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Ballard Power Systems' (BLDP) CEO Randy MacEwen on Q3 2017 Results - Earnings Call Transcript

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Ballard Power Systems, Inc. (NASDAQ:BLDP) Q3 2017 Earnings Conference Call November 2, 2017 11:00 AM ET


Guy McAree - Director of Investor Relations

Randy MacEwen - President and Chief Executive Officer

Tony Guglielmin - Chief Financial Officer


Rob Brown - Lake Street Capital Markets

Carter Driscoll - FBR Capital

Amit Dayal - Rodman & Renshaw

Jeff Osborne - Cowen and Company


Thank you for standing-by. This is the conference operator. Welcome to the Ballard Power Systems 2017 Q3 Conference Call and Webcast. 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, Investor Relations. Please go ahead.

Guy McAree

Thanks very much, and good morning to everybody. We’re going to be discussing Ballard’s Third Quarter 2017 financial and operating results this morning, and we’ve got Randy MacEwen, our President and CEO; and Tony Guglielmin, our CFO with us today, and they’ll both be speaking on the call.

We are going to be making forward-looking statements that are based on management's current expectations, beliefs and assumptions, concerning future events. Actual results could be materially different. So, please refer to our most recent annual information form and other public filings for our complete disclaimer and related information.

On this call, this morning Randy is going to discuss key developments during Q3, followed by Tony's review of our Q3 and year-to-date financial results and then we'll open the call for questions and answers.

Just before we start-up a brief note for those who are unable to participate at our September Investor and Analyst Day in New York, the presentation material from that day, and the audio recording of the event can

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Comments (57)

IMO, BLDP is now working with the #1 and #2 auto OEMs (VW & Toyota..BLDP says they are working with 4 auto OEMs for whatever that is worth) and the #1 and #2 train OEMs (CRRC and now Siemens). Ballard's partners speak for themselves. CRRC already has a hydrail tram on the tracks with BLDP inside. With London and now Ontario considering hydrail, the train sector is heating up fast.

Those partners are just the tip of a very large iceberg. Other partners: UTC, ABB, Boeing, Northrup. IMO ABB may become very significant because of grid scale storage solutions that only H2 can offer.
" I think we have in the range of about 13 different platforms today that have Ballard technology inside in some form that are certified in China and we will continue work with Bus OEMs and commercial truck OEMs to make sure there is demand go through an adoption of the technology."

"Right, so we have partners coming out with some launch plans and deployment plans in the very near-term in terms of activity. So, I don’t want to use excerpts, some of her announcements, but what I will tell you is that there are number of vehicles that have been built manufactured with Ballard technology inside of them that are road ready and we will start to see some deployments occurred in a number of different cities in China this is both in the bus market as well the commercial truck market."
Henrik Alex profile picture
Sure, remember that Ballard delivered the fuel cell engines directly for these demonstration projects. There's no supply needed from the JV for these deployments.
I wasn't speaking to any revenue impact, just that in terms of market and investor awareness, that BLDP expects some deployments to occur within the next 60 days.
phenix profile picture
So Henrik (nothing happening in Germany) how do you feel about the fact that B is now working with Siemens? Still think they have too much focus on the China market? I wonder how you will feel when more news comes out from Japan, India, the US and the rest of Europe. I hope you are starting to modify your view of B and can give us an update via SA sometime soon.. Have a great weekend!
Hype of Fuel Cell Stocks pending with passage of ITC possibly
Henrik Alex profile picture
The FTC reinstatement would have basically no impact on Ballard's business.

Moreover, I was simply illustrating how other market segments have performed even better in the general market hype.
Yeah sure. No direct benefits but does market bother. Bitcoin like hype can do anything to fuel cells as well.
Bitcoins and Ballard. First letter is common. Nothing else and certainly Hype is not.
Well whether you like or not the sp is holding up pretty good!
Henrik Alex profile picture
As a trader, I am certainly very happy with the strong sentiment the market has shown on a constant basis over the past few months.
I know
Perhaps should be prepare that the price may not go back down to 3s or 4s anymore.. and BLDP might now be in a whole new territory.
fo2grafen profile picture
bitcoin compare to Ballard?
Henrik: You negativity towards Ballard is amusing. Same comments from $2.50 to $5.80. Dont you realise that investors are betting on the future and not the small numbers from the Q rapports? The interesting part from Q rapports regarding Ballard, is the underlying positive trend.
This stockprice has potential to be explosive the next few years. Still a very good risk/reward.
Henrik Alex profile picture
The company is currently trading at a valuation of best in breed SAAS software companies which command gross margins of 80-90%, grow by 30-40% each year and harvesting huge positive cash flows each quarter.

Now compare this to Ballard. Like most of the market, the fuel cell space is overheated by unrealistic expectations, mostly with regard to China.

But fuel cell stocks aren't the biggest bubble around. Compared to most of the Bitcoin-related crap currently trading in Canada, BLDP, FCEL and PLUG have performed rather poorly.

Take a look at HIVE Blockchain for example, OTC: PRELF - up several thousand percent within weeks.
With no debt, break even operations, good margins, a healthy order book, and 50% year over year revenue growth for the last 2 years set to continue, I just don't see Ballard as overheated. Execution risk in China is the all encompassing risk factor. Possibly in the next 60 days as production scales up, we will see if Broad Ocean starts taking up orders.
It seems to me you have decided to be bearish no matter what happens. And thats a shame, there is enourmous potential in this industry, Ballard being in the top spot stockwise.
Do you have other EV stocks that are recommended at this stage? A lot of them surged allready.
How do buy. Company is not for sale. Now getting shares from market to extent of Management control not practical. Broad Ocean picked up 10% stake already. That is max can be done.
Kakophonix profile picture
I think Broad Ocean has an option for additional 10% stake. But not sure..and do not want to dig for this
Is it a crazy idea for the Chinese (or another company) to buy Ballard at this stage. or doesn't it make sense?
Guidance is like this. 82M orders confirmed for 12 months. This is roughly 40% of total deliveries. So expected revenue can be upto 200M. It is between the lines. But I don't think that is gonna happen.
Henrik Alex profile picture
The number is actually lower than at the end of 2016 ($87 million) - Ballard's FY2017 revenues will come in at $110-115 million, roughly 25-30% above the backlog level.

Should the 12-month-backlog not change substantially during Q4 this would point to FY18 revenues to DECLINE from 2017 levels assuming the same rate of additional revenues being realized over the course of the year.

Moreover, a large part of the backlog consists of the MEA take-or-pay contract which needs to be honored in full by Synergy for Ballard to realize the backlog (and cash flows).
Kakophonix profile picture
Honestly, i am not sure I see in CC transcription the guidance that next 2018 year revenues should exceed level of 150-160 million. In fact I believe that would be great achievement. Then can we expect the market cap growth from 1 billion to 1,5 billion in 2018? Market is crazy, I know. But if I have 1 billion...and if I have only 1 billion, I am not sure I would spend it for Ballard right now. ROI ratio would be too far away for me to see for this price.
I can say with some confidence Ballard is under owned stock among peers. This is evident from the number of comments in Ballard vs Plug vs FCEL. Further Share Holding pattern of Ballard has least institutional holding. Being a Canadian company investors in US has given it a miss. All going to change and it may surprise investors with upsides. 1 Billion is not big for Huge level of IP and working business model. High oil price and failure of tesla can be huge boost for fuel cell industry.
LYogi profile picture
I think we will stall at 1 billion market cap but the future is very bright and very clean
Kakophonix profile picture
I am not questioning that. I am questioning for how long can pace of growth of PPS be such bigger than growth of revenues. I do not think it is possible for them to grow the revenues more than 50% year over year. Do not forget their target is to educe the costs (sales prices) of MEAs and fuel cells stacks in general. That will allow them to boost the sales. But the selling price will be less. I do not see it is healthy and I do not see it is possible for stock to hold more than 50% annual growth of PPS in average since now. Already now it seems a bit overheated. Honestly, when I was buying it for 1.70, I was hoping for 3.00 at the end of 2017. Based on knowledge of 100-110 mil revenues as a target. Well, 4.00 was nice surprise, 5.00 has made me scared :-))
It has surprised everyone. You are not alone.
phenix profile picture
Disruptive tech like high tech co's may see sp going up well before revenues justify this. The potential is what interests investors. Think of Ford automobiles at the time of the horse and buggy....that is where we are at now. All imho.
Kakophonix profile picture
they are now 1 billion company... question is if the rate of growth of revenues can follow the rate of growth of PPS...we will see. Buyers vs Sellers battle may start soon...
How long is long?
China Fuel Cell growth will rocket in the next 2 yrs. Ballard is the major part of this. I see excellent future in Ballard.
FBin2025 profile picture
Glad to see cash flow! I have held on way too long, but feels like I can't give up now??
Henrik Alex profile picture
Cash flow from operations was $7.7 million negative as the company realized $11 million of previously deferred revenues.
Are you softening up at all on your skepticism regarding China? I know they aren't experiencing production revenue yet, but they do seem well positioned in Shanghai, and MacEwan seems to have a very high degree of penetration in to government decision making.
Henrik Alex profile picture
Not at all. Did you realize on the call that they still don't believe Broad Ocean's rosy projections?
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