- Revenue of $21.6M, 30% Gross
Margin and ($3.6)M Adjusted
EBITDA
- Full-year 2018 Outlook revised to revenue of $90-95M
- Announcement of strategic collaboration with Weichai Power
VANCOUVER, Oct. 31, 2018 /PRNewswire/ - Ballard Power
Systems (NASDAQ: BLDP; TSX: BLDP) today announced consolidated
financial results for the third quarter ended September 30, 2018. All amounts are in U.S.
dollars unless otherwise noted and have been prepared in accordance
with International Financial Reporting Standards (IFRS).
Randy MacEwen, President and CEO
said, "Ballard delivered Q3
revenue of $21.6 million, gross
margin of 30% and Adjusted EBITDA of ($3.6)
million. Financial results disappointed in Q3, primarily due
to a slower-than-expected ramp-up in China, while the Company's long-term value and
growth potential improved in the quarter. Near-term headwinds in
China resulted in a material
reduction in MEA sales to the Guangdong Synergy-Ballard joint
venture in Q3 and in our outlook. Slower growth in market demand
has been primarily the result of the relatively modest pace of
hydrogen fueling station roll-out, along with evolving government
subsidy rules and delays in Fuel Cell Electric Vehicle, or FCEV,
certifications. During the quarter, however, we also announced a
strategic collaboration with Weichai Power, announced the
divestiture of our Power Manager business, and unveiled our
next-generation fuel cell stack. We continue to position
Ballard as the leading fuel cell
technology provider in the FCEV market for Heavy Duty Motive
applications – a market poised for attractive long-term growth in
key global geographies."
Mr. MacEwen continued, "Our strategic collaboration with Weichai
Power, which we anticipate closing by year-end, is expected to be a
positive long-term catalyst for our business. Weichai is a leading
Chinese automotive and equipment manufacturer with a strategic
focus on China's new energy
business segment. This strategic collaboration is validation of the
FCEV value proposition in Heavy Duty Motive applications and
Ballard's technology leadership
position in the PEM fuel cell industry. This transaction will
strengthen our balance sheet through equity investments of
approximately $183 million, including
a further investment of approximately $20
million from Zhongshan Broad-Ocean Motor. Over the next 3
years, we also expect to deliver against our $90 million Technology Solutions program related
to a next-generation technology transfer to the planned
Weichai-Ballard joint venture."
Given the uncertainties regarding Synergy-Ballard joint
venture's ability to meet its "take or pay" commitment under its
contract with Ballard, the Company
is taking the prudent step of removing the remaining value of this
contract from the Order Backlog and 12-month Order Book. With this
adjustment, the Order Backlog and 12-month Order Book at the end of
Q3 were $122.7 million and
$59.6 million, respectively.
Ballard is working with the joint
venture and other partners to address current issues and future
opportunities.
This adjustment, combined with the recent sale of the Power
Manager business – which closed in October
2018 – and the associated absence of Power Manager revenue
in Q4 2018, results in expected full-year 2018 revenue of
approximately $90-95 million.
Q3 2018 Financial Highlights
(all comparisons are
to Q3 2017 unless otherwise noted)
- Revenue was $21.6 million, a
year-over-year decline of 32% due primarily to lower Heavy Duty
Motive product shipments and lack of one-time revenue from
China that was generated in 2017.
- The Power Products platform generated revenue of $11.2 million, a decrease of 47%:
- Heavy Duty Motive revenue was $6.3
million, a decrease of 65% primarily related to lower
shipments of products to China,
including MEAs for the Guangdong Synergy-Ballard joint
venture;
![Ballard Q3 2018 Results (CNW Group/Ballard Power Systems Inc.) Ballard Q3 2018 Results (CNW Group/Ballard Power Systems Inc.)](https://mma.prnewswire.com/media/778209/Ballard_Power_Systems_Inc__Ballard_Reports_Q3_2018_Results.jpg)
-
- The Portable Power business generated revenue of $1.9 million, an increase of 124% due to Power
Manager shipments to complete an order for the U.S. Army;
- Material Handling revenue was $2.7
million, an increase of 31% primarily due to a shift in
product mix; and
- Telecom Backup Power revenue was $0.3
million, a decrease of $0.3
million resulting primarily from reduced hydrogen-based
product shipments to Europe and
Japan.
- The Technology Solutions platform generated revenue of
$10.4 million, a decrease of
$0.2 million.
- Gross margin was 30%, a 2-point decline reflecting the change
in the mix of products and service revenue.
- Cash operating costs2 were $10.6 million, an increase of 13% primarily
attributable to an increase in research and product development
costs, including work related to next-generation fuel cell stack
and modules.
- Adjusted EBITDA2 was ($3.6)
million, a decline of 512% or $4.5
million, primarily driven by decreased gross margin from
lower revenues, as well as increased cash operating costs.
- Net loss was ($6.0) million, a
decline of $5.0 million.
- Net loss per share was ($0.03)
compared to ($0.01) in Q3 2017.
- Adjusted net loss2 was ($6.0)
million, a decline of $5.0
million.
- Adjusted net loss per share2 was ($0.03) compared to ($0.01) in Q3 2017.
- Cash used by operating activities was ($7.7) million, flat compared to Q3 2017, and
reflecting cash operating loss of ($4.9)
million and use in working capital of ($2.8) million.
- Cash reserves were $23.2 million
at September 30, a decrease of 61%
from the end of Q3 2017 and a decrease of 34% from the end of the
prior quarter. Cash reserves were impacted in the quarter by the
acquisition of certain strategic assets of Automotive Fuel Cell
Cooperation Corporation for approximately $4
million, as well as a build-up of inventory in advance of
product demand. Subsequent to the quarter, $1.3 million in net cash was received at the
closing of the divesture of the Power Manager business.
Q3 2018 Highlights
Strategic Collaboration in China
•
|
Announced a strategic
collaboration with Weichai Power Co., Ltd. ("Weichai") which
includes:
|
|
i.
|
Equity investment by
Weichai in Ballard of approximately $163 million, representing a
19.9% interest in the company and reflecting a price of $3.54 per
share which is a 15% premium to the 30-day VWAP at the time of the
announcement;
|
|
ii.
|
Establishment of a
joint venture with Weichai in which Ballard will initially have a
49% ownership
position;
|
|
iii.
|
$90 million
technology transfer to the joint venture related to Ballard's
next-generation LCS fuel cell stack and power modules for bus,
commercial truck and forklift applications in China; and
|
|
iv.
|
Commitment by Weichai
to build and supply at least 2,000 fuel cell modules for commercial
vehicles in China using Ballard technology.
|
•
|
In addition,
Zhongshan Broad-Ocean Motor Co., Ltd., a current Ballard strategic
investor and Chinese partner, agreed to invest a further
approximately $20 million at the same $3.54 price per share and 15%
premium as Weichai to maintain its 9.9% ownership position in
Ballard.
|
•
|
Use of proceeds are
expected to include investment in Ballard's core fuel cell
business, equity contributions to the joint venture to finance
Ballard's ownership position in the joint venture's operations, and
support of potential M&A transactions.
|
•
|
These transactions
are expected to close in Q4 2018, subject to completion of
definitive agreements, regulatory approvals and other customary
closing conditions.
|
Next-Generation Products
•
|
Unveiled a
next-generation high performance liquid-cooled fuel cell stack, the
FCgen®-LCS, which will be a core technology component of
Ballard's 8th-generation power module portfolio for use
in Heavy Duty Motive applications – including buses, commercial
trucks and trains – planned for initial launch in 2019, and other
applications such as forklifts.
|
•
|
Benefits of the
FCgen®-LCS are expected to include:
|
|
i.
|
40% reduction in
total-cost-of-ownership;
|
|
ii.
|
Planned operating
lifetime of more than 30,000
hours;
|
|
iii.
|
33% increase in power
density;
|
|
iv.
|
Ability to start in
cold temperatures from -25oC
(-13oF);
|
|
v.
|
Tolerance to a
widened range of operating conditions;
|
|
vi.
|
Simplified systems
integration; and
|
|
vii.
|
Sustainability
features.
|
Divestiture of Non-Core Assets
- Announced a definitive agreement to divest certain non-core
assets of the company's subsidiary, Protonex, related to the Power
Manager business to Revision Military.
- Subsequent to the quarter, on October
5, announced that the transaction had closed and
Ballard received an initial
payment of approximately $4.1
million, paid in cash and note, with up to a further
$11.25 million payable based on
achievement of specific sales objectives during a 12-month earn-out
period.
- Ballard has retained certain
assets related to fuel cell propulsion systems for commercial
unmanned vehicles.
U.S. Bus Market
- Announced that El Dorado National's 40-foot Axess fuel cell
bus, powered by Ballard's
FCveloCity®-HD module, successfully completed testing at
The Altoona Bus Research and Testing Center in Pennsylvania under a program established by
the Federal Transit Administration (FTA), making them ready for
large-scale deployments under FTA funding.
Other
- Acquired certain strategic assets of Automotive Fuel Cell
Cooperation Corporation (AFCC), a private company owned by Daimler
AG and Ford Motor Company, enabling Ballard to efficiently and rapidly accelerate
production growth objectives.
- Subsequent to the quarter, announced two Heavy Duty Motive
projects for which the California Air Resources Board has
identified preliminary funding and for which Ballard will provide fuel cell modules to
power FCEVs planned for 2020 deployment:
-
- 2 terminal fuel cell hybrid electric yard trucks to be operated
by TraPac at the Port of Los Angeles,
California; and
- 4 Class-6 fuel cell hybrid electric delivery trucks to be
operated by UPS from its Ontario,
California Customer Center.
Q3 2018 Financial Summary
|
|
|
(Millions of U.S.
dollars)
|
Three months ended Sept.
30,
|
Nine months ended Sept. 30,
|
|
2018
|
2017
|
% Change
|
2018
|
2017
|
% Change
|
GROWTH
|
|
|
|
|
|
|
Fuel Cell Products
& Services Revenue:1
|
|
|
|
|
|
|
Heavy Duty
Motive
|
$6.3
|
$17.8
|
-65%
|
$28.9
|
$37.1
|
-22%
|
Portable
Power
|
$1.9
|
$0.9
|
124%
|
$6.7
|
$3.0
|
128%
|
Material
Handling
|
$2.7
|
$2.0
|
31%
|
$4.8
|
$6.2
|
-23%
|
Backup
Power
|
$0.3
|
$0.6
|
-40%
|
$1.0
|
$1.2
|
-13%
|
Sub-Total
|
$11.2
|
$21.3
|
-47%
|
$41.4
|
$47.5
|
-13%
|
Technology
Solutions
|
$10.4
|
$10.6
|
-2%
|
$26.7
|
$33.5
|
-20%
|
Total Fuel Cell
Products & Services Revenue
|
$21.6
|
$31.9
|
-32%
|
$68.1
|
$81.0
|
-16%
|
PROFITABILITY
|
|
|
|
|
|
|
Gross Margin
$
|
$6.4
|
$10.2
|
-37%
|
$22.5
|
$29.0
|
-22%
|
Gross Margin
%
|
30%
|
32%
|
-2-point
|
33%
|
36%
|
-3-points
|
Operating
Expenses
|
$11.8
|
$11.1
|
6%
|
$37.0
|
$33.3
|
11%
|
Cash Operating
Costs2
|
$10.6
|
$9.4
|
13%
|
$31.8
|
$27.8
|
14%
|
Adjusted
EBITDA2
|
($3.6)
|
$0.9
|
-512%
|
($8.3)
|
$1.2
|
-768%
|
Net Income
(Loss)
|
($6.0)
|
($1.0)
|
-486%
|
($15.9)
|
($5.2)
|
-207%
|
Earnings Per
Share
|
($0.03)
|
($0.01)
|
-475%
|
($0.09)
|
($0.03)
|
-202%
|
Adjusted Net Income
(Loss)2
|
($6.0)
|
($1.0)
|
-509%
|
($15.9)
|
($4.3)
|
-271%
|
Adjusted Net Loss Per
Share2
|
($0.03)
|
($0.01)
|
-475%
|
($0.09)
|
($0.02)
|
-264%
|
CASH
|
|
|
|
|
|
|
Cash Provided (Used)
by Operating Activities:
|
|
|
|
|
|
|
Cash Operating Income
(Loss)
|
($4.9)
|
$0.6
|
-977%
|
($9.4)
|
$0.8
|
-1,302%
|
Working Capital
Changes
|
($2.8)
|
($8.3)
|
66%
|
($22.5)
|
($9.8)
|
-129%
|
Cash
Provided (Used) By Operating
Activities
|
($7.7)
|
($7.7)
|
1%
|
($31.9)
|
($9.0)
|
-253%
|
Cash
Reserves
|
$23.2
|
$60.1
|
-61%
|
|
|
|
For a more detailed discussion of Ballard Power Systems' third
quarter 2018 results, please see the company's financial statements
and management's discussion & analysis, which are available at
www.ballard.com/investors, www.sedar.com and
www.sec.gov/edgar.shtml.
Conference Call
Ballard will hold a conference call on
Thursday, November 1, 2018 at
8:00 a.m. Pacific Time (11:00 a.m. Eastern Time) to review third quarter
2018 operating results. The live call can be accessed by dialing
+1.604.638.5340. Slides related to the Company's financial results
will be available during the call in the Earnings, Interviews &
Presentations area of the Investors section of Ballard's website at www.ballard/investors.
The audio webcast of the call will also be archived on this same
page of Ballard's website.
About Ballard Power Systems
Ballard Power Systems
(NASDAQ: BLDP; TSX: BLDP) provides clean energy products that
reduce customer costs and risks, and helps customers solve
difficult technical and business challenges in their fuel cell
programs. To learn more about Ballard, please visit www.ballard.com.
Important Cautions Regarding Forward-Looking
Statements
This release contains forward-looking statements
concerning projected revenue growth, product shipments, gross
margin, Adjusted EBITDA, cash operating expenses and product sales.
These forward-looking statements reflect Ballard's current expectations as contemplated
under section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Any
such statements are based on Ballard's assumptions relating to its
financial forecasts and expectations regarding its product
development efforts, manufacturing capacity, and market demand. For
a detailed discussion of the factors and assumptions that these
statements are based upon, and factors that could cause our actual
results or outcomes to differ materially, please refer to
Ballard's most recent management
discussion & analysis. Other risks and uncertainties that may
cause Ballard's actual results to
be materially different include general economic and regulatory
changes, detrimental reliance on third parties, successfully
achieving our business plans and achieving and sustaining
profitability. For a detailed discussion of these and other risk
factors that could affect Ballard's future performance, please refer to
Ballard's most recent Annual
Information Form. These forward-looking statements are provided to
enable external stakeholders to understand Ballard's expectations as at the date of
this release and may not be appropriate for other purposes. Readers
should not place undue reliance on these statements and
Ballard assumes no obligation to
update or release any revisions to them, other than as required
under applicable legislation.
Endnotes:
|
1 We
report our results in the single operating segment of Fuel Cell
Products and Services. Our Fuel Cell Products and Services segment
consists of the sale and service of PEM fuel cell products for our
power product markets of Heavy Duty Motive (consisting of bus,
truck, rail and marine applications), Portable Power, Material
Handling and Backup Power, as well as the delivery of Technology
Solutions, including engineering services, technology transfer and
the license and sale of our extensive intellectual property
portfolio and fundamental knowledge for a variety of fuel cell
applications.
|
|
2 Note
that Cash Operating Costs, EBITDA, Adjusted EBITDA and Adjusted Net
Income (Loss), are non GAAP measures. Non GAAP measures do not have
any standardized meaning prescribed by GAAP and therefore are
unlikely to be comparable to similar measures presented by other
companies. Ballard believes that Cash Operating Costs, EBITDA,
Adjusted EBITDA and Adjusted Net Income (Loss) assist investors in
assessing Ballard's operating performance. These measures should be
used in addition to, and not as a substitute for, net income
(loss), cash flows and other measures of financial performance and
liquidity reported in accordance with GAAP. For a reconciliation of
Cash Operating Costs, EBITDA, Adjusted EBITDA and Adjusted Net
Income (Loss) to the Consolidated Financial Statements, please
refer to Ballard's Management's Discussion &
Analysis.
|
|
Cash Operating Costs
measures operating expenses excluding stock based compensation
expense, depreciation and amortization, impairment losses or
recoveries on trade receivables, restructuring charges, unrealized
gains or losses on foreign exchange contracts, acquisition costs
and financing charges. EBITDA measures net loss attributable to
Ballard Power Systems Inc. excluding finance expense, income taxes,
depreciation of property, plant and equipment, and amortization of
intangible assets. Adjusted EBITDA adjusts EBITDA for stock based
compensation expense, transactional gains and losses, asset
impairment charges, unrealized gains or losses on foreign exchange
contracts, finance and other income, and acquisition costs.
Adjusted Net Income (Loss) measures net income (loss) attributable
to Ballard from continuing operations, excluding transactional
gains and losses, asset impairment charges, and acquisition
costs.
|
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SOURCE Ballard Power Systems Inc.