Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems, First Quarter 2020 Results 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. Welcome to Ballard's first quarter 2020 financial and operating results conference call. With us today on the call we have Randy MacEwen, Ballard's President and CEO; and Tony Guglielmin, our Chief Financial Officer. We're 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 a complete disclaimer and related information. I just want to note as well that we are planning an investor and analyst day on September 29 later this year. Our original intent was to hold this face-to-face event in New York City. However, in view of the COVID-19 pandemic, we are now planning to host a virtual investor and analyst day event with a live video stream. We are going to be confirming additional details once arrangements are finalized. On today's conference call, Randy’s going to provide his perspective on the COVID-19 situation and notable industry developments. Tony will then review first quarter 2020 financials and we will follow that by the Q&A session. I’ll pass the call over to Randy now.

Thanks Guy, and welcome everyone to today's conference call. Today I would like to spend some time providing an update on the COVID-19 situation at Ballard, discussing recent noticeable industry developments and then providing some initial thoughts on longer term structural implications for our industry as a result of the COVID-19 pandemic. I want to start today by commenting on the status of our business and operations in the face of this extraordinary environment. Our top priority always is the health and safety of our people, customers and partners. We continue to monitor and comply with the most conservative public health guidelines. We have taken decisive actions and implemented important measures to mitigate the impact of the COVID-19 pandemic on our people and on our business. We also remain firmly committed to serving our customers and meeting their needs. This means we have taken actions that align with employee safety and risk mitigation while also preserving business continuity to support our customer deliverables. So, while we have about 2/3rds of our global workforce working productively from home, we also continue to operate our essential manufacturing and testing operations in Burnaby and continue to provide essential field service support to our customers in China, Europe and North America. In our facilities, we've implemented precautionary and proven measures including relating to hygiene, sanitization, procurement and supply of PPE, temperature screening and physical distancing. We've made certain changes in our facilities and operations in Burnaby and in Hobro, Denmark to support physical distancing and employee safety. We've also been busy stabilizing our supply chain to understand potential disruptions and choke points. While some of our critical suppliers temporarily suspended operations, almost all of them have resumed operations already or expect to be resuming production shortly. We have taken a number of steps to…

Thanks Randy and good morning everyone. As Randy mentioned top-line revenue in the first quarter was a Q1 record of $24 million up 50% year-over-year. In the quarter, power products revenue was up 95%, and technology solutions revenue increased 20%. In power products, heavy duty motive was up $7.8 million to $10.4 million. This was largely due to a year-over-year increase in sales of module parts, kits, and MEAs to the Weichai-Ballard joint venture in China. The increase in technology solutions revenue to an $11.6 million was due primarily to the LD program and the technology transfer program with our Weichai-Ballard JV. This was despite the temporary slowdown in China and JV activities in the quarter. Gross margin as 22% in Q1 up eight point's year-over-year. The improvement was the result of the 50% increase in total revenues combined with the shift in mix to higher margin, product and service revenue. Cash operating cost increased 31% year-over-year to $12.2 million primarily attributable to increased expenditures in technology and product development. This increase stemmed largely from new hires made throughout 2019 to support investments in our next generation fuel cell products. Adjusted EBITDA in Q1 was negative $9.1 million, an increase of $0.5 million compared to the same quarter last year. This included Ballard's $2.5 million share losses related to the Weichai-Ballard JV. Ballard's net loss in Q1 was negative $13.5 million compared to negative $12 million in Q1 last year and earnings per share was negative $0.06 in Q1 compared to negative $0.05 in Q1 2019. Both the net loss and EPS numbers include the Ballard share losses from the Weichai-Ballard JV. Cash used by operating activities was $10.1 million in Q1, consisting of cash operating losses of $7 million and working capital outflows of $3.1 million. In terms of liquidity, during March we began executing our $75 million ATM program. During the quarter, this generated net cash proceeds of $52.6 million. We ended the quarter with cash reserves of a $181.6 million, 10% higher than the same period last year and 33% higher than the end of the prior quarter. We also added an additional $12.3 million to cash reserves in April under the ATM program. In total, the ATM transactions have added $64.9 million to cash reserves to this point in 2020. Benz was accomplished with no price discount, relatively modest transaction fees and limited dilution to existing shareholders. Finally, we ended Q1 with an order backlog of a $169.5 million and a 12 month order book of a $105.8 million. Our sales pipeline remains robust with significant qualified commercial sales opportunities. And with that let me turn the call back over to the operator for questions.

[Operator Instructions] Our first question comes from Rob Brown with Lake Street Capital Markets. Please go ahead.

Good morning. Randy, I just wanted to clarify what you said on the JV operation with Weichai. Did you say that was going to be running kind of mid-year here and then maybe could you clarify the steps that need to happen thereafter to kind of ramp that up?

Great, thanks for the question Rob, and good morning. Yes. So, we had in the last conference call identified we started the JV to start and before the commission mid-year. So, that timeline hasn’t changed. When we had the call last time, we did know that there was some delays that went, that was occurring, we basically had a contractor that was out of Hubei province that was unable to support the JV construction for a period of time. Weichai and the Weichai-Ballard JV is back to full staffing now for some time. And in fact, we have a JV board call tonight. And but the facility is basically fully constructed, all of the equipment almost all of the equipment has arrived I believe now and is in the process of being commissioned. So, achieving mid-year, there are really a lot of bi long pulls in the tenet this point. It's really a matter of optimizing getting equipment fully commissioned and optimizing doing sample runs and stuff like that. So, I think we're in very good shape. In fact, there was a kind of a preliminary soft opening of the JV. There are some activities currently underway on some temporary line. So, there is a lot of work going on there including with the vehicle OEMs and in terms of qualifying new vehicles and new platforms and on the sales side and we're expecting a good finish to 2020 with the JV as well as a very strong 2021 with the JV.

Okay good, thank you. And then, in the U.S. market you mentioned some pull from California, some moving toward regulatory pull. What are the steps in the U.S. market that you sort of see playing out as a result of that and sort of the timelines you kind of think can develop there?

Yes. I think the highlight that we wanted to focus on with the clean truck standard and we've been actively involved helping kind of shape this legislation in California as well and still up for in a final drop. So, it's not a lot out of course but I think the direction we're seeing in the change from the previous version to this final drop, there are very I think supportive of a strong outcome. And so, moving to a regime in some way similar what Europe did last year where you have very clear emission reductions for Class A trucks here in California, now we're talking from 2B all the way up to Class A trucks. We see this annual increase from 2024 through to 2035 as a very powerful requirement and I think companies like Daimler and truck involved with these type of announcements are while they're initially going to be focused I think on Europe, that is clearly a requirement for these truck OEMs to meet the requirements that are coming in California. And what we've seen in the U.S. of course while you don’t necessarily have good visibility what's going to happen at the national level. What we see is that California is a very significant influence on climate policy and air emission policy in the U.S. and typically some of those good regulatory work that's done in California is adopted eventually in other states. So, we think it's really important what California is doing. We're very supportive of the activities there I believe we'll likely see a favorable outcome on this front in 2020 and starting to get very clear requirements for these truck OEMs to start decarbonizing their platforms for 2024. So, if we kind of look at that timeline of 2024 to 2035 and you look at the increasing percentage requirement each year, not just for the Class 7 8 tractors but Class 4 through 8. We see lots of opportunity there for fuel cell technology that I think uniquely satisfies the requirements particularly for long pay, long and heavy payloads, long routes and heavy pay loads. And we believe Ballard is very well positioned and we need to do continue to great work on collaboration as well as continuing to progress the technology and the products including importantly product cost reduction which is a very big emphasis for us here in 2020.

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

Our next question comes from Amit Dayal with H.C. Wainwright & Co. please go ahead.

Great. Good morning, everybody. And then, with the [indiscernible] environment shaping up, Randy. Could you talk about how difficult it maybe from [indiscernible] end of this market to go down your IP and your history in this space?

Yes. Good morning, and thanks for the question. I apologize, maybe I'm going to ask you to repeat the question, and it was very difficult to hear you.

Yes. I was just asking how you guys are positioned competitively with a lot of these positive longer-term industry developments taking place. How difficult would it be for --?

The fuel cell technology work is no small undertaking for any company. And we've had this a lot longer and they highlighted they have a history of a couple of 100 past cars and some buses. And kind of millions of kilometers driven. Just in China alone, we have over 23 million kilometers of service with vehicle that have Ballard technology inside and outside of China. Of course we've got a long history and the largest fleet of fuel cell buses. So, I think from a competitive positioning, when you look at Ballard, when you look at technology leadership whether it's durability and power density, reliability, uptime and availability in the field. When you look at product offering, which the characteristics required to meet the market requirements. When you look at service support that we have, we have very high uptime or availability of our vehicles in the field, well we do an excellent job on the service side as well. And then when you look at brand and reputation, and importantly partnerships along the supply chain side we've been working with a lot of key partners there to qualify materials and we're very encouraged with the opportunity for product cost reduction going forward at this system level at the stock level, at the MEA level, plate level. So, a lot of work being done with the supply chain. And then, when you think about partners on the market access side and strategic partners like Weichai, we have I believe the strongest possible platform in the China market and a huge competitive advantage because of our relationship in our joint venture with Weichai. It's a very compelling company. And they did they continued to prove that every week. So, I think overall we have a very strong position and aligned…

Let me say that there, Randy, and this regarding with on [indiscernible]. We've involved these [indiscernible] still in the early stages of taking shape. But are you seeing a big change in inbounds you're getting with your quest to test pilots some of your offerings?

Yes. So I -- what's been surprising frankly is that we knew for a long time that the bus and truck markets were going to be very important markets. There are large addressable markets, we have a very good positioning in these markets. What surprise me frankly is the activity levels we're also seeing in some of the other market segments. So, rail, marine, forklift, but also even stationary power, increasingly there is more activity on the DG side. And so I think there are a number markets that are very surprised to the upside and I would probably put a spotlight on. And each of these markets will take time. They're not going to -- you're not going to see high revenue values next quarters from these markets to be clear. But I've -- the level of quoting activity and the level, the proposals that we're looking at and the customer collaboration opportunities we're negotiating are very exciting and we're seeing new geographic markets pop up as well. So, I think there's a lot happening that in my mind has been accelerated. And I don’t know if it's COVID-19 necessarily, we started feeling this just before late-2019 and early-2020 but it's really accelerated in the last few months as well.

Thank you, Randy. And thanks a lot and there are people other questions up front.

Yes, thank you Amit.

Our next question comes from MacMurray Whale with Cormark Securities. Please go ahead.

Hi, good morning. When you mentioned, Randy, about the hydrogen programs in China expecting some developments to be revealed in Q3. Can you speak first of all whether there is any involvement of Ballard at Weichai or the JV in shaping that program and whether there's any sort of insight you can provide in terms of the size of the timing of the types of stimulus?

Yes. Good morning, Mac, thanks for joining and thanks for the question. So, I think what we'll likely see and it could be as early as June or July. We're always reluctant to give a time, particularly we're talking about regulatory environments. Now we seem to take longer. And we actually expected these to be in place earlier this year but of course for the '19 has caused some delays on that front. So, we might see something happen as early as June or July. But to be cautious, I'd kind of think about it as June 3. So, that's the timing in terms of the announcement. I think there's a lot of discussion in the markets about what may the new fuel cell subsidy scheme may look like. And I think a number of parties have been influential in helping shape this. So, there are industry groups and there are companies that have access to regulatory authorities at the national level and provincial level. I don’t want to get into detail on how we get to influence this or how our partner influences this but I believe that Weichai has a very loud voice in the market. They're the largest manufacturer of diesel engines in China. And the fuel cell platform that they're building out with Ballard is I believe going to be the leading fuel cell business in the country. And I think there is a lot of support for our Weichai in terms of transitioning over time their portfolio to provide for zero-emission solutions. In terms of what the scheme might look like, we our understanding that there likely will be five or six key regions that are identified as regions where there will be significant policy support and subsidy support. And these regions are clusters will…

Okay. And then just following up on visibility. On the 2000 unit committed by Weichai, do you have any additional insight into where they'll be deployed or by whom or what the plan is there?

We do. We’re going to follow Weichai's lead on our communications on this, Mac. So, they have commented publicly that they expect these primarily to be buses. There will be some trucks as well. And they'll there are different regions that they'll go into but primarily in Shandong province.

Okay. And then just a couple of things perhaps from Tony. Just in terms of modelling over the next couple of quarters. If we would see revenue pushed out, can you remind us of the stakes versus variable overhead in sort of the cost to goods sold, whether we'll see a big jump in the burn rate because there will be fixed overhead not being covered. I'm wondering about that. And then second question is just can you go over the anti-dilution rights that Weichai has given the 8(a), how that works with the aftermarket financing?

Sure. So, let me and thanks Mac. Let me deal with the second question first. This is the in regard to the Weichai anti-dilution rights. So, Weichai does have, it has the right to top up with regard to any new financing public market or private financing we do to top up to 19.9% related to the financing. So, with regard to the ATM specifically, this is the $75 million program. Weichai has indicated to us they do intend to top up to maintain the 19.9%. So, that would be off of thus far would be about a $16 million relative to what we did thus far. And if we complete the program, that might move that 16 to $17 million or $18 million of addition. This will now, this will be funded under a private placement with Weichai. So, at this point they have indicated, they will top up, it's just a really right now question of timing. We expect that to we'd close some time but likely in the second quarter but at this point we don’t have a firm window on it. So, those are the anti-dilution rights specifically that they have and we do expect them to exercise. So, that's on the Weichai side of things. What your other question with regard to the cadence of revenue and fixed and variable overhead. I got to say I don’t have the numbers in front of me right now, Mac. But I will say Q1 is somewhat illustrative at a revenue number of around $25 million, no $24 million $25 million as was highlighted or as you've seen. We did see a pump up in gross margin from Q4 last year particularly when we had a lower level of revenue and certainly Q1 of 2019. So, we're already with that 22% gross margin in Q1, we're already starting to see that type of absorption of the overhead. If I could find the numbers, I'll certainly get back to you on the call, if not we'll take it offline. But as we think about Q2 and the rest of the year, we had kind of signaled that we expected to see a decent Q1 which I think we which we've seen a little bit below I think were $0.02 this was but to all things considered. And we are expecting to see some improvement into the second quarter not withstanding some of the delays that Randy mentioned. And of course, we would expect as we signaled in the past a fairly strong second half of the year of course assuming that there isn’t a sort of a round two if you will of any COVID situation. So, let me get back to you on a little bit of the numbers but I would expect to see the gross margin that you saw in Q1 at that revenue level will. That we expect to see that actually improve slightly as revenue goes up when you absorb more.

Okay, yes we can do that offline. And just as well I probably have a question about the pricing that Weichai will get like whether all match the average sort of prices that the market was buying in?

Yes. I could touch on that quickly, just that is an important point. And they get it all, it all tie of the timing. So, Weichai has the right to top up. In our investor rates, it's been Mac we've offered them the ability to top up at the end of the quarter or at the end of the ATM program. And it's depending on which option they choose, yes they do get the benefit of the weighted average price under the ATM but there is a TSX restriction on pricing. So, if they close, they get that VWAP but if the closing is delayed and the stock price rises appreciably, then they would have to be subject to whatever restrictions the TSX has on maximum allowed discount to the closing date. But in theory, they would get the benefit of the VWAP. And if the number is to be figured out but the VWAP for the ATM shares that we issued thus far is a bit over $8, about $8.13 if I recall was the VWAP under the shares issued today. But in order to get that, we'd have to close fairly quickly. So, whether they enjoy that or not is could be the function we're closing.

Yes Mac, its Randy. Just wanted to supplement that. So, whether -- I do believe Weichai will top up and whether it's at the $8.13 VWAP or some higher price because of the TSX restrictions. It's a really good signal in mind. You think about they invested back in late 2018 where they invested at $3.54 U.S. So, with them toping up at these levels, it's a very good indicator of the value they place on Ballard.

Yes, that's right. I should have said at that $8.13 by the way of course that's US dollar price as well as with the $3.54 that they originally invested in. so, those are off at now stock prices.

Okay. Excellent, thanks.

Our next question comes from Jeff Osborne with Cowen and Company. Please go ahead.

Yes, thanks. What it's been discussed, Randy. But maybe just on China. Is there any update outside of Weichai and the JV to share with any other potential customers or avenues to revenue growth?

Thanks throughout for the question, Jeff, thanks for joining. Yes, so on the rail side, it was just late December early January when the first tram line in the world really started commercial in on the Gaoming line in Foshan in Guangdong Province. And so we, was some disruption to the operation of that tram line during the COVID-19 situation. So, that will I'll call it the activities from CRRC have been kind of on pause. Well that continued to I want to get data off the first deployments there. So, there is I think increasing investment likely to occur in China on the rail side and we see zero-emission rail is a key part of that. So, I do believe there's lots of opportunity not just in Europe with Siemens but also in China with CRRC on the rail side. And of course that's outside of the joint venture. And then, the pass-car market is another market that we've been looking at and we've had discussions with a number of different vehicle OEMs as well as Tier 1 suppliers on the opportunity for the Chinese passenger car market. Its evolving slowly particularly with the last few months. But we'll see how that shapes. We do think there are opportunities in that market. And then the other thing that's interesting in my mind, this is in the joint venture is material handling market is a market segment that we're seeing some interest in, globally. So, we have kind of three key projects we're working on in material handling side for fuel cell powered forklifts. And I believe that China is a market longer-term where we're going to see some traction for fuel cell forklifts as well particularly as we just increasingly become so important there. So, I would just point to rail and the passenger car market outside of the JV. Inside the JV, we haven’t talked much about material handling market but I do view that as a long-term market and of course Weichai with the something around 45% 47% ownership position of KION has a good partner there for the European market as well. So, kind of other markets that we see in the China market are off road markets. So, a construction equipment and mining equipment, we've got some activities in other jurisdictions in these markets as well. But these are markets that we see potentially working with Weichai in the are some of these off road markets as well because they've a strong competitive position in those markets too. So, those are some additional markets. And then of course on we still have our legacy nano-fuel cell technology and that is being used at the Synergy Ballard JV and there are continuing sales by the JV to users of the nano-fuel cells stack. So, that's another revenue source of opportunity going forward as well.

Got it. And that was very detailed. A real quick, with the Green Deal in Europe and obviously a lot of moving parts there. But is there any risk to the JIVE program may be slowing down and then things like that that are one-offs game rolled into a broader infrastructure package or vision?

There's a possibility. I think what we've seen is that it's every time there are European bus demonstration programs, it always takes longer than party live like. And we're seeing progress of course, we have now some of the orders obviously in the past 120 days particularly on with Solaris. We're seeing lots of opportunities in the European market that are kind of bubbling below the surface where the volumes look to that next stage on the bus side. And then of course the commercial truck market is going to be a huge market I believe in Europe. But I do think you're going to see more announcements on the bus side both in I'll call it mainland Europe as well as in the UK.

Got it. That's all I had, thank you.

Thanks, Jeff.

Our next question comes from Joseph Osha with JMP Securities. Please go ahead.

Hello everybody, long time, Randy.

Hi Joe, how are you doing?

Just fine. I'm curious about what you think on some of the I'll call them the soup to nuts competitors Nikola brings to mind. There are some others that seem to believe they can do everything from the fueling to the heavy truck to the power train to the fuel cell. Did those companies ultimately represent potential customers or do you see them sticking with kind of been not in been in your mentality?

Yes. I won't comment specifically on Nikola but just that overall model we are seeing others potentially talk about these models where you basically offer transportation that is based on our per kilometer driven or a lease rate and then they say we'll take care of designing and manufacturing the vehicle, we'll take care of supply in the hydrogen refueling infrastructure and we'll take care of the financing. But it takes a lot of capital and a lot of business complexity to deal with all those variables. And partnering is a very key way to mitigate that risk and I think a very important driver of whether or not that type of model is going to be successful. And I think as companies look at this space, the technology on fuel cell is not easy. If it was easy, it would have been commercialized a long time ago. And so, Ballard is in a leadership position on the technology front and I think as companies scratch more at the surface and invest time understanding where the challenges are on that really commercializing high durability, high power density, and high performing fuel cell technology. I believe they're going to need partners and going back to the vehicle OEMs whether it's trucks, busses, pass-cars, and going back to the Tier 1 suppliers for all of these market and within the commercial vehicle market, a number of them I think are going to be looking at Ballard as a company that has technology, it would make sense to partner rather than for to try and do it in-house. And particularly as they look at trying to invest in autonomy and connectivity and electrification, the battery side shared mobility and even continued investments in internal combustion engines. So, I think companies are going to recognize like I believe Daimler and Daimler Trucks and Volvo Group, the collaboration is perhaps a more powerful model than trying to do it all yourself. And even in these type of organizations that do believe they're going to be able to accomplish everything internally, I think over time that Ballard will have opportunities in those companies. The number of kilometers we're getting is just increasing every day in the field. Our uptime availability rates is increasing every day in the field. Our technology is getting more mature, our products are getting more mature. And customers that are putting -- end-customers or users who have whether it's their brand on the front of a truck or in the front of a bus or their brand on promising delivery of materials or people, this durability and reliability is going to be very important.

Thanks. And then just a follow-on. It's I guess kind of an evaded question. I'm wondering if you've hand any conversations with some of the folks looking at electrolysis. In particular, I'm hearing from say New Fortress Energy and then some other folks about this idea doing hydrogen production with zero or even negative cost wind power in particularly in the middle of the day. What potential exists who are your business to cooperate with some of the fueling infrastructure businesses? Thanks.

Yes. So, great question. We've longed into looking at electrolysis technology. Our belief if that there are two homerun opportunities in the hydrogen fuel cell trigger. There are of course others. But the two homerun opportunities we see in the hydrogen fuel cell industry is 1) fuel cell technology for medium and heavy-duty motive applications. 2) Is electrolysis to generate green hydrogen and really support the Paris climate accord objectives. And so yes, we follow in track electrolysis very closely. We're familiar with all of the companies in this space and it's been kind of interesting to see some of the positioning that's happened over the last year where you had comments requiring hydrogen, it's not just for the fuel cell technology but for the electrolysis guaranteed and invested in hydrogen, it's just before that as well. You've got Linde and other gas companies making investments in electrolysis companies and setting up joint ventures. So, I'd say the gas giants are increasingly getting more invested in electrolysis and see opportunity there. You have jurisdictions like Australia who are -- in Saudi Arabia who are really looking at electrolysis and green hydrogen as ways to decarbonize and even economic development opportunities. I mentioned earlier, BP and Shell looking at net carbon zero mandates over the long term. I think you'll see Ramco is starting to join this type of course looking at hydrogen roadmaps in the future and electrolysis is going to be a key part of this. And so, we don’t have any proprietary technology at Ballard focused on electrolysis. There's always been the theory that fuel cell technology and electrolysis is reversible technology, hasn’t really proven out to be that way. Practically, there are a lot of challenges with that. There are a lot of core competencies and a…

Excellent, thanks for the insight.

Thank you, Joe.

This concludes the question and answer session. I would like to turn the conference back over to Randy MacEwen the CEO for any closing remarks.

Great. Thank you for joining us today. We look forward to speaking with you again in August when we have this stats results for Q2 in 2020. Thanks again.

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