Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems' Second Quarter 2021 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. . I would now like to turn the conference over to Kate Charlton, Vice President, Investor Relations. Please go ahead.

Good morning. Welcome to the Ballard's second quarter 2021 financial and operating results conference call. My name is Kate Charlton, and I'm delighted to have recently joined the Ballard Power team as the Vice President of Investor Relations. I look forward to speaking with many of you joining the call today and over the coming weeks and months. With us on today's call are Randy MacEwen, Ballard's President and CEO; and Paul Dobson, Chief Financial Officer. We will be making forward-looking statements that are based on management's current expectations, beliefs and assumptions concerning future events. Actual results could be materially different. Please refer to our most recent Annual Information Form and other public filings for a complete disclaimer and related information. I'll now turn the call over to Randy.

Thanks Kate, and welcome to the Ballard team, and I'd like to thank Guy McAree for his many years of valued service and wish him the very best in his planned retirement. I'd also like to offer a warm welcome to additional new members of our leadership team, including Linda Downs, Chief People Officer and Mike Kubik, Vice President, Strategy and Corporate Development. As announced yesterday, I'm also pleased to welcome a new member to our Board of Directors, Hubertus Muehlhaeuser. Hubertus, brings a strong background in industrial manufacturing, including commercial vehicles, construction machinery, agricultural machinery and powertraining technologies. I look forward to his insight and counsel to support Ballard's strategic objectives and drive long-term shareholder value. Now welcome everyone to today's conference call. In Q2, Ballard revenue was $25 million and over 40% increase from Q1 and flat compared to the second quarter last year. Gross margin was 15%, adjusted EBITDA was negative $19.7 million, and cash reserves at the end of the quarter $1.24 billion. We received $26 million in new orders in the quarter, up over 100% from Q1. Looking at the first half of the year, orders were also up over 40% from H1 last year. Our net order backlog of approximately $113 million shows modest quarter-over-quarter growth. The second quarter and first half of this year have highlighted our ability to navigate a challenging environment amidst widespread disruption in global supply chains. Early in the pandemic, we worked with key suppliers to ensure long-term agreements and extend purchase order coverage, allowing our suppliers to secure raw materials early before many of the 2021 shortages began to impact supplies. Maintaining dual-sourcing in different continents and increasing safety stocks on critical and long lead materials has allowed us to navigate short-term disruptions over the last 18 months.…

. The first question comes from Aaron MacNeil with TD Securities.

Randy, you touched on it in your prepared remarks, but can you give us a sense of how competitive a typical new order is? Particularly for one like Tata, which is a new customer. The types of questions I'm looking for answers on are how many competitors are bidding? Are your modules priced competitively? Are less proven competitors offering discounts to build references, are you charging a premium and relying on reputation? I know you can't get into specifics, but the pricing dynamic for us is sort of a black box. And I'd just be curious to get any thoughts that you could share.

Sure. Aaron, thanks for the question and most of your comments are applicable. What we've seen is a change in the competitive landscape over the last number of years, right? And so if you go back 5 years ago, there only would have been a handful of companies, a very small handful, competing for these type of opportunities like Tata, as an illustrative example. And what's happened, of course, over the last number of years is that we have much larger companies that have seen our strategy of looking at the medium and heavy-duty motive markets of bus, truck, rail and marine, where the value proposition for fuel cells are strongest. And so it's a more competitive landscape, but what's critically important to understand, whether it's Tata, Solaris, Van Hool, Wrightbus, New Flyer, et cetera. Their logos are on the front of these buses, and they care about safety. They care about reliability. They care about durability. We're now approaching 100 million kilometers of in revenue service, which is a massive differentiator for Ballard compared to any other company in the fuel cell industry that focus on these heavy duty motive markets. So one of the things that's critically important, too, is we're really focused on -- as our tagline "Here for life" implies the lifecycle for our customers and making sure that we're thinking about long-term durability and the cost for our customer, not just upfront capital cost, but over the lifecycle of that deployment. So there are a number of factors that go into winning a customer like Tata. Certainly, the technology, the product offering, the fit of that product for their -- in terms of power output, temperature, ease of integration, there are a number of variables there. But reliability, durability and proven technology is a major calling card for Ballard, and we play that as you would expect. That being said, your point on pricing is important. We are seeing other companies who are earlier to the game, who aren't on an 8th generation of product, trying to win early deployment opportunities and pricing aggressively. And that's a factor we have to take into account, and that's why we have our 3x3 program to cost reduce Ballard stacks and modules over that 3-year time horizon by 70%. So we don't want to just rest on our technology advantages, but we're looking at cost reduction as a major advantage going forward. And then one last point I'd just highlight Aaron is, this business model we have where we sell into multiple end markets, we think is very attractive. A lot of leverage with the same core competencies, same technology and a substantive part of the same bill of materials for modules across bus, truck, rail and marine and increasingly off-road in stationary power applications. What that means is that beyond the technology advantages we have as we sell across a number of verticals, we expect to have a volume, and therefore, a cost advantage as well.

Got it. That's helpful. I'm hoping that you can also give us a bit more details on the updated time line for the subsidies in China. Obviously, like let's not get into picking a date or anything like that. But I guess what might be more interesting is if you can give us a sense of the mechanics of what might occur when that announcement is made, both at the JV level and then at the Ballard level. For instance, like does the JV have orders in hand contingent on the finalization of the subsidies or will it start to build inventories? What's the utilization at the JV level today versus what you think it might look like subsequently? Like any sort of goalposts would be interesting.

Yes. So some of the context on the JV, of course, is that we've done a lot of work on optimizing our production processes. And we've learned a lot over the last year. That's quite helpful. Particularly on the plate production side, we've seen a lot of efficiency and yield improvements that are very compelling. So that's on the production side. Production utilization is very low right now, as you'd expect, and of course, this is a facility that's, I believe, the largest facility to produce fuel cell stacks and modules in the world for these heavy duty motive applications. So over 2 gigawatts of production capacity, about 20,000 vehicles annually that this facility can support. It's quite an impressive facility. So operating at very low utilization currently. And then when you look at additional activities as the entire China market has been waiting for policy clarity, we've done a lot of work at the joint venture on next-generation module design, and increasing the breadth of the portfolio, so different power outputs. Weichai has brought a lot of capability to bear here in terms of understanding the market requirements there. And they're experts obviously at diesel engine design. And so together, it's a very powerful combination with Ballard's fuel cell capabilities and Weichai's engine design and supply chain muscle. So there's been a lot of work done on cost reduction for balance of plant components over the last 1.5 years. That's very compelling. And then on the customer side, a number of customers continue to clock up kilometers as they validate the reliability and validate the durability of our products in their applications. And we're talking about here some of the largest bus OEMs in China and some of the largest truck OEMs in China that now have new platforms with the latest generation of Weichai-Ballard stacks and modules on test in the field. So that's important development there. We don't have a contingent order book, to answer your question directly, at the JV. I think customers really want to understand how the point systems in various demonstration regions will get finalized and what that means. But what I think is very encouraging beyond the national policy appointing demonstration regions is the recent announcement in Shandong province for the Hydrogen Society program. And this is a program that's very much focused on the deployment of fuel cell trucks and buses and hydrogen refueling station infrastructure in Shandong province. Of course, that's where the Weichai-Ballard joint venture is located. So we believe that we have a very strong position as that project starts to scale up, and we're already seeing activity from the JV with customers for that program.

The next question comes from Mac Whale with Cormark Securities.

I thought, Randy, I would switch gears to the Gore agreement. Can you speak a little bit about the trend behind this? Or what the interest is from Gore, because Gore supplies you with membrane, but it hasn't MEA program. Can you speak to whether we should view this as a sign of your leadership in that MEA area? Or just could you speak to the nature of that collaboration?

So we've been working with Gore materials for a long time. Gore is obviously a leader for membranes, and they have evolved their recipe and their processing and their capacity over the last number of years. And I think they'll continue to be a leader at the membrane level for a very long time. So we're very pleased with the deepening collaboration we have with Gore. There's lots of work underway as we look at collaboration that will continue to improve the performance of membranes, thinner membranes, higher performance, lower cost, better utilization, et cetera. So we're very excited about the activity we have underway with Gore, not just as a supplier, but really as a partner that's looking at the long-term landscape for membranes in fuel cell applications, particularly for heavy duty mobility where membrane durability is critically important. I also want to highlight there are other membrane suppliers that we have a collaboration and partnerships and supply arrangements with, including China domestic suppliers that have emerged over the last number of years. We've worked over about a 4-year period with one company in particular, and have worked with them to really validate their material with a number of iterations during that 4-year period, helping them with their specifications so that there's another option that's domestic for the China market. We're seeing very strong technical results as well as cost opportunities for that membrane as well. So I won't comment on Gore's positioning in the MEA. I will say Ballard is very strongly positioned at the MEA, and we appreciate the relationship we have with Gore as a key supplier for membrane.

Okay. Switching then to the Linamar Initiative and it's at pretty early stage right now. You're working on a powertrain sort of prototype by the end of the year. What is the timing on the testing of that? And then any decision on a JV? Is that like a 2022 decision point? Or would it be earlier or later than that?

Yes Mac, great question. So there are a number of work streams going on in parallel with Linamar. One relates to the commercialization discussions in terms of business model, business plan and JV. The second relates to collaboration on the product architecture, including the integration of our modules, our stacks into balance of plant components, module design and powertrain integration, including storage. Linamar has a lot of capabilities here and a lot of investments they've been making over the last number of years, and I think are well positioned, particularly for utility vehicles and certain vehicles in the light duty car and van sector where we see high utilization rates. And of course, our high-power density stack is well positioned for that market after a long investment cycle with Audi there. And then the third is really about the customer side. And where do we see adoption and penetration. And so those are the three work streams going on in parallel. And I just want to comment that Linamar is a great international player, Tier 1 supplier in all automotive sectors, but well positioned in these light duty car market where we see vans and utility vehicles seeing adoption for fuel cell vehicles and their conviction level and positioning on this, I think, is very, very solid.

Okay. And just my last question, if I could just throw one more in there. On the Tata order, 15 units is a great start on that. Is that -- when you look at their plan, is that more like a Van Hool kind of program where you see around $1.5 million every couple of quarters? Or is it more like Wrightbus where there's more like $2 million a quarter? Just trying to get an idea of how to model that over the next 6 months to 12 months?

Yes. So I think like over this next 6 months to 12 months, I wouldn't assume additional orders from Tata. What we're looking at here is those 15 buses going into deployment in a pilot program in the Greater New Delhi region area. So that's the -- there will be some time to validate those new modules. They're taking our latest generation modules. We had a prior experience with Tata on previous generation product. And so we're now moving to the latest generation product in a much larger pilot program. Now you compare it to, for example, some of the European bus OEMs, I would actually Mac, compare it more strongly with the Chinese bus OEMs. Because the size of the Indian market is substantive compared to North America and Europe. And what we see is a very large Indian market that is now really over the last 6 months kind of awaken to the hydrogen opportunity in a serious way. So we think India will be a very large market long-term for hydrogen, and particularly for mobility, where obviously, local air emissions, along with climate change are big drivers in India.

Okay. That's helpful Randy, because yes, as you pointed out, it's a big market. So I guess your comment is really-- there's a hockey -- there is a legitimate hockey stick there, like in China, and it's a question of exceeding the market. And then once they're comfortable, you'll see sort of that uptick in growth.

Yes. For us, we're really pleased to be working with Tata, particularly, they're the #1 bus OEM in a large market.

The next question comes from Michael Glen with Raymond James.

Randy, you talked about some capital deployment. You made some pretty broad statements there about you've identified several opportunities, you're in active discussions with a number of parties. I'm just curious if you can just perhaps dig into that a little bit more. Is this M&A? Is it MoUs? Is it partnerships? Like just trying to assess in more detail what we might be thinking about here.

Yeah, hi Michael, it's Paul Dobson here. So yes, on the capital deployment front, we are very active both on the M&A front and in commercial discussions with a number of large players. On the M&A front, as we talked about before, really what our strategy is aimed at is accelerating deployment of customer adoption and expanding our capability. And really looking at that in the key markets. So Europe is a big growing market, lots of support in Europe. And so looking to see how we can expand our capability there. And then also in China, looking to perhaps expand our manufacturing capability there to supply the JV and the Chinese market. So those are some of the things that we're looking at. And then on the partnership side, again, looking at key geographies, Randy mentioned India with Tata. That is a massive market. And when I first joined a few months ago, it wasn't -- yeah, I think it has been on the radar, but more on the periphery, but now it's squarely in our sight and some interesting discussions going on there as well as with other players in Europe as well. So there's lots going on in that space. We're quite active. We hope to make some announcements this year, but can't promise that, obviously. But we are in some advanced discussions with some pretty interesting opportunities.

Okay. That's great insight. And just circling back to the customer or the competition question from earlier. When you're involved in a customer engagement, and I would suspect most of these customers are also looking at battery electric solutions for their fleets as well. I'm just trying to assess like how much of that -- how much of a competitive angle or a competitive dynamic is emerging with respect to hydrogen versus battery electric, when customers are looking at these type of solutions?

Yes. Michael, in the bus market in particular, there are a number of battery electric OEMs that are showing good progress in that market. So that's a competitive market. But what we do see is it really very much a function of the transit operator, what their routes are and the duty cycles for those routes. And then therefore, what powertrain technology can meet the requirements for that fleet. And so that's how I would say that market is being characterized. In terms of the competitive dynamics, in my opinion, what we're seeing is more transit operators looking at hydrogen today than were doing so a year ago. And we've seen a number of instances where we've seen follow-on orders from transit authorities that have deployed Ballard fuel cell engines in buses over many years and are scaling up their fleets to give you many examples in North America and Europe like that. And what we're now seeing is that their experiences have been socialized with other transit authorities who are now open to this opportunity. And as the mandate for zero-emission buses grow stronger in the U.S., in Europe and in China, this is a very large attractive market. And then as you move to the truck market, I would say that except for very short duration trips, kind of last mile smaller trucks, what you're seeing, in my opinion, and in many cases, is that hydrogen is the predominant discussion point with battery, a secondary consideration in most of the truck market opportunities we're seeing. So more of a fuel cell dominant opportunity as you move to the heavier trucks.

The next question comes from Craig Irwin with Roth Capital Partners.

So Randy, you know I've followed Ballard for eons, right? I mean, it's a couple of decades now. At the beginning, Ballard had some incredibly interesting and important joint ventures and collaborations with the biggest name brand OEMs, truck producers in Europe. And I guess Audi, VW is the last one to really be spending money with you visibly. These other companies have been decidedly quiet around fuel cells in the last 2 years. Given your experience with them and your deep knowledge of their needs, their long-term requirements, is it possible that you pick up one of these really top-class Tier 1 OEMs, again, either for a commercial vehicle program or to support a trucking program? And is that something that credibly is in the offering for the next year or 2? Or should we look at more players, more like MAHLE as to underpin the future development?

Yes. Great question Craig. And you're right. Many years ago, of course, both Daimler and Ford were shareholders of Ballard. And of course, we had a longstanding and continue to have a longstanding relationship with previously VW and now the Audi brand in the VW Group. And you know what it say on the commercial vehicle market is, you have Daimler and Volvo, obviously in their joint venture. And they're looking at the deployment of fuel cell commercial trucks, as they say, in the second half of the decade, so 2025 through 2030. So they clearly are making significant investment, but it will take some time. In terms of securing customers, large OEMs, our plan is to do this with MAHLE, and have not just a leading fuel cell module as we develop that with MAHLE but also a number of balance of plant components that go beyond the module and integrate into powertrain and are optimized. And so this is a plan from Ballard, like we have done in China with Weichai, where you go with the Tier 1 supplier level with a compelling package to the vehicle OEMs to help simplify customer adoption and remove customer friction points. So it will take time for the Ballard-MAHLE product to go through development, testing, field trials, et cetera. And so I think it'll take a few years before we see the OEMs in any large quantities purchasing that product. This one will be very transparent on the sequencing of that. But I do view on the commercial vehicle side, a number of OEMs as potential customers for Ballard and MAHLE as we move forward together.

So my second question is really a question that I've been getting from investors, from clients. People want to know why Ballard hasn't been more aggressive, particularly on the hydrogen strategy side, right? There's the expectation of low-carbon fuel standard adoption across the United States, at least in another 24 states over the next several years. They're all sort of in some stage of adoption, and that should provide access to some pretty rich subsidies for fuel cells, given green hydrogen superior environmental footprint, economics, et cetera. And you underline some of those numbers in the front end of your call, in the prepared remarks. Is a hydrogen strategy to facilitate customer adoption, something that you would look to deploy your cash for, is this a priority for Ballard right now? Or do you see this as something that's best handled by other partners out there in the market like in Air Liquide or one of the global suppliers of hydrogen today?

Yes, thanks for the question, Greg. As we look at supply of energy, supply of fuel, we really do think that the long-term winners in that market will be companies that have scale and capacity and strong balance sheet. We don't ever see Ballard being a supplier of fuel where customers pay on a per drink basis and Ballard is the financial sponsor effectively for that. So we do believe that the large energy companies, like Shell, like Total and even a broader set like EOG and then the industrial gas companies, Linde, Air Liquide, Air Products. These companies are expert at engineering procurement construction. They're expert at the station design and the various technologies that go into station design, they're expert at transporting liquid fuels or gaseous fuels. And of course, they have balance sheet strength. And while we have a significant balance sheet strength here on a relative basis in the fuel cell industry, it's a shallow pool compared to the type of capital you need. So we do think that Shell's, BP's, Total's, EOG's et cetera, and then the industrial gas companies will be the long-term providers of hydrogen fuel. And you need to be in that game in volume with very significant capabilities and capital. So that being said, our customers need hydrogen. Many of our customers are already used to procuring diesel fuel. And so we don't need to supply the hydrogen from Ballard, but we, of course, are partnering with many companies so we can help simplify the experience for end customers. And so we have strong collaborations with providers of equipment. And obviously with providers of hydrogen fuel. And as infrastructure gets built out and you think about the projects we're focused on, where we're looking at return to base centralized depot refueling where the barriers to entry on hydrogen fueling are lowest. We're able to bring partners to bear on these types of projects.

And then last question, if I may. Sort of a big picture question. China is always unpredictable, particularly for Western companies and Western executives. I guess it's been roughly 60% of revenue over the last couple of years. Would you expect China to still be -- to continue to be the majority of revenue over the next few years? Or is the activity you're seeing in Europe and North America indicative that one of these other global markets or possibly India could surpass China as a focus of activity for Ballard?

Yes. Great question. And so part of our business model, of course, is to be selling into multiple verticals in key geographies with a strong customer set. So we're not dependent on any one market, segment, geography or customer. And if you look at the revenue actually for H1 of 2021, 50% of our revenue came from Europe. Last year, it was 50% from China. And if you look at our order book, and we don't disclose our order book by geography, but very strong take-up, almost 70% from Europe and North America. So what we're seeing, of course, is that as the China policy has stalled, our China revenues have declined. But Europe -- and that's the overall revenue, then it's kind of masking the growth that we're seeing in Europe and in North America as well as some of the other market segments. So heavy duty motive will be our largest market application, and we'll see that split up between China, Europe and other markets, including North America over time. And I agree with you, India and other markets, we'll start to see traction in too. So what I'll say is we like this model of resiliency so that if there are any stalls, we've seen this in the solar industry, we've seen it in the wind industry where during early adoption periods, various geographies have stronger years and weaker years. And so we like this resiliency that we have in our model. But I do expect China to be a major contributor to revenue as the policy clarity shapes. And we start really striving towards that 1 million fuel cell vehicles by 2030.

Great. Thanks for taking my questions and it's great to see the heavy-duty revenue picking up there. So congrats.

The next question comes from Praneeth Satish with Wells Fargo.

There's been some reports of city clusters in China that have been selected for the pilot programs, and recognizing that nothing is finalized as of yet. But I guess conceptually, what would happen if the Weichai JV and its province that it's located in, is not in one of these clusters, how would that impact the JV if it wasn't the city cluster? Would it make a difference?

Yes. I don't think we ever really had strong expectations that Shandong province would be included in the first batch of city clusters. There are some other markets that are large cities like Shanghai, for example, and Beijing, where you always are going to expect to see them included. And our early work in China in Guangdong province at Ballard has a number of vehicles in Guangdong province. So those 3 will certainly be, I think, the highest priority 3. There's likely 5 that will be announced, but we'll have to see how it plays out. Of course, some of the customers we're working with and some of the supply chain partners we have are in some of those other clusters as well. So we expect to sell across China in cluster cities or demonstration regions outside of cluster demonstration regions and in Shandong province. And I think over time, you'll see that the cluster regions will expand. And over time, of course, subsidies will relax and the market will need to compete with economics. And that's really the long-term market we're focused on.

Okay. Great. And then just switching gears. I wanted to ask about gross margins. They were kind of flat in Q2 with the first quarter. Were there any transitory or supply chain or any type of cost that hit you this quarter that could reverse over the balance of the year? Where do you see margins tracking for the balance of the year next?

Yes, its Paul here Praneeth. Yes, we did see some impacts in the gross margin. So one of the things Randy mentioned and talked about in the remarks was around the supply chain. So the team has done a really good job in securing supplies and getting those on board as we're going through the COVID environment. We have seen some impact in platinum prices. As platinum went from, I think, last year, $850 an ounce to about $1,300 or so. And so we did see some of those costs come through. We've also been investing quite a bit in people and added quite a few people in our advanced manufacturing group and in other areas as well, working on product development, R&D, launching products and our cost reduction programs. And so those fixed costs coming -- some of those fixed costs coming through our margins were also there. So our cost base now, we think we're at where we thought we would be at this point in the year, and so we expect that to be maintained going forward. We'll have to see where commodity prices get to and see what could be passed through to customers. But right now, we don't have -- some contracts, we have the ability to pass those costs through to customers, but most of them we don't. So we'll be looking at ways to mitigate that risk going forward.

The next question comes from Rob Brown with Lake Street Capital Markets.

Just wanted to follow-up on the rail market development. You had a nice order from Siemens there. How do you see that market developing? Is that a pilot project that will take time to turn into follow on orders? Or how do you sort of see that market developing?

Yes. Thanks for the question. Of course, the rail market is a market that we're excited about and one we believe will surprise to the upside. And the Siemens opportunity is really one where we're thinking that there will be a couple of phases to this. So we've gone through the product development phase and successfully worked on a module that meets the onerous rail coercion standards and can be integrated and packaged appropriately and meet the requirements. This Mireo Plus H platform, what we're expecting is a demonstration pilot in the Bavaria region. And then that will be a 30-month trial. And then what we're expecting is basically from 2023 to 2024, these initial trains being put into passenger service. What I can say is that Siemens is quoting this train in a number of projects. And so I think what we'll likely see is 2024 is kind of when lift off will occur in terms of sales of additional units in quantity to the European market. So there's still more work to do, and we're focused on that. But it'll be relatively modest order inflow over the next couple of years as we validate this on rail.

The next question comes from Jonathan Lamers with BMO Capital Markets.

Randy, you mentioned targeting near-term diversification across target markets and geographies. Could you give us a hint of the product areas or customer markets that Ballard might be looking to diversify into?

Yes. So what we're seeing, again, is additional verticals where the technology can have a play. And I think some of these markets, like some of the off-road markets, whether it's construction equipment or mining applications, they're large markets, and they are markets where we believe fuel cells are the only viable technology for decarbonization. So there's a lot of work going on, a lot of interest there from mining companies and equipment manufacturers of construction and mining equipment. And stationary power is a market where we're seeing lots of interest in a number of different market segments. So it's not just backup power, where we're seeing increased demand in Europe, but stationary power applications with renewables, where there's very large opportunities. And then as we look at data center applications, we're seeing a lot of interest in those segments. In terms of geographies, we've already commented on India, I think there are other markets like Australia and some markets in the Middle East where we're seeing increasing interest for fuel cell solutions.

And a follow-on to that. On the Fusion-Fuel order, do you believe that the modules designed for the marine market will be cost competitive in the stationary power market? I just have a few questions on this. Is there a segment of the European stationary power market or certain customers that Ballard and Fusion-Fuel are targeting for these? Is Ballard marketing its modules to other electrolyzer suppliers? Could you just talk to us about the market opportunity that you see, because it's kind of interesting that this is opening up in electrolyzers?

Yes. So on the marine market, first of all, this FCwave, we're seeing a lot of interest in ferries and tugs and work boats and cruise applications. And so this product was designed with the marine market in mind. And what we see is that, that module has a lot of applicability for other market opportunities, including stationary power, but we're also seeing even the bill of materials, for example, in our marine market product and our rail market product, probably 70% or 80% of the bill of materials is fairly similar. So we have some really good opportunity across multiple end markets. In terms of the application of the module for stationary power, I do think it's going to be cost competitive as compared to other fuel cell solutions. When I look at the design and how that design can fit into the applications, we're seeing that a lot of customers are looking at not just the upfront capital cost, but the long-term operating cost. And we've designed the module for the marine market where you get high utilization. And a lot of other stationary power fuel cell technology out there like backup power, have low utilization. So some of the differentiation we have for our product is the durability and the design of those products for markets where durability is important. And now looking at stationary power, like the electrolyzer connection you referred to, or markets where you have high utilization. Think about, for example, a mining site where you have the ability to have solar or wind as your renewable input, have an electrolyzer there, produce hydrogen, that hydrogen can be used for mining vehicles, but it can also be used to provide when the wind isn't blowing and when the sun isn't shining, primary power back to the base requirements at that mining site. So that's an illustrative example, but there are a lot of kind of micro grid opportunities that we see. And of course, we're working with many electrolyzer companies, mainly the leading electrolyzer companies on a number of projects.

Okay. And one follow-up on China. Do you believe that we will see an overarching national policy implementation announcement? Or will we just continue to see a series of regional policies sort of suddenly implementing the national policy? I'm just curious whether you can comment on the clarity that your customers are looking for?

Yes. I think China, beyond the demonstration program that's been discussed about is really looking at announcing its hydrogen strategy. So it's roadmap, very similar to what other countries have done. So that would be a more comprehensive outlook on how hydrogen will play out across industry, energy, mobility and the connection between renewable energy, which is an abundance, of course, in China and very high penetration expected in the future and the role that hydrogen can play in there. So we do expect to see a broader hydrogen strategy that is launched in China. I won't even speculate on the timing because we've gotten the policy timing wrong already, but we do expect to see that, that will occur.

Okay. But that's not what your customers need to see at this stage to start ramping up production. Is that correct?

Yes. No, that's not a condition precedent for the type of growth we're expecting with the regional deployments in the demonstration regions as well.

The next question comes from Rupert Merer with National Bank.

Randy, you gave us some comments on supply chain and product development activities at Weichai and Linamar. As you get further into your partnerships with Linamar and MAHLE, do you see them as silos? Or are you going to see some cross-pollination between the programs to accelerate development?

Yes. Great question. I think there's a lot of leverage that we'll see with the work we're doing in China with Weichai and the supply chain there. The work we're doing with MAHLE, and MAHLE is certainly looking at a number of key balance of plant components that go inside of our module as well as some powertrain components and the ability for us to use those components, not just with the MAHLE product but across geographic markets and different verticals. And similarly with Linamar. Linamar is working on a very intriguing conformable storage solution, potentially that has a lot of creativity and innovation. And so if that sees commercialization, the ability to use that in markets beyond what we've contemplated with Linamar, is quite compelling as well. So we do see opportunity with our three industrialization partners, Weichai, MAHLE and Linamar to use their expertise, their components in all verticals likely and in all geographies.

And they're all relatively comfortable working together? Are they?

Yes. I don't know that they'd be necessarily be working together. It's more the ability for us to take, for example, a MAHLE component and integrate that into a China solution we're working on, for example, for the rail market, and where take a Linamar storage solution, let's say, and integrate that into a product for the marine market. So there's a number of different ways we can think about using the components and the powertrain integration capabilities that may be applicable to other markets.

The next question comes from Amit Dayal with H.C. Wainwright.

Randy, just -- I'm sorry, I keep bringing up China again and again to you. But does the China policy from your perspective in fuel cells, sort of involve heavy subsidies, et cetera, and that is a factor that's preventing the market from moving independently in bringing these cleaner vehicles to the market? Just trying to understand, obviously, there are maybe cost issues. But given sort of the environmental benefits, et cetera, where all of this -- can the market sort of move independently a little faster, while the policy level stuff comes into play?

Yes. So Amit, thanks for the question. We have to understand, of course, China is a command economy, and it's driven by policy. And when policy statements are made, commercial enterprises cascade under that and move forward based on the policy statements. And we have to understand that fuel cell technology in most applications is not cost competitive today. We've outlined this before that the road map for cost competitiveness on a total cost of ownership for bus, truck, rail, marine. We're looking at applications between 2023 and 2027-2028 time frame, where we see that TCO crossover against incumbent diesel technology. Of course, interestingly, the cost of carbon continues to go up as well. And so that's a real wildcard that could accelerate the time line for TCO comparatives. So what we see, of course, and we saw this with solar and wind and batteries is typically markets provide some initial support in early adoption where you've got low volume and high cost. And as the policy supports initial adoption and volume increases and costs come down, then the policies relax and decrease over time. So we're expecting to see something similar to that in China. And so yes, the market is waiting for that policy support in China, and then we'll start to see volume deployed, costs come down and policy will become less important as we've seen in other industries. So that's the dynamic there. I think the other dynamic is, of course, the build-out of hydrogen refueling stations even for centralized depot refueling like buses and commercial trucks, that's critically important. And China, I think, has a real advantage compared to other countries in terms of deploying capital and putting a lot of muscle behind these type of infrastructure build-out, which other jurisdictions may be more challenged with different stakeholders involved in seeing that getting realized. So I think China has the ability to move very fast once the policy framework is in place.

Understood. And then on the stationary power side, right, it seems like that's a market that is maybe ready to go now with fuel cells, et cetera, with micro-grid adoption and all of the other sort of applications around stationary power. What are we doing from a business development perspective to sort of get a bigger share in that space? Even from an R&D perspective, what kind of resources are we sort of applying to maybe create a bigger presence on the stationary power side?

Yes. It's a good question. And really, we are, of course, seeing leverage off of the work we're doing in our technology and products, including the ability to use those products in a number of stationary power market applications. We have increased our business development activities globally. So in China, in Europe, in North America and in other markets as well, we've brought on additional resources. And there's a lot of active discussions underway with different companies in the value chain. And some of them quite large-scale companies that are looking to really game-change decarbonization and stationary power market segments. So still too early for us to comment on the progress we're making there on the business development side, but we hope to be able to provide more visibility later this year. But we're making the investments we need to, both on the technology as well as on customer engagement to move the yardsticks.

Understood. That's all I had. Thank you Randy.

The next question comes from Craig Shere with Tuohy Brothers.

Randy, I apologize. I'm not sure I reconcile answers to your couple of questions regarding hydrogen fuel supply. It sounds like the response to one was that, we need to leave this up to the big boys, the integrated energy conglomerates, industrial gas companies that will be the main supplier and relied upon. But in another question, it sounded like some turnkey Ballard electrolyzer application opportunities could have meaningful kind of turnkey, all quick adoption opportunities for end customers, and of course, some of that related to the Fusion-Fuel and other opportunities. Can you kind of help me understand how to triangulate all this?

Yes, Craig, great question, and we should be very clear about this. There's the difference between designing and manufacturing equipment that you sell versus being a supplier of hydrogen. And what we were describing before was the opportunity for Ballard, particularly with our PEM fuel cell capabilities to potentially look at PEM electrolyzer manufacturing downstream. So not being a supplier of hydrogen, but a supplier of electrolyzer equipment. So we don't discount that opportunity. That's certainly an opportunity that we have a high level of interest in, but we wouldn't be looking to sell hydrogen as a captive supplier as an energy company. Is that helpful?

That's helpful. But nonetheless, if the end user buys the fuel cell equipment and buy the electrolyzers, they have all they need to make the package work, right?

Right. So what you'll see typically is end users like a transit authority, would say to Shell, we'd like to have a fueling station built. Shell will then go to an electrolyzer company if they want on-site hydrogen production by the electrolyzer, put in place the compression and chillers and storage and dispensing equipment, own and operate that asset and sell the hydrogen fuel to that transit operator. So we would be okay being a provider of electrolyzer equipment in that model I just described, but we wouldn't be in the role of Shell where we design and build a turnkey fueling station and operate that station selling fuel. Do you appreciate the difference there?

Yes. But you get to sort of double dip. You'll support both the electrolyzers and, of course, the equipment that's fueling up.

Exactly. We'd have the ability in that case and that illustrative example where if we were -- had electrolyzers where you're selling, we'd have the ability to sell that equipment, plus the ability to sell the fuel cell modules into the vehicle that are consuming the hydrogen.

Right. And last question, any thoughts before we get clarity on China regulation about the ability to break out of this kind of $100 million annualized revenue run rate we've been at for a couple of years now? And any thoughts about timing to cash flow breakeven?

Yes. I mean we don't provide guidance on our current year revenue, let alone, our views on when we'll see cash flow breakeven. What we do see, of course, is that as you look at deployments of buses, in China, in Europe, in North America, starting to scale, particularly you think about 2024 and 2025 objectives for zero-emission buses in different markets. As you see, the progress we go through on the commercial truck side with Weichai-Ballard joint venture in China with MAHLE in Europe, as illustrative examples, and get to commercialization of modules into trucks and on roads. And as you see, the rail programs start to move from the pilot projects to deployments. And as you see marine applications similarly doing that, this is the 2024, 2025 to '30 ramp that we've talked about with all of these verticals across the 3 key geographies and potentially more really contributing. So we've always said that the growth rate will see a very steep curve as you kind of get to the 2024-2025 time frame. And between now and then, we expect to see good growth by traditional industry standards, but not necessarily the hockey stick effect, you'll see after that.

Understood. Thank you.

The next question comes from Chris Souther with B. Riley.

Maybe just within the European bus space, would you be able to frame or kind of give an outlook on the number of buses in the backlog today and the mix within that 12-month backlog and delivery cadence for this year versus some of the visibility you've got for next year? Just hoping to kind of nail down the cadence that we're looking at. And are all the orders to-date under drive to or earlier programs. So trying to get a sense of the time line for that next program batch out of Europe.

So we're expecting to see some very important developments on the European bus support team, I think, later this year, certainly before December or perhaps in the early December time frame, we're expecting to see kind of the next major announcement on the support of post-JIVE and pretty significant scale for Europe. So we're pretty excited about that. When you kind of look at the near-term in terms of the order intake, a big part of our order intake relates to -- in the first half of the year did relate to buses in Europe. We expect that trend to continue. We have a number of bus OEMs that we're working with in Europe. So Wrightbus, Solaris, Van Hool, ADL, these are all active in the market and winning projects in the market in key cities that are really starting to see scaling effect occurring in those cities. And some of the sales pipeline suggests to me, we're now looking at over the next number of years, thousands of buses that will be signed up in the marketplace in Europe for fuel cell deployment.

That's great to hear. And maybe turning back to India and Tata, the opportunity there. You talked about the momentum for clean hydrogen there as a way then, -- market size, which is obviously very attractive. Is that one where -- if that were to take off a market where JV or local production would be preferential? Or is it a market you think you'd source from either China, your JVs, or North America, or Europe over time? Just wanted to get a sense of kind of the larger strategy there. If that's a market you think is going to kind of take off your similar -- the China potential?

Yes, Chris, that's a great question. I think India, like China, like Japan and certain other markets, is a very unique market. And the companies that are present there and have strong position there and have capabilities there can bring a lot of value to bear. And so we are considering a larger strategy in China that could involve a more comprehensive relationship with a key Indian partner. We'll see how that market development and business development activity shapes over the next 12 months.

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

Great. And thanks, everyone, for joining us today. Paul, Kate and I, look forward to speaking with you in November when we'll discuss results for Q3 2021. Thanks again.

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