Mr. Guy McAree reports

BALLARD REPORTS THIRD QUARTER 2013 RESULTS

Ballard Power Systems Inc. has released consolidated financial results for the third quarter ended Sept. 30, 2013. All amounts are in U.S. dollars unless otherwise noted and have been prepared in accordance with international financial reporting standards. In accordance with IFRS, all numbers, including Ballard's 2012 audited financial statements, reflect continuing operations, excluding material products.

Summary of third quarter 2013 results

In third quarter, revenue was up 65 per cent compared with the same quarter last year to $17.0-million, gross margin was up 16 points to 28 per cent, and adjusted earnings before interest, taxes, depreciation and amortization improved 86 per cent to negative $900,000.

These results continue the strong positive trend in Ballard's financial metrics. On a year-to-date basis through third quarter, revenue improved 61 per cent compared with the same period last year to $43.9-million, gross margin was up 11 points to 25 per cent and adjusted EBITDA improved 55 per cent to negative $8.5-million. These third quarter results were driven by the three core elements of the company's business model: product sales, engineering services and licensing.

Ballard also made the decision in the quarter to strengthen the company's balance sheet and on Oct. 9 announced the closing of an underwritten equity offering with gross proceeds of approximately $14.5-million. This has augmented Ballard's cash buffer in its growth plan to achieve positive cash flow.

John Sheridan, president and chief executive officer, said: "The continuing strength in Ballard's operating results is evidence of the positive impacts of our strategy, in tandem with strong execution performance and progress in market development for clean energy fuel cell products and services. With the positive trend in fuel cell products and services over the past two years, revenue and gross margin have each more than doubled, and adjusted EBITDA has improved by more than 50 per cent."

Third quarter 2013 highlights:

Growth (all comparisons with third quarter 2012 unless otherwise noted):

• Revenue of $17.0-million, an increase of 65 per cent;
• Gross margin of 28 per cent, an improvement of 16 points, due to the revenue growth and shift in product mix toward engineering services and licensing.

Commercial-stage markets:

Telecom backup power:

• Revenue of $3.9-million, an increase of 6 per cent;
• ElectraGen system shipments of 155 in the quarter, primarily for deployment in telecom networks in China, Philippines and Jamaica; the shipments to Jamaica were 12 ElectraGen-ME methanol systems for Digicel, ordered during third quarter following a successful trial in Digicel's Jamaica telecom network;
• While shipment volumes in the quarter down marginally by 4 per cent, on a year-to-date basis, shipments up 217 per cent;
• Signed an ESA with Azure Hydrogen for 220 ElectraGen systems, composed of 120 direct hydrogen and 100 methanol-fuelled systems, for deployment in Chinese telecom networks; of these systems, 110 were delivered in third quarter with the rest to be delivered in fourth quarter;
• Signed a distribution agreement with AECi in Southeast Asia and received an order from that distributor for 20 ElectraGen-ME methanol systems to be shipped in fourth quarter for Globe Telecom, a major Philippine network provider.

Material handling:

• Revenue of $2.1-million, an increase of 51 per cent; driven by an increase of 47 per cent in shipments of fuel stacks to Plug Power for use in this market.

Engineering services:

• Revenue of $6.5-million, an increase of 77 per cent;
• Continued contract work with AFCC and Mercedes-Benz Fuel Cells;
• Work on the four-year Volkswagen contract ramped up to the full quarterly run rate expected through the rest of the contract term.

Development-stage markets:

• Revenue of $4.5-million, an increase of 188 per cent;
• Shipped four fuel cell bus modules in the quarter: two to Van Hool in Europe and two to Azure Hydrogen in China;
• Signed a multiyear bus module assembly licence agreement to support Azure Hydrogen's China fuel cell bus program; the agreement has an expected value of approximately $11-million over the first 12 months, of which $2-million of licence revenue was booked in third quarter;
• Ballard and consortium partners BAE Systems and ElDorado National awarded $6.7-million in financing by the U.S. Federal Transit Administration for deployment of buses in two U.S. cities, with delivery planned in 2014.

Path to profitability (all comparisons with third quarter 2012 unless otherwise noted):

• Cash operating costs of $6.6-million, an improvement of 1 per cent;
• Adjusted earnings before interest, taxes, depreciation and amortization of negative $900,000, an improvement of 86 per cent;
• Net income of negative $4.6-million or negative five cents per share, improvements of 50 per cent and 55 per cent, respectively;
• Cash used by operating activities of negative $4.8-million; cash operating loss of negative $2.3-million, an improvement of 68 per cent, offset by an increase in working capital of negative $2.5-million;
• Cash reserves of $20.4-million, or $17.7-million net of $2.7-million outstanding on the company's bank operating line;
• Following the quarter, an underwritten offering was completed with gross proceeds of approximately $14.5-million.

Business outlook 2013:

The company has confirmed its full-year guidance:

• Revenue growth in excess of 30 per cent;
• Adjusted EBITDA improvement in excess of 50 per cent.

                     THIRD QUARTER 2013 FINANCIAL HIGHLIGHTS
                            (millions of U.S. dollars)      
             
                                              Three months ended   Nine months ended 
                                                     Sept. 30,          Sept. 30,
                                                  2013      2012      2013      2012
Growth
Fuel cell product and service revenue
Telecom backup power                              $3.9      $3.7     $14.6      $6.0
Material handling                                 $2.1      $1.4      $4.5      $4.7
Engineering services                              $6.5      $3.7     $14.9      $9.9
Development-stage markets                         $4.5      $1.6     $10.0      $6.6
Total fuel cell product and service revenue      $17.0     $10.3     $43.9     $27.2
Twelve-month rolling order book                  $43.3     $39.2
Profitability
Gross margin                                        28%       12%       25%       14%
Cash operating costs                              $6.6      $6.6     $21.8     $23.0
Adjusted EBITDA                                  ($0.9)    ($6.0)    ($8.5)   ($18.9)
Net income (loss)                                ($4.6)    ($9.2)   ($17.7)   ($25.3)
Earnings per share                              ($0.05)   ($0.10)   ($0.18)   ($0.29)
Normalized net (loss)                            ($4.6)    ($9.2)   ($16.2)   ($25.3)
Normalized net (loss) per share                 ($0.05)   ($0.10)   ($0.17)   ($0.29)

For a more detailed discussion of Ballard Power Systems' third quarter 2013 results, please see the company's financial statements and management's discussion and analysis, which are available at the Ballard website, SEDAR and the U.S. Securities and Exchange Commission website.

Conference call

Ballard will hold a conference call on Oct. 30, 2013, at 8 a.m. PDT (11 a.m. EDT) to review its second quarter 2013 operating results. The live call can be accessed by dialling 1-604-638-5340. Alternatively, a live audio and PowerPoint slide webcast can be accessed through a link on Ballard's home page. Following the call, the audio webcast will be archived in the quarterly results area of the investor section of Ballard's website.

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