Ballard Power Systems has released its consolidated financial results for the fourth quarter (Q4) and full year ended 31st December 2017.
President and CEO Randy MacEwen said 2017 was a milestone year for Ballard on its path to profitability, adding, “We generated record revenue of $40.3m in the final quarter, contributing to record full year 2017 revenue of $121.3m, an increase of 42% year-on-year. We delivered a six-point improvement in gross margin for the full year to 34%. The company’s strong top-line growth and gross margin expansion contributed to Adjusted EBITDA of $2.1m in Q4 and $3.3m for the full year 2017. We have now achieved positive Adjusted EBITDA in four of the last five quarters.”
In addition to improved financial performance, Ballard made measured progress in 2017 on its strategic positioning.
MacEwan explained, “We continued to advance our next generation technology and products. We made important progress on the localisation of Ballard-designed stacks and modules in China, including commissioning of both our Synergy-Ballard stack joint venture operation and Broad-Ocean’s engine assembly line in Shanghai.”
“We strengthened our engagement with key customers and continued to expand the range of fuel cell electric vehicle (FCEV) applications. As a result, our fuel cell value proposition is gaining traction across a broadening array of FCEVs, including buses, commercial trucks and rail, and in the key geographic markets of China, Europe and the United States.”
“We also continued to advance our Technology Solutions business, which offers significant embedded optionality on longer-term fuel cell motive markets, including drones, marine and passenger cars.”
Looking to the future, MacEwen said he believed Ballard is poised with highly-disruptive and field-proven technology at the convergence of three global megatrends – decarbonisation, air quality and electrification of propulsion.
“This presents a compelling future for Ballard. We believe that FCEVs will become a meaningful portion of the heavy, medium and light duty transport markets where long range, rapid refueling and route flexibility are customer requirements. This is consistent with our ‘30 by 30’ industry challenge, by which 30% of all new commercial vehicles in key markets are FCEVs by 2030.”
“As we look out to 2020, we expect strong growth in FCEV demonstration programs and commercial scaling in certain heavy and medium duty applications in China, Europe and the United States. With continued investment in technology, products, customer engagement and our brand, we see Ballard having a leading position in these large and growing addressable markets. In 2018 we will continue focusing on our strategic positioning, delivery against our customer promises, exceptional talent and disciplined investments. We have a solid foundation for 2018, including total committed orders of $91.4 million expected for delivery in 2018 and a robust sales pipeline,” MacEwan concluded.
Q4 2017 financial highlights
Total revenue was $40.3m in the quarter, a 31% improvement. The power products platform generated revenue of $30.1m, up 58% year-over-year and reflecting strong growth in Heavy Duty Motive.
Technology Solutions revenue was $10.2m, a 13% decrease due primarily to programme scope and timing of underlying service contracts.
Gross margin was 31%, up one-point to $12.6m, due to the increased proportion of revenue from high-margin Heavy Duty Motive.
Cash operating costs were $11.2m, a 38% increase due primarily to higher technology and product development activities, increased investment to support commercial efforts in China as well as the impact of a higher Canadian dollar, relative to the US dollar, on the Canadian operating cost base.
Adjusted EBITDA improved 18% to $2.1m, due to the increase in revenue and gross margin. Net loss was $2.9m or $0.02 per share, changes of -158% and 0%, respectively. The quarterly net loss was driven primarily by impairment charges related to the divestiture of the Solid Oxide Fuel Cell business at the Company’s Protonex subsidiary. Adjusted net loss was $0.9m or $0.01 per share, changes of -5% and -3%, respectively.
Cash used by operating activities was $0.7m, a -109% change, reflecting cash operating income of $1.7m, combined with net working capital outflows of $2.4m, driven by higher accounts receivable of $5.7m and lower deferred revenue of $1.5m.
Full year 2017 financial highlights
Total revenue for the year was $121.3m, a 42% improvement. The power products platform generated revenue of $77.6m, an increase of 39% reflecting strong growth in Heavy Duty Motive and Technology Solutions.
Technology Solutions revenue was $43.7m, an increase of 47% due to programme scope and timing of programs, including the Synergy JVCo technology transfer agreement.
Gross margin was 34%, up six-points to $41.6m primarily due to a shift in revenue mix toward higher margin Heavy Duty Motive and Technology Solutions.
Cash operating costs were $39.1m, an increase of 14% due primarily to higher technology and product development activities, increased investment to support commercial efforts in China as well as the impact of a higher Canadian dollar, relative to the US dollar, on the Canadian operating cost base.
Adjusted EBITDA improved 134% to $3.3m, due to higher revenue and gross margin. Net loss narrowed to $8m or $0.05 per share, improvements of 62% and 66%, respectively. The reduction in net loss was driven by the improvement in Adjusted EBITDA and by higher finance and other income due primarily to higher foreign exchange gains.
Adjusted net loss was $5.2 or $0.03 per share, improvements of 73% and 76%, respectively.
Cash used by operating activities was $9.8m, a change of -150% reflecting cash operating income of $2.5m and net working capital outflows of $12.3m, reflecting in part the completion of certain work that had significant prepayments.
Cash reserves were $60.3m at 31st December, $12.3m lower than the end of 2016.
Given the early stage of the hydrogen fuel cell market development and adoption rate, and consistent with the Ballard’s approach in 2017, the company is not providing specific financial performance guidance for 2018.
Global trends toward decarbonization, improving air quality and the electrification of propulsion systems have underpinned a growing interest in fuel cell electric vehicles, or FCEVs, for heavy and medium duty applications in bus, commercial truck, rail and marine markets. Industry activity levels are increasing in China, Europe and the United States.
Looking to 2020, the Company expects strong growth in FCEV demonstration programs and commercial scaling in certain heavy and medium duty applications in China, Europe and the United States. With continued investment in talent, technology, products, customer engagement and brand, Ballard expects to have a leading market position.