• 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:
  1. 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;
  2. Establishment of a joint venture with Weichai in which Ballard will initially have a 49% ownership position;
  3. $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
  4. 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 8^th-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:

1. 40% reduction in total-cost-of-ownership;
2. Planned operating lifetime of more than 30,000 hours;
3. 33% increase in power density;
4. Ability to start in cold temperatures from -25^oC (-13^oF);
5. Tolerance to a widened range of operating conditions;
6. Simplified systems integration; and
7. 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

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.

Further Information

Guy McAree +1.604.412.7919, investors@ballard.com or media@ballard.com   

Endnotes:

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.