46th Annual Technology Media & Telecom Conference in New York City on May 31. And I'll be participating at the 3rd Annual Oppenheimer Emerging Growth Conference in New York City on May 15 and at the B. Riley FBR Investor Conference in Los Angeles on the 23rd of May. And with that, I will turn the call over to Randy.

Thanks Guy, and welcome everyone to our first quarter 2018 earnings conference call. Our Q1 results were consistent with the type of start for the year we had anticipated. As has been typical with past years our revenue cadence through 2018 features a relatively slower first half followed by an expected increase in business levels in the second half. As previously indicated, we're expecting a relatively flat 2018 overall. However, I want to point out of the relatively high level of one-time technology transfer revenue in China last year is masking underlying growth this year. We continue to be very excited by the growing opportunities set we see in heavy duty mode of applications, where customer requirements include long range, rapid refueling, medium to heavy payloads and route flexibility. I want to direct you to Slide 5. In a 2017 report prepared for the hydrogen council, McKinsey concluded that fuel cell electric vehicles offer the most effective solution for vehicles weighing more than about seven tons; we're traveling more than about 100 kilometers on a daily basis. There are three additional notable points. First, in each of these markets, including city bus, heavy trucks, trains and trams, fleets and taxis, and light commercial trucks, there each large addressable market. Second, many of these applications feature centralized return to base or deeper refueling, which represents the lowest barrier for hydrogen refueling infrastructure. And third, in many of these markets Ballard has industry leadership positioning including talent, technology, products, field experience, service support, and brand. In my view what's been most exciting so far this year is the growing interest in meaning progress we made across a number of transportation applications deducted in this McKinsey graphic. I want to be very clear all market signals are positive. Today the interest in hydrogen fuel cells is real and growing and Ballard is well positioned. I'd like to summarize recent important developments which underpin our perspective on future growth. Looking first of the transit bus market, we announced this week a firm purchase order with a key partner Van Hool, a Belgian bus OEM to supply all 40 of the fuel cell engines that will support the German cluster under the JIVE program. These 40 engines which we expect to begin shipping in 2018 will power zero emission fuel cell electric buses to be deployed in Cologne and Wuppertal Germany beginning in 2019. This is the largest fuel cell bus program announced to date in Europe. In the U.S. bus market, progress continues, particularly with our key partner New Flyer. Last week, Orange County Transit Authority awarded New Flyer 10 fuel cell buses. We also expect another 10 fuel cell buses to be awarded by AC Transit later this year. In the commercial truck market, progress also continues particularly on the planned deployment of 500 licensed fuel cell electric commercial trucks in Shanghai this year, all using Ballard fuel cell stacks technology. Approximately 80 of these trucks are now in normal operation with another 220 in trial operation. In the U.S. commercial truck market, during Q1 we announced that Kenworth hybrid Class-8 drayage truck using a Ballard FCveloCity module that successfully completed initial road testing in the Pacific Northwest. The truck was also displayed at the 2018 Consumer Electronics Show in Las Vegas. This moves the program to the next stage, which involves extensive on road trialing at the ports of Long Beach and Los Angeles. We also announced another U.S. medium-duty commercial truck activity during the quarter, specifically the signing of a contract with CALSTART for an FCveloCity module to be used in a trial of a hybrid UPS Class-6 delivery vans operating in the LA area. This is another example of fuel cell electric vehicles addressing limitations of batteries in a target use case. The battery-only UPS delivery vans are often limited to specific routes with modest range and flat terrain. CALSTART has stated that at least 1,500 UPS vans operating in California are prime targets for this hybrid fuel cell solution. It's important to note that medium and heavy-duty trucks account for a disproportionately large percentage of CO2 emissions in the transport sector, including 26% in the U.S. And with significant use of these trucks at ports, including 21,000 Class 8 drayage trucks in use today at the ports of LA and Long Beach alone. The focus is increasing on this environmental challenge. Turning to the train market. In Europe, during the quarter Siemens announced receipt of approximately €12 million in funding to support the development program for the Siemens Mireo, which is a zero-emission fuel cell light rail commuter train. This is important progress in relation to our November 2017 announcement of a multi-year agreement with Siemens for the development of a customized 200 kilowatt fuel cell module to power the Mireo. The Mireo's lightweight design, energy efficient components, and intelligent onboard network management capability well results in the use of up to 25% less energy than traditional electrified trains with similar passenger capacity. With initial deployments plan for 2021, the Mireo will also reduce infrastructure costs and minimize environmental impact. In the marine market in addition to our initial collaboration activities with ABB and Royal Caribbean cruises that we previously discussed. This year we also announced a successful integration and testing of Ballard 30 kilowatt modules in a hybrid build in Japan. The modules were sold through our distribution agreement with Toyota Tsusho to Yanmar, a major industrial equipment manufacturer in Japan. The testing was focused on the establishment of safety guidelines for hydrogen fuel cell powered boats operating in Japan's restricted coastal waters. It's an important step in the wider adoption use of fuel cells in Japan's marine sector. And just to underscore the momentum that's beginning to build in the marine sector, the United Nations, International Maritime Organization or IMO announced the signing of a historic agreement last month by 170 member government, establishing aggressive reduction targets for greenhouse gas emissions in the shipping industry. The targets are to reduce GHG emissions to 40% of 2008 levels by the year 2030, 50% by 2050 and completely eliminate GHG emissions by the end of the century. On the light-duty end of the spectrum of transportation applications, several important developments have occurred since our last conference call. In terms of material handling, we've made a number of important announcements. First, we're very pleased with our announcement two days ago, relating to the signing of a Master Supply Agreement with Hyster-Yale to supply minimum annual volumes of air-cooled fuel cell stacks through 2022 that will power Class-3 lift trucks such as such as pallet jacks as part of Hyster-Yale's ongoing fuel cell forklift program. In addition we will be supporting the design of the electrical propulsion system for these Class-3 Hyster-Yale trucks. This initiative complements the Nuvera liquid cooled fuel cell stack offering. So it's exciting for us to be working with the forklift manufacturer that's leading the OEM community in terms of fuel cell power trucks. Second, as referenced on our previous call, we signed a $4.2 million initial contract with an unnamed strategic customer for a multi-year Technology Solutions program to develop an ultrahigh durability and high performance air-cooled fuel cell stack that can be used to power Class-3 forklift trucks. This program is targeting the development of a stack with 20,000 hours of operating life, which will of course be another important factor in driving down product cost and strengthen your value proposition in expanding the addressable market. And finally, we received a follow-on purchase order from Nisshinbo to progress our previously announced Technology Solutions program, first focused on the development of Non-Precious Metal Catalyst-based fuel cell stacks. This multi-year effort is expected to result in significant cost reduction of both air-cooled and liquid-cooled stacks for use in material handling applications. These programs are very positive indicators of Ballard's future opportunities in the evolving material handling space, as we believe the market will move to purpose built fuel cell forklifts in the longer term. Also in a light duty area, we continue to make progress in the unmanned vehicle market through our subsidiary Protonex. While this is a nascent market and most of our work at this point has been with military customers, we believe that both military and especially commercial unmanned vehicle demand are poised to grow dramatically over the three-year to five-year time horizon. Our collaboration with Cellula Robotics was recently announced as we work together on the development of a fuel cell powered long range autonomous underwater vehicle work that's being funded on our contract with the Department of National Defense in Canada. This is the first of a possible three phase program with the potential to dramatically reduce the cost of ocean exploration, observation mapping by enabling month long underwater autonomous missions. Finally with respect to Protonex power management product, we announced two SPM-622 military purchase orders in Q1 with a total value of $3.5 million. The first PO value of $1.6 million was shipped in the quarter with the remaining $1.9 million PO plan for shipment later this year. With that, let me now turn the call over to Tony for his review of Q1 2018 results. Tony?

Thanks Randy, and good morning, everyone. Topline revenue in Q1 was $20.1 million, a decrease of 11% or $2.6 million year-over-year. This largely reflects the absence of $6.2 million of technology solutions revenue associated with our stacks joint venture in China recorded in Q1 last year, partly offset by growth in our Power Products business. Overall Power Products revenue increased 11% to $12.4 million in the quarter. This was driven by a 29% increase in heavy duty mode of revenue to $9.3 million primarily the result of increased MEA shipments to our stack joint venture in China. We also saw 100% increase in Portable Power revenue to $2.4 million as Protonex ship power managing units to fulfill the $1.6 million order received in January from the U.S. Army. Technology Solutions revenue was down 33% year-over-year or $3.8 million to $7.7 million. This decrease reflected the absence of the same $6.2 million of one-time revenue booked in Q1 2017. This again was partly offset with growth in Technology Solutions contracts with other customers. In terms of gross margin, in Q1, we saw a year-over-year reduction $0.9 million to 33%. Again a consequence of the absence of the same high margin technology transfer revenue we saw in the first quarter last year. That said, gross margin in Q1 this year is in the range we expect for the full-year as we've discussed previously. Cash operating costs increased 8% in Q1 to $10.7 million. This was due primarily to higher investment in technology and product development including our next generation liquid-cooled stack and module technology partially offset by previously announced cost reductions at Protonex. Cash operating costs were also negatively impacted by a stronger Canadian dollar relative to the U.S. dollar as a significant amount of our cost base is denominated in Canadian dollars. Adjusted EBITDA was negative $3.8 million for the quarter compared to negative $0.7 million in Q1 2017, reflecting the lower revenue and lower gross margin in the quarter. Net loss in Q1 was negative $5.5 million compared to negative $2.9 million in Q1 last year and earnings per share was negative $0.03 in Q1 compared to negative $0.02 in Q1, 2017. Cash used in operating activities was negative $7.2 million in Q1 consisting of cash operating loss of $2.8 million and working capital outflows of $4.4 million. The working capital increased primarily to support 2018 deliveries. In terms of liquidity, we ended Q1 with strong cash reserves of $52.5 million and no debt. Finally, an update on order backlog. Our order backlog which reflects committed orders on hand remains strong at $222 million at the end of Q1 roughly unchanged from year-end. At the end of Q1, our 12-month order book stood at $89 million, up from $73 million at year-end reflecting the strong order intake in Q12. This excludes the purchase order from Van Hool for 40 modules to power buses in Germany as well as the supply contract with Hyster-Yale both announced this week. And with that, let me turn the call back to the operator for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Sameer Joshi of Wainwright & Co.

Good morning, Randy, Tony and Guy.

Good morning, Sameer.

I start with China, how is the products and ramp, our production facility ramp going there and how many vehicles are actually on the road? I think you mentioned 80 - how do you see that developing towards the 500?

Sure. Good morning, Sameer. So they're I think four or five key things we kind of look at right now in terms of how the China market is pacing. One is you have to track subsidy support very carefully in China and there seems to be a very solid base - continues to be a solid base in China and the subsidy report. The second is the vehicle list, the promotional list where MIIT, the Ministry of Information and Industry there certifies or classifies vehicles as eligible for - as fuel cell vehicles to be roadworthy as well as subsidy worthy. And so we continue to see progress on the MIIT vehicle list. The third, the one you're referring to is kind of deployment activity and right now today there are over 300 column Ballard powered vehicles on the road either in normal operation or in trial operation. And we see probably an excess of the 1,000 vehicles by the end of this year with similar type of operation either in normal operation or trial operation by the end of the year. So those are important and we mentioned 80 there's also another 220 additional in the 500 in Shanghai that are currently in trial operation. So there's good progress in Shanghai on that deployment to answer specifically your question. Another key thing that we track in the China market is hydrogen refueling infrastructure. And right now we're currently tracking 76 hydrogen refueling stations. There are 16 currently in service or - in service or in trial service. There's two different designations there. 16 are currently under construction and 44 in the planning stage, so we are tracking those. And I think one thing that's very encouraging is we're starting to see a number of the larger players like [final pack] accelerating their engagement on the hydrogen refueling side. And then the last thing is just tracking different companies in the industry. And what's been I think really important in the last six to 12 months and it's accelerated literally in the last few months is the number of large industrial and transportation companies carefully looking at the fuel cell industry and trying to determine the best technology solutions and the best partnering arrangements for them in the marketplace. So we see lots of opportunity in that market. And then in terms of the JV production, I think you're asking the question about how the JV is ramping. It's consistent with what we had communicated previously. We came in at 2017 with good production in December. We've had fairly similar production run rates kind of looking at 2000 on an annualized basis.

Okay, great. That was a really good color on the overall China initiative. Thanks for that. But I think in the last call what we understood was that Chinese - the revenue from China, the contributions would be dropping to around 40% of your total overall revenues from 60% that you saw it contributed in 2017. That gives you a gap of a whole of around $25 million. And you outlined all these other initiatives and marine initiatives as well as progress on the unmanned vehicle. Where do you see this $25 million gap being filled?

Yes. So a couple of things and Tony can supplement. First of all we're seeing growth in the Heavy-Duty Motive segment, particularly bus and commercial truck. Those are the key markets right now today. And as you probably know ACT Expo is underway right now in Long Beach and we're seeing a lot of interesting developments on the truck market. Electrification of freight transportation particularly is growing very fast. We're seeing the truck market is a large market, very fragmented, but e-commerce is growing, so freight volumes are they projected to grow in the range of 40% by 2050 and the emissions from heavy-duty vehicles, including trucks continue to grow and disproportionately very significant part of air pollution in GHG. So there's a lot of activity going on in the truck space right now. We're looking at the value proposition for each of the different 8 classes in North America as well as the 3 classes in Europe and the 4 classes in China. So there's a lot of activity on that front. Your comment seems to be more about how do we fill a delta from last year is kind of one-time revenue. And I think with a relatively flat year-over-year based on the order book we have and the sales activity in the pipeline implies a fairly good growth in the underlying business. But your question also alluded to some of these other markets like marina and UAV. These are longer term markets. I think what's important to understand, this is fairly unique I think to Ballard as well as timing wise in the last six months in particular, we're really starting to see progress in each of these different applications. And what's important to understand is our business model has core competencies, core technology, and in some cases products that can be used across multiple market applications and multiple geographies. So we're very excited about the leverage and the scaling effect we start to see as these markets continue to pick up, but they're still very early in these markets.

Yes. And I'll just supplement to just in terms of maybe a couple more specifics in terms of gap. And we talked about some of these, obviously the progress we're making in the power manager space, so we expect that to - as you're talking about filling the gap, certainly we're looking for some improvement particularly in the second half of the year. And I think Randy talked about it more, I would say that we're quite excited about Europe this year. If you're looking for particular geography and the announcement we made on the Van Hool Germany, I think is the first of what we expect to be some additional deployments this year. So those are kind of a couple of very specific areas that are not related to the China market that we think will help build to fill that gap if you will.

And Sameer, Guy just noted that I misspoke earlier on the JV capacity. I think, I said 2,000, I meant to say 20,000.

Okay, good to know. Just one last one before I step back into queue. There's a recent news about UQM being one of your contract assembly manufacturer. What is your capacity, manufacturing capacity in the U.S. and why was this more necessitated?

Yes, so we do see a lot of activity particular in the California market that's suggesting growth in the U.S. marketplace. We've just recently hired a key addition to our team to increase our California coverage. So there's an investment we're making in the U.S. market, like we are in China, like we are in Europe. I think the reality is we're seeing growth opportunities and in our three core market and we're making the investment we need to make sure we have products that satisfy the market requirements. One of the things we're looking at is to make sure that we're satisfying local contract requirements in China as well as local assembly requirements in the U.S.

Okay, I would step back in queue. Thanks.

Thank you, Sameer.

Our next question comes from Rob Brown of Lake Street Capital Markets.

Good morning.

Good morning, Rob.

Just one of the follow-up again with the Kenworth Development Program in truck and the U.S. Development Program in general. What sort of your sense on the test timeline there and the development timeline and how that may play out?

Yes, I think we'll let Kenworth kind of lead the communications on this. So there's a lot of sensitivities right now in the commercial truck market there's a lot of companies coming to market with electrification and we'll let our partner kind of lead the discussion on how this timeline rolls out.

Okay, fair enough. And switching to the JIVE opportunity in Europe, you've got some orders now. But what sort of remains in terms of that opportunity at this point coming forward.

Yes, sure. So Rob what we announced was what's called the German cluster. We expect the next cluster to be awarded will likely be the U.K. cluster and we feel work well position for that cluster, but there's still to do on that front. What we'd expect to see something transpire potentially over the next three months the next quarter.

Yes, okay, good. And then maybe just touching on the material handling market, you had a nice announcement there. What does that give you for the market? Is that an OEM product towards - aftermarket product and then how do you sort of see the next step to material handling market developing?

Yes, I think what's important is that we've secured a very important relationship with the company that see the value proposition for fuel cell forklifts and that is positioned long-term to transition ultimately I think to purpose built fuel cell forklifts. I think where the market is today. We're really talking about what we call the BRC, battery box replacement and that's the current strategy that Hyster-Yale has. But we see longer term opportunities with Hyster-Yale and other forklift OEMs as this market evolves.

Okay, thank you.

Thanks, Rob.

Our next question comes from Carter Driscoll of B. Riley FBR.

Good morning, Randy, Tony and Guy.

Hi, Carter.

So just following-up on Rob's question, so this - it's kind of a two part relationship that we says that today Hyster-Yale, which obviously is very important development for your material handlings business. But could you characterize the work you're doing for the electrification side versus what you're doing specifically for the Class-3 pallet jacks that's not for a purpose built product that they haven't built is to help them go-to-market faster. I guess I'm trying to understand the two different moving parts a little bit better?

Yes, so Hyster-Yale is having their earnings conference call right now, so obviously an important customer with a lot of sensitivity on how things are communicated, so we'll let them lead the discussion. What I would supplement it with though is that, Nuvera, the company they acquired late 2014 has a liquid-cooled stack and what they want to make sure is that they have a product portfolio that satisfies all three classes. And so this is really an opportunity for them to secure, I believe a leading air-cooled stack to supplement and make sure they can fill up the portfolio. So that's their strategy So there's work that will be conducted both at Hyster-Yale parent company level as well as Nuvera subsidiary level. In terms of collaborating to make sure they have the right stack technology and the right systems to meet their market requirements.

But this is for I mean largely can still be for drop in replacement. The other work you're designed is for a purpose built forklift down the road, is that fair characterization?

Yes, I would characterize the work today is focus and the stack supply agreement is focused on the battery box replacement market. We see longer opportunity with Hyster-Yale and with others for purpose built forklift, but we can't comment on what Hyster-Yale plans are.

Got it. Okay. Maybe shifting over to the UPS, obviously, there's been a lot of announcements for development work, especially for last mile delivery as range extension technology. Could you characterize the engagement with UPS that obviously has been early adopter of electrified delivery vehicles? Are they looking to hold off rising competition or segment by becoming more productive by adding some very similar to your strategy and commercial light vehicles in the EU and China? Amazon looks like it's trying to get the space maybe even Wal-Mart and certainly FedEx. Maybe just characterize if that is in correct in my assessment the nature of the relationship I realize it's early on.

You're right it is really and this is an initial demonstration but with a key customer and key geographic market from a macro level this scene of electrification of freight transportation has moved much faster in the last 12 months frankly than I would have anticipated and just spoke late last night with Rob Campbell, our Chief Commercial Officer who's at the ACTExpo and his comment was that this Expo is really dominated by electrification. There's a lot of the interest in zero emission solutions. And of course the challenge with battery only solutions is the range issues and the refueling to a recharging time and so you kind of look at a side by side comparison with fuel cells and batteries working together in a range extension application, you get two times the range about 15 times faster refueling and 10 times later solution and payload is very important. So we see a very strong value proposition in this market, but it will take time to validate these with key customers that are very thoughtful about how they piece new technology and new products into their portfolio.

Maybe could you comment Randy on obviously both the cost of the molecule - larger molecule and the lack of infrastructure naturally leads much like you saw many years ago now early adoption when natural gas look like it might be a competitor to diesel. Return to base operations you talk about either both your opportunity maybe to supply the infrastructure side and/or what you're seeing there's in the context of the discussions and adoption is that are those the two key concerns really the cost of fuel and the infrastructure and how that might be build out in cost effective manner?

Yes, so I think the question really goes to the kind of the challenges with adoption of fuel cell electric vehicles particularly in this truck market that we're talking about in delivery. I would say those four challenges really and we're looking very hard against each one of these that the first is the total cost of ownership. The second is power density to make sure that the fuel cell module can fit into the internal combustion engine space. So that's critically important. So packaging really. So it's mounted under the cabin. Hydrogen storage continues to be a key consideration and making sure you can have storage that allows you to capture longer range applications. And then as you point out hydrogen infrastructure and price and here we're looking at hydrogen infrastructure is being an easier solution given the returned to base depot type refueling. But you do need to have sufficient volume so you're getting utilization against those assets so you can drive the cost down. So we're targeting kind of US$5 per kilogram. We see a powerful way to get there. But it's going to take volumes and utilization. So those are the four key challenges and we're working by ourself on our own technology obviously with partners and ecosystem collaborators to address these issues.

Okay. And then maybe just last one for me. In terms of the JIVE program. Obviously, there's JIVE I, any update on when you think the second program might begin to solicit?

You were seeing activity already on that front, so I could see activity that would crystallize in some bits in 2018. In terms of contracting, I think we probably should assume that's 2019, but we'll see how that plays out. These programs always take longer, so I'm very cautious to be more specific on the timing, but I will say the JIVE I we're seeing lots of good activity there literally on a daily basis right now.

And I'm sorry, can I just squeeze one last one in. Can you talk about competitive front, with train and tram market particularly with Siemens and Alstom?

Yes. So obviously, it's important that we kind of look at this globally too. So I would say you've got CRRC in China, very active in the train space. As you know we've got two partnerships with the CRRC Group in China. I just visited those companies recently and there's good progress being made in China, and I think they're looking at international markets as well. And then in Europe, you obviously have both Siemens and Alstom very active in this space. I think obviously the interesting development is the expected merger, the announced and expected merger of Siemens and Alstom and what happens to that business post-merger. And so we feel like we're well positioned with Siemens proper today. And the collaboration is going very well. We had a number of milestones we needed to deliver in the first quarter. We successfully delivered all of those milestones and our pacing through our program with them very effectively. We've got key meetings with them next week in Germany. So there's a lot of good activity going on with Siemens and we'll put our focus there for the European market.

Appreciate taking all my questions. Thanks guys.

Thanks Carter.

Our next question comes from Jeff Osborne of Cowen & Company.

Good morning, guys. Most of them have been asked, but maybe Randy on the transfer impact for Q1, I think you called out $6.6 million. Do you have another number in aggregate or can you remind us what it was for 2017 as a whole, and just as we look at year-over-year comps, what it was in 2Q?

The aggregate technology solutions revenue for the JV last year?

Exactly.

Is in the $16 million range. Tony?

Yes for the full-year about $16 million, $15 million, $16 million for the full-year.

And do you have that handy what it was in 2Q just as we look at year-over-year growth rates if we're to back that up?

It's about $4 million, Jeff.

$4 million. Okay, perfect. And then I might have missed it, but can you just discuss when the Hyster deliveries would start. I know you can't quantify the scope and all that good stuff, but when do you expect a battery replacement product to be shipping in their service network installing it? Or how are you folks doing with that?

Yes. So we'll let Hyster-Yale lead the communications on this. Very important, we don't get ahead of their communications.

Got it. Makes sense. And then maybe just following up on Sameer question. Is there a way to kind of rank order the growth opportunities in the second half? I would assume bus is number one, MEA shipments are two, and power managers three in terms of the non-China growth, but maybe I'm wrong. Can you just insert any other items that are in backlog that would have delivery schedules in the second half of the year to give you the line of sight to that growth?

I think you've got them right, Jeff.

Yes, the only thing I'd add to that - yes, the only other thing that we've added, which is really less power products, but in the TS, on the technology solutions side, although, I mentioned as obviously we're down year-over-year in technology solutions, but we are looking for some pickup in our overall TS business in the second half of the year, existing customers and some new ones. So I see a little growth if one adjust for that $16 million, $17 million of the China JV. There is some underlying growth going on in TS more generally as well.

That actually does fit well into my last question, I assume the answer is no comments. But can you just touch on - you haven't mentioned out EBW in a couple earnings calls, any qualitative comments about how the partnerships going, the development when we might see any vehicles for initial testing on the road? I know they've shown some at auto shows and whatnot, but just how is that partnership progressing would be helpful?

The technology milestones continue to perform very well. Well actually the visiting Audi for two days next week in Germany and I think the next stage of the relationship is certainly something we're interested in advancing. But the reality is that that program is going very well. They were happy with the deliverables and they announced recently that they're looking at the 2020, 2021 timeframe for their initial demonstration deployment fleet and there's a lot of activity that we're aligning with Audi to make sure that we can support them for that.

That's perfect. More than answer than I was expecting. So appreciate it. Thanks much guys.

Thank you.

Our next question comes from Annapoorni CS of Roth Capital Partners.

Hi, good morning guys. Most of my questions have been answered. But just wanted to check European order, it might have been answered earlier, but I missed it. So just wanted to check on the UK JIVE cluster that you were talking about earlier, the last call, how is that materializing and on the current cluster as well like is there any more clarity that you can give us in terms of timelines? I know it's starting by the end of - by second half of 2018, but is there anything more that you can give us in terms of timelines?

Yes, I think the question was really focused on the European JIVE program and obviously we're pretty happy that we were able to secure effectively 100% of the openers for the German cluster. We're now working against the UK cluster and we feel like we're well positioned for that. We can't assume that though. We'll see how that moves out over the next 90 days or so and hopefully have an update for you the end of next quarter.

All right, and in terms of this current cluster, the German one is there anything more in terms of timelines that you can give us like - I understand it's in the second half of 2018, but is there any much information that you could give us?

Yes, nothing to granular. There's a lot of moving pieces. So it's difficult to be precise. What I can tell you is we expect to start our module deliveries in 2018 and those are move into 2019 and that we expect to sell - in 2019.

All right. Thank you.

Thank you.

This concludes the time allocated for questions on today's conference call. I would like to turn the conference back over to Mr. Randy MacEwen for any closing remarks.

Thanks, Ariel and thanks everyone for joining us today. We look forward to speaking with you again in early August when we will discuss results for the second quarter of 2018. Thank you.

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