Mr. Randy MacEwen reports

BALLARD REPORTS Q2 2023 RESULTS

Ballard Power Systems Inc. has released consolidated financial results for the second quarter ended June 30, 2023. All amounts are in United States dollars, unless otherwise noted, and have been prepared in accordance with international financial reporting standards (IFRS).

"We are making important progress on our strategic priorities, as communicated at our 2023 capital markets day. During Q2, we grew our order book, invested in next-generation fuel cell products, and continued to drive our product cost reduction programs," said Randy MacEwen, president and chief executive officer. "We continue to see growing customer interest across our market verticals, which is reflected in $25.1-million of new orders in Q2 and a growing sales pipeline. Importantly, our power products backlog is now up over 140 per cent compared to the prior-year period. We are particularly excited by the growing customer engagement levels in the U.S. and European markets.

"As a result of the increasingly constructive hydrogen policy landscape and increased market activity in the U.S. and EU [European Union], and given the continued hydrogen and fuel cell policy uncertainties and market delays in China, we are accelerating our work on our 'local-for-local' global manufacturing plan and related future capital allocation plans. Specifically, we are re-evaluating our previously announced MEA localization plan in China pending completion of a comparative analysis on manufacturing capacity expansion options and possible sequencing prioritization in the U.S. and/or EU markets. We expect to conclude this work in early 2024.

"We continue to track to our full-year guidance ranges for operating and capital expenses. Our investments prioritize technology and product development programs, product cost reduction initiatives, customer platform wins, customer experience, and advanced manufacturing.

"We expect a busy second half of 2023, with sequential quarterly revenue growth as compared to first-half quarters, along with continued progress on our order book to support 2024 revenue growth."

Q2 2023 financial highlights (all comparisons are with Q2 2022, unless otherwise noted):

• Total revenue was $15.3-million in the quarter, down 27 per cent year over year:
  • Heavy duty mobility revenue of $8.5-million decreased 39 per cent, driven primarily by lower revenues from Ballard's bus, truck and rail verticals, partially offset by higher marine revenue.
  • Stationary revenue of $3.5-million decreased 6 per cent due primarily to lower sales of stationary power generation fuel cell modules, stacks, products and services in Europe, partially offset by higher stationary revenues in North America.
  • Emerging and other markets revenue of $3.3-million was flat compared with the prior year, with higher revenues in North America mitigating lower shipments to Europe.
• Gross margin was negative 21 per cent in the quarter, a decrease of 10 points, driven by a combination of a greater weight of power products in the revenue mix, pricing strategy, increased investment in manufacturing capacity, increases in supply and labour costs, and inventory adjustments.
• Total operating expenses and cash operating costs were $37.5-million and $32.9-million, respectively, a decrease of 3 per cent and an increase of 3 per cent, respectively, from Q2 2022. Increases were driven primarily by higher expenditures on research, technology and product development activities, and general and administrative expenses.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was negative $35.9-million, compared with negative $35.0-million in Q2 2022, primarily as a result of the decrease in gross margin and the increase in cash operating costs.
• Ballard received approximately $25.1-million of new orders in Q2, and delivered orders valued at $15.3-million, resulting in an order backlog of approximately $147.5-million at the end of Q2. Order backlog growth was driven predominantly by increased orders from North America in the bus, rail and emerging-markets verticals. Backlog from customers in Europe and North America now represent close to 80 per cent of the total backlog. Additionally, the power products backlog increased further in Q2 and is now up over 140 per cent compared with the prior-year period.
• The 12-month order book was $85.9-million at Q2 end, an increase of $12.0-million from the end of Q1 2023, an approximately 16-per-cent quarter-over-quarter increase.

2023 outlook

In 2023, the company maintains its guidance ranges for total operating expense and capital expenditure (see an attached table).

For a more detailed discussion of Ballard Power Systems' second quarter 2023 results, please see the company's financial statements and management's discussion and analysis, which are available at the company's website and on SEDAR+.

Conference call

Ballard will hold a conference call on Wednesday, Aug. 9, 2023, at 8 a.m. PT (11 a.m. ET) to review second quarter 2023 operating results. The live call can be accessed by dialling 1-604-638-5340. Alternatively, a live audio webcast can be accessed through a link on Ballard's website. Following the call, the audio webcast and presentation materials will be archived on the company's website.

About Ballard Power Systems Inc.

Ballard Power Systems' vision is to deliver fuel cell power for a sustainable planet. Ballard zero-emission PEM (polymer electrolyte membrane) fuel cells are enabling electrification of mobility, including buses, commercial trucks, trains and marine vessels, and stationary power.

We seek Safe Harbor.