Ballard Power ((TSE:BLDP)) has held its Q1 earnings call. Read on for the main highlights of the call.
Ballard Power’s recent earnings call presented a cautiously optimistic outlook, highlighting moderate revenue growth and significant cost reductions. The company showcased its strong cash reserves and emphasized the bus market as a key growth driver. However, challenges such as negative gross margins, tariff impacts, and unpredictable order intake were also noted. Overall, the positive aspects slightly outweighed the negatives, providing a balanced sentiment.
Revenue Growth
Ballard Power reported a 6% increase in revenue for Q1 2025 compared to the previous year, driven primarily by a robust 41% growth in the bus vertical. This sector’s performance underscores its importance as a growth engine for the company.
Engine Shipments and Gross Margin Improvement
The company saw a 31% increase in engine shipments, contributing to a 14-point improvement in gross margin compared to Q1 2024. Despite this progress, the gross margin remained negative at 23%, reflecting ongoing challenges in revenue absorption against manufacturing overhead costs.
Operating Cost Reductions
Ballard achieved a notable 31% reduction in total operating expenses, with specific cuts in research and product development (28%), general and administrative (32%), and sales and marketing expenses (23%). These reductions highlight the company’s focus on improving operational efficiency.
Strong Cash Position
Ending Q1 with $576.7 million in cash and no debt, Ballard Power demonstrated strong balance sheet management. The company has no immediate financing needs, underscoring its financial stability.
Bus Market Leadership
Ballard continues to lead the market in supplying fuel cell engines to bus OEMs in Europe and North America. This leadership position is pivotal for the company’s growth strategy in the transit bus markets.
Negative Gross Margin
Despite improvements, Ballard’s gross margin remained negative, impacted by low revenue and manufacturing overhead costs. This remains a critical area for the company to address moving forward.
Tariff Impact on U.S. Sales
Ballard anticipates a 20% increase in tariff costs on products sold in the U.S. market. The company plans to pass these costs onto customers, which could affect pricing and competitiveness.
Order Intake Variability
Following a record new order intake in Q4 2024, Q1 2025 saw a softer order intake, highlighting the variability in project-based business. This unpredictability poses a challenge for consistent revenue forecasting.
Forward-Looking Guidance
Looking ahead, Ballard Power expects to convert significant sales opportunities in the rail, stationary, and marine markets in the coming quarters. Despite a soft new order intake in Q1, the company remains optimistic about its order backlog of $158 million, with $92.4 million expected over the next 12 months. Capital expenditure guidance for 2025 is set between $15 million and $25 million, reflecting a 38% reduction at the midpoint compared to 2024.
In summary, Ballard Power’s earnings call presented a mixed yet cautiously optimistic outlook. While the company faces challenges such as negative gross margins and tariff impacts, its strong cash position, cost reductions, and leadership in the bus market provide a solid foundation for future growth. Investors will be keenly watching how Ballard navigates these challenges and capitalizes on emerging opportunities in the coming quarters.