Ballard Power Systems has announced consolidated financial results for the first quarter ended 31st March 2017.

Randy MacEwen, President and CEO stated, “We made continued progress in Q1 on strategic positioning and improved financial performance.”

“Our strategic focus on high growth and high growth margin market opportunities translated to 39% revenue growth and gross margin performance of 42%. With our performance in Q1, coupled with a record order book and sales pipeline for 2017 delivery, we see a strong set-up for the remainder of 2017,” He added.

MacEwen continued, “Since the start of the year, we have made important progress in the execution of our China strategy. We closed a technology transfer transaction having an estimated value of $25m with our strategic partner Broad-Ocean, enabling Broad-Ocean to manufacture Ballard-designed modules in three regions in China. We also signed an $11m equipment supply agreement with Broad-Ocean for 200 fuel cell modules. In addition, we established a relationship with Yinlong, a major Chinese bus OEM, including the sale of initial modules for integration into buses that are expected to be deployed in Beijing.”

MacEwen concluded, “The strategic positioning and expected scaling of our business supports our planned growth trajectory and advancement toward sustainable profitability.”

Q1 2017 financial highlights

Total revenue was $22.7m in the quarter, an increase of 39% resulting from growth in both power products and technology solutions. The power products platform generated revenue of $11.1m in the quarter, an increase of 9%.

Heavy Duty Motive revenue was $7.2m, an increase of 120% resulting from shipments of power modules and fuel cell stacks to fulfil orders in support of clean energy vehicles in China.

Revenue from the portable power market was $1.2m, a decline of 53% due to lower power manager product shipments to military customers, as Q1 2016 had benefited from product shipments relating to an order placed by the US Army late in the prior year.

Material handling revenue was $2.2m, a decline of 46% primarily resulting from lower fuel cell stack shipments to Plug Power combined with a lower average selling price due to product mix.

Backup power revenue was $0.5m, an increase of $0.2m resulting primarily from product shipments to Asia Pacific. The technology solutions platform generated revenue of $11.5m in the quarter, an increase of 90% reflecting work on bus and tram programmes in China. Gross margin was 42% in Q1, an improvement of 22-points primarily due to a shift in product mix toward higher margin technology solutions and heavy duty motive for the China market, including the ongoing establishment of a production line in Yunfu, China for the manufacture and assembly of FCvelocity®-9SSL fuel cell stacks.

Cash operating costs were $10.0m in the quarter, a 6% increase attributable to higher research and product development expenditures as well as a stronger Canadian dollar relative to the US dollar, since a significant amount of cost is denominated in Canadian dollars.

Adjusted EBITDA was $0.7m in Q1, an improvement of $6.6m or 91%. The company’s net income was $2.9m in the quarter, an improvement of $7.1m or 71%. Adjusted net income was $2.9m, an improvement of $5.9m or 67%, and adjusted net loss per share was $0.02 per share, an improvement of 70%.

Cash used by operating activities was $3.1m, an improvement of 59% reflecting cash operating loss of $1.2m and use in working capital of $1.9m. Cash reserves were $68.0m on the 31st March 2017, an increase of 54% from the end of Q1 2016.

Q1 2017 sales and operations highlights

Ballard has signed a definitive agreement with Zhongshan Broad-Ocean Motor Co., Ltd. relating to technology transfer, licensing and supply arrangements for the assembly and sale of FCveloCity® 30-kilowatt (kW) and 85kW fuel cell engines in three strategic regions of China, including Shanghai. The deal has an estimated value of approximately $25m in revenue to Ballard over the initial 5-year term, including technology solutions revenue of $12m. The transaction was subsequently closed on the 6th April, at which time Ballard received initial payments totalling $3.6m.

Subsequent to the quarter, on the 5th of April, the company announced a definitive equipment supply agreement with Broad-Ocean for the supply and delivery of 200 FCveloCity® fuel cell engines to be used in demonstrations of clean energy buses and commercial vehicles in key Chinese cities, with the engines manufactured and supplied by Ballard from its operations in British Columbia. The deal value is approximately $11m, which is incremental to the expected $25m value of the technology transfer deal that closed on the 6th April.

The company signed an initial equipment sales agreement with Zhuhai Yinlong Energy Group, a major Chinese manufacturer of battery electric buses, for 10 FCveloCity® 30kW fuel cell engines, which Ballard plans to deliver in 2017 for integration into buses to be deployed in Beijing.

Ballard joined the Fuel Cell Electric Bus Commercialisation Consortium, a large-scale project for which funding has now been committed to support deployment of 20 zero-emission fuel cell electric buses at two California transit agencies. 10 buses are to be deployed with Alameda Contra-Costa Transit District (AC Transit) and 10 buses are to be deployed with the Orange County Transportation Authority (OCTA).

Protonex, Ballard’s Portable Power subsidiary, received certification from the US government enabling its SPM-622 Squad Power Manager and VPM-402 Vest Power Manager products to be exported under the Commerce Department’s Export Administration Regulations, classification EAR99.

Q1 2017 corporate platform highlights

The company opened their first Ballard corporate office in China headquartered in Guangzhou, to serve as an initial operations centre supporting management, sales and business development, technical, after-sales and administration activities. Ballard plans to expand its China team to almost 20 people by year-end 2017.

Purchased all shares in Ballard’s European subsidiary held by Dansk Industri Invest A/S (previously Dantherm Air Handling A/S) for a nominal value and, as a result, Ballard now owns 100% of the Company’s subsidiary in Europe, ‘Ballard Power Systems Europe A/S’.

Subsequent to the quarter announced that Rob Campbell had joined Ballard as Vice-President and Chief Commercial Officer.