Mr. Randy MacEwen reports

BALLARD REPORTS SECOND QUARTER 2016 RESULTS

Ballard Power Systems Inc. has released its consolidated financial results for the second quarter ended June 30, 2016. (All amounts are in U.S. dollars unless otherwise noted and have been prepared in accordance with international financial reporting standards.)

Highlights:

• A 58-per-cent second quarter revenue growth driven by China bus contract deliveries;
• Second quarter gross margin improvement to 29 per cent.

"Our strong order book for 2016 continued to drive year-on-year revenue growth of 58 per cent in second quarter," said Randy MacEwen, president and chief executive officer. "Revenue from our power products platform increased 87 per cent, including a significant improvement in heavy-duty motive resulting from shipments to China in support of planned fuel cell bus deployments, together with the addition of portable power revenue. We also experienced a 20-per-cent gain in revenue from our technology solutions platform. The revenue mix, with its heavier weighting from higher-margin heavy-duty motive, portable power and technology solutions, underpinned a significant improvement in gross margin, to 29 per cent in the quarter, up from 10 per cent in 2015 second quarter."

Mr. MacEwen continued: "Ballard achieved important progress on a number of key strategic fronts. First, we sold our methanol telecom backup power business for up to $6.1-million. Second, we licensed our hydrogen backup power system designs in China for $2.5-million. Third, we signed definitive agreements for a transaction, which, subject to closing, is estimated at $168-million in revenue over five years, for the establishment of a fuel cell stack manufacturing operation in China, and fourth, we announced a pending strategic collaboration and $28.3-million equity investment from Broad-Ocean."

Second quarter 2016 financial highlights (all comparisons are with second quarter 2015 unless otherwise noted):

• Total revenue was $17.6-million in the quarter, an increase of 58 per cent resulting from growth in heavy-duty-motive shipments and the addition of portable power. The power products platform generated revenue of $11.8-million in the quarter, an increase of 87 per cent:
• • Heavy-duty-motive revenue was $4.7-million, a significant increase from $600,000 in second quarter last year, due to shipments of fuel cell stacks, power modules and kits to fulfill orders in support of clean energy buses in China.
  • Revenue from the new portable power market was $2.9-million.
  • Material-handling revenue was $2.5-million, a decrease of $200,000 or 6 per cent, due to a decrease in fuel cell stack shipments to plug power.
  • Backup power revenue was $1.6-million, a decrease of 46 per cent.
• The technology solutions platform generated revenue of $5.9-million in the quarter, an increase of 20 per cent.
• Gross margin was 29 per cent in second quarter, an improvement of 19 points due to a shift in product mix toward higher-margin heavy-duty-motive, portable power and technology solutions products.
• Cash operating costs were $8.4-million in the quarter, a 25-per-cent increase primarily attributable to the inclusion of the Protonex subsidiary operating costs.
• Adjusted earnings before interest, taxes, depreciation and amortization were ($2.9-million) in second quarter, an improvement of 40 per cent.
• Net income was ($5.8-million) in the quarter, an improvement of 21 per cent from second quarter 2015.
• Normalized net income was ($5.5-million), an improvement of 22 per cent.
• Normalized net loss per share was (four cents) per share, a 34-per-cent improvement.
• Cash used by operating activities was ($3.9-million), an improvement of 26 per cent, reflecting cash operating loss of ($3.7-million) and use in working capital of ($200,000).
• Cash reserves were $41.3-million at June 30, 2016, which includes $3.0-million received from the sale of the methanol telecom backup power business assets to Chung-Hsin Electric & Machinery Manufacturing Corp. (CHEM) and prepayment of $2.5-million received from licensing the manufacture of direct hydrogen systems for backup power in China to Guangdong Nation Synergy Hydrogen Power Technology.

Second quarter 2016 sales and operations highlights:

• Closed the sale of methanol telecom backup power business assets to CHEM, a major Taiwanese power equipment company, for a purchase price of up to $6.1-million. This includes $3.0-million paid on closing and up to $3.1-million based on certain sales objectives during an 18-month earn-out period. CHEM will also purchase fuel cell stacks from Ballard over the earn-out period, with a minimum spend of $2-million.
• Protonex, a Ballard subsidiary, received a $5.8-million purchase order for the supply of Squad Power Manager (SPM-622) special operations kits for end customer U.S. Special Operations Command. This is the largest purchase order in Protonex history and represents follow-on business from the $2.8-million SPM order from the same customer received in December, 2015. All products under this new purchase order are expected to be shipped in 2016.
• Hosted the party secretary of China's Guangdong province during his first ever visit to Canada, to discuss international trade opportunities and take part in a fuel-cell-powered transit bus demonstration.

Subsequent to the quarter:

• Licensing the manufacture of direct hydrogen systems for backup power in China: signed a definitive agreement with Synergy for a technology solutions transaction to enable Synergy to manufacture and sell Ballard's direct hydrogen FCgen-H2PM fuel cell backup power systems in China. Synergy prepaid a $2.5-million upfront licence and technology services fee in second quarter and will make additional royalty payments to Ballard for each unit sold, subject to annual minimums, starting in 2018. Ballard will be the exclusive supplier of air-cooled fuel cell stacks to Synergy for use in FCgen-H2PM systems.
• Licensing the manufacture of fuel cell stacks for buses and commercial vehicles in China, with minimum value of $168-million over five years: signed definitive agreements with Synergy for the establishment of an FCvelocity-9SSL fuel cell stack production operation in China, to power buses and commercial vehicles, with a minimum value of $168-million over five years. This represents the largest fuel cell transaction in Ballard's history. Ballard will receive $18.4-million in technology solutions revenue for training and support and will be the exclusive supplier of membrane electrode assemblies (MEAs) for each fuel cell manufactured in China, with minimum annual MEA take-or-pay volume commitments yielding a value of at least $150-million over the five-year term from 2017 to 2021. FCvelocity-9SSL fuel cell stacks will be manufactured through a joint venture to be created in China prior to the closing of the transaction, in which Ballard will hold a 10-per-cent ownership position in return for an approximate $3.0-million contribution. The transaction is scheduled to close in late 2016, subject to establishing the joint venture, signing of additional definitive agreements with the joint venture and customary closing conditions, including regulatory approvals.
• Strategic collaboration and $28.3-million equity investment in Ballard: Zhongshan Broad-Ocean Motor Co. Ltd. and Ballard have entered into a strategic collaboration, which includes a $28.3-million equity investment in Ballard by Broad-Ocean. Broad-Ocean is a leading global manufacturer of motors that power small and specialized electric machinery for electric vehicles (EVs), including buses, commercial vehicles and passenger vehicles. The company produces more than 50 million motors annually for customers on five continents. The investment will be made through a subscription and purchase of 17.25 million common shares issued from treasury at a price per share based on a 20-day volume-weighted average price calculation (the calculated price per share is $1.64 (U.S.)). Ballard intends to use the proceeds from the financing for general corporate purposes, including potential financing of future acquisitions or investments in complementary businesses, products or technologies. The investment transaction is expected to close in third quarter 2016, subject to customary closing conditions, including regulatory approvals. Ballard and Broad-Ocean are discussing areas of strategic collaboration that offer the potential to further accelerate and scale the adoption of fuel cell technology and products in China and expect to sign formal collaboration agreements by year-end.

Second quarter 2016 corporate platform highlight:

• Ballard reconfirms that cost reduction initiatives undertaken in the first half of 2016 are expected to yield annualized cost savings in excess of $4.0-million, lowering break-even revenue by more than $20.0-million.

                               SECOND QUARTER FINANCIAL SUMMARY       
                                  (millions of U.S. dollars)

                                                    Three months ended        Six months ended  
                                                          June 30,                June 30,
                                                      2016        2015        2016        2015
Growth
Fuel cell products and services revenue (1)
Heavy-duty motive                                     $4.7        $0.6        $8.0        $2.3
Portable power                                        $2.9         n/a        $5.5         n/a
Material handling                                     $2.5        $2.7        $6.5        $5.2
Backup power                                          $1.6        $3.0        $1.9        $3.6
Subtotal                                             $11.8        $6.3       $22.0        11.1
Technology solutions                                  $5.9        $4.9       $11.9        $9.3
                                                  ========    ========    ========    ========
Total fuel cell products and services revenue        $17.6       $11.2       $34.0       $20.4
                                                  ========    ========    ========    ========
Profitability
Gross margin $                                        $5.1        $1.1        $8.4        $2.1
                                                  ========    ========    ========    ========
Gross margin %                                       29 %        10 %        25 %          10
                                                  ========    ========    ========    ========
Cash operating costs (2)                              $8.4        $6.7       $17.8       $14.6
                                                  ========    ========    ========    ========
Adjusted EBITDA (2)                                  ($2.9)      ($4.8)     ($10.1)      ($9.9)
                                                  ========    ========    ========    ========
Net income (loss) (3)                                ($5.8)      ($7.3)     ($15.8)      ($0.3)
                                                  ========    ========    ========    ========
Earnings per share                                  ($0.04)     ($0.06)     ($0.10)     ($0.00)
Normalized net (loss) (2)                            ($5.5)      ($7.0)     ($14.5)     ($15.2)
                                                  ========    ========    ========    ========
Normalized net loss per share (2)                   ($0.04)     ($0.05)     ($0.09)     ($0.12)
                                                  ========    ========    ========    ========
Cash
Cash used by operating activities
Cash operating income (loss)                         ($3.7)      ($5.5)     ($11.1)     ($11.3)
Working capital changes                              ($0.2)       $0.2       ($0.3)       $0.6
                                                  --------    --------    --------    --------
Cash used by operating activities                    ($3.9)      ($5.3)     ($11.4)     ($10.7)
                                                  ========    ========    ========    ========
Cash reserves                                        $41.3       $41.2
                                                  --------    --------    

(1) The company reports its results in the single operating segment of fuel cell products 
and services. Its fuel cell products and services segment consists of the sale and service 
of fuel cell products for its power product markets of heavy-duty motive (consisting of 
bus and tram applications), portable power, material handling and backup power, as well as 
the delivery of technology solutions, including engineering services and the licence and 
sale of its extensive intellectual property portfolio and fundamental knowledge for a 
variety of fuel cell applications. 
(2) Note that cash operating costs, earnings before interest, taxes, depreciation and 
amortization, adjusted EBITDA, and normalized net loss are non-generally accepted 
accounting principle measures. Non-GAAP measures do not have any standardized meaning 
prescribed by GAAP and therefore are unlikely to be comparable with similar measures 
presented by other companies. Ballard believes that cash operating costs, EBITDA, adjusted 
EBITDA and normalized net loss assist investors in assessing Ballard's operating 
performance and liquidity. These measures should be used in addition to, and not as a 
substitute for, net income, 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 normalized net loss to the consolidated financial statements, 
please refer to Ballard's management's discussion and analysis. 
Cash operating costs measure operating expenses excluding stock-based compensation expense, 
depreciation and amortization, impairment losses or recoveries on trade receivables, 
restructuring charges, acquisition costs, and financing charges. EBITDA measures net loss 
attributable to Ballard Power Systems excluding finance expense, income taxes, depreciation 
of property, plant and equipment, amortization of intangible assets, and goodwill impairment 
charges. Adjusted EBITDA adjusts EBITDA for stock-based compensation expense, transactional 
gains and losses, asset impairment charges, finance and other income, and acquisition costs. 
Normalized net loss measures net loss attributable to Ballard from continuing operations, 
excluding impairment losses or recoveries on trade receivables, transactional gains and 
losses, asset impairment charges, and acquisition costs. 
(3) Includes gain of $14.2-million in the first quarter of 2015 on sale of intellectual 
property to Volkswagen Group.

For a more detailed discussion of Ballard Power Systems' second quarter 2016 results, please see the company's financial statements and management's discussion and analysis, which are available at the Ballard website, SEDAR and EDGAR.

Conference call

Ballard will hold a conference call on July 27, 2016, at 8 a.m. PDT (11 a.m. EDT) to review its second quarter 2016 operating results. The live call can be accessed by dialling 1-604-638-5340. Alternatively, a live audio and 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 investors section of Ballard's website.

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