Earnings call transcript: Ballard Power Systems Q2 2025 sees revenue miss, stock dips

Ballard Power Systems Inc. (BLDP) reported its financial results for the second quarter of 2025, revealing a narrower-than-expected loss per share but falling short on revenue expectations. The company posted an earnings per share (EPS) of -$0.08, slightly better than the forecasted -$0.09. However, the revenue of $17.8 million missed the anticipated $18.69 million, leading to a pre-market stock price drop of 1.67% to $1.77. According to InvestingPro analysis, BLDP currently appears undervalued based on its Fair Value calculation, despite facing significant operational challenges with a weak financial health score of 1.29.

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Key Takeaways

• Ballard’s EPS beat forecasts, showing a minor improvement.
• Revenue fell short of expectations, affecting investor sentiment.
• The company’s restructuring efforts are set to reduce costs by 30%.
• Heavy Duty Mobility Market remains a significant revenue contributor.
• Stock price decreased by 1.67% in pre-market trading.

Company Performance

Ballard Power Systems demonstrated a mixed performance in Q2 2025. While the company managed to exceed EPS forecasts, its revenue fell short of expectations. The Heavy Duty Mobility Market was a key contributor, generating $16.1 million of the total $17.8 million revenue. The company is undergoing restructuring to enhance efficiency and expects to see significant cost reductions by 2026. InvestingPro data shows the company maintains a strong liquidity position with a current ratio of 9.0 and holds more cash than debt on its balance sheet, though it’s currently burning through cash at a concerning rate.

Financial Highlights

• Revenue: $17.8 million, an 11% year-over-year increase.
• Earnings per share: -$0.08, better than the forecasted -$0.09.
• Gross margin: Improved to -8%, a 24-point improvement from the previous year.
• Operating expenses: $31.7 million, marking a 12% decrease year-over-year.
• Adjusted EBITDA: -$30.6 million, a 13% improvement from last year.

Earnings vs. Forecast

Ballard Power Systems reported an EPS of -$0.08 against a forecast of -$0.09, resulting in an 11.11% positive surprise. However, the revenue of $17.8 million was 4.76% below the forecasted $18.69 million, highlighting a shortfall in expected sales.

Market Reaction

Following the earnings announcement, Ballard’s stock price dropped by 1.67% in pre-market trading, settling at $1.77. This decline reflects investor concerns over the revenue miss, despite the slight EPS beat. The stock remains closer to its 52-week low of $1, indicating ongoing market challenges. InvestingPro data reveals the stock has shown strong momentum with a 36.36% return over the past six months, though price movements remain notably volatile with a beta of 1.78.

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Outlook & Guidance

Ballard is targeting a cash flow-positive position by 2027, with a strategic focus on rail, marine, bus, and material handling markets. The company plans to host a Capital Markets Day in 2026 and anticipates full-year capital expenditures at the lower end of guidance ranges.

Executive Commentary

CEO Marty Meese emphasized the company’s strategic direction, stating, "We are charting a course toward becoming a sustainable cash flow positive business by 2027." He also highlighted the role of innovation, noting, "Innovation is not just about technology. It’s about products, services, business models, and partnerships."

Risks and Challenges

• Revenue Miss: Falling short of revenue expectations could impact future growth prospects.
• Restructuring Costs: Implementation of cost reductions may initially increase expenses.
• Market Competition: Intense competition in the fuel cell sector could pressure margins.
• Economic Conditions: Global economic uncertainties may affect demand in key markets.
• Technological Advancements: Keeping pace with rapid technological changes is crucial.

Q&A

During the earnings call, analysts raised questions about Ballard’s market readiness and technology development, particularly in the Chinese market. The company addressed its restructuring strategies and cost-control measures, emphasizing a cautious approach to market expansion and innovation.

Full transcript - Ballard Power Systems Inc (BLDP) Q2 2025:

Conference Operator: Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems Second Quarter twenty twenty five Results Conference Call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.

I would now like to turn the conference over to Sumit Kundu, Investor Relations. Please go ahead.

Marty Meese, President and CEO, Ballard Power Systems: Thank you, operator, and good morning. Welcome to Ballard’s second quarter financial and operating results conference call. Joining me today is Marty Meese, Ballard’s new President and Chief Executive Officer and Jay Murray, our Vice President of Finance and Corporate Controller, who is stepping in for Kate Iqbalote this quarter. We will be making forward looking statements that are based on management’s current expectations, beliefs and assumptions concerning future events. Actual results could be materially different.

Please refer to our most recent annual information form and other public filings for our complete disclaimer and related information. I’ll now turn the call over to Marty. Thanks, Sumit. Good morning, everyone. As this is my first earnings call as CEO of Ballard, I’d like to begin by sharing some of my background and the principles I bring to Ballard.

I’ll apologize in advance for talking a bit about myself, but I believe context is important, both for understanding the journey that brought me here and the perspective I bring to our path forward. As the saying goes, that some of your past moments is what led you to today. My journey includes leadership roles in both Fortune 100 companies like Flex and innovation driven startups like Vertigy. I’ve led product and service businesses, publicly traded companies, and venture backed teams. Each experience has reinforced my belief that there are always better ways to do things and that success lies in execution, innovation, and delivering meaningful value to customers.

I spent the first fifteen years of my career in the electronic manufacturing services or the EMS industry. That experience shaped my understanding of the value of disciplined execution and cost control, delivering products with precision, frugality, and extraordinary service. In EMS, successes earned through reliability, working capital efficiency, and constant operational rigor. The past eighteen years of my career have been focused on clean tech, serving as COO at SunPower, a vertically integrated public solar company, and most recently as CEO of a hydrogen electrolyzer startup. These roles were centered on innovation led value creation.

First, to reach grid parity in solar and then to unlock possible parity for green hydrogen. The importance of technical excellence, product innovation, urgency, and establish establishing bankability was constant throughout. In 2015, I joined Ballard’s board. Now as CEO, I’m both grateful and excited to be leading this company. Ballard has over forty five years of history pioneering and educating the world on the promise of hydrogen fuel cells.

In recent recent years, we’ve transitioned from being primarily a technology development and solutions company to a product company with growing commercial traction in bus, rail, marine, stationary power and material handling. That transition hasn’t been easy and it hasn’t been linear. Tailwinds in policy and market enthusiasm have shifted in recent years. As we face new headwinds, uncertainty, changing regulations, tariffs and delayed adoption in certain sectors, we must evolve again. That change starts with me.

We are charting a course toward becoming a sustainable cash flow positive business by the 2027. To do that, we are aligning around what I believe are universal truths for any successful business, including Ballard, the value of execution and cost. Execution is fundamental. It starts with understanding, simplifying, reducing our costs across our operations, our products, and our processes, and coupling cost improvements with disciplined capital management. Our recent investments in automated manufacturing of MEAs and bipolar plates gives us the cost reduction advantage we intend to fully leverage.

The value of service. Commercial success is earned from customer success, Winning on total cost of ownership and delivering real measurable customer value is how we win. Just as important, our customers need to be willing to understand and pay for this delivered value. That’s how we build a self sustaining business. The value of innovation.

Innovation is not just about technology. It’s about products, services, business models, and partnerships. From stack improvements to value added balance of plant and from product simplification to customer centric design. We are relentlessly focused on developing better, safer, higher value solutions. As the saying goes, a designer knows he has achieved perfection not when there is nothing more to add, but when there is nothing left to take away.

That’s the mindset we bring to product development. The customer feedback we are receiving is very encouraging and bodes well for the future of our new products in development. We also see innovation opportunities beyond the product across our business model, supply chain, and go to market approach. The value of deep experience and brand. Ballard has delivered over 300,000,000 kilometers of fuel cell powered transportation, more than any competitor by far.

We have the most durable products, the best delivered TCO or total cost of ownership and a globally respected brand. Our reputation and technical depth are tremendous assets that we will continue to build upon. The path forward. We are taking a hard look at markets that are not moving as fast as expected. For example, we are adjusting our investments in the heavy duty truck sector.

These are hard choices, but they are necessary to maintain focus and discipline. Our recent realignment and headcount reduction efforts structurally lower our cost base and allow us to redirect resources toward near term opportunities where we see clear product market fit and margin improvement potential. We are now supplementing our industry leading innovation culture with a focus on continuous improvement, operational rigor, capital discipline and customer value delivery. Dollar’s foundation is strong. We have no debt, no immediate capital needs and an unmatched global team.

This is why I joined and why I’m optimistic about the future we’re building together. We’ll provide more detail on financial implications of restructuring on the Q3 call, and you can expect near term updates on key strategic focus areas. We’re also planning our next Ballard Capital Markets Day expected to take place in 2026, where we’ll share more about our path forward. Moving to our q two performance. We delivered a solid quarter leading to an increase in revenue of 11% year over year with growth particularly in the rail vertical.

Gross margin improved by 24 points, reflecting cost efficiencies driven by our 2024 restructuring activities and a net reduction in onerous contract provisions. Despite soft order intake in Q2 of $8,300,000 we are progressing with key customers across our verticals. Notably, after the quarter, we secured one of the largest marine orders in our history with E CAP and Samska. Deliveries in the bus and rail segments remained on pace, and we are seeing renewed interest in material handling opportunities. We are also on schedule and progressing on Project Ford, our high volume bipolar plate automated manufacturing initiative.

This is a foundational element of our product cost reduction strategy. Before I hand the call over to Jay, I’ll reiterate this. We believe deeply in the role of hydrogen and fuel cells to decarbonize key sectors of the global economy. While market adoption remains uneven, Ballard is taking steps needed to lead over the long term with discipline, clarity and resilience. Jay, over to you.

Thanks, Marty. As Marty mentioned, total revenue for Q2 was $17,800,000 up 11% year over year. The heavy duty mobility market contributed 16,100,000.0 driven by bus and rail shipments. Gross margin improved to negative 8%, up 24 points compared to Q2 of last year. This improvement was due primarily to lower manufacturing overhead costs as a result of our September 2024 restructuring and by a net reduction in owner’s contract provisions.

Total operating expenses were $31,700,000 down 12% year over year. However, excluding initial restructuring and related charges of $5,900,000 incurred in Q2 on a recent realignment and headcount reduction efforts, operating expenses decreased by 28% compared to 2024. Cash operating costs declined in a similar manner to $22,700,000 a 27% year over year reduction. Adjusted EBITDA was negative $30,600,000 a 13% improvement from negative $35,400,000 last year, reflecting improved gross margin performance and lower operating costs, partially offset by an increase in restructuring expenses. Cash used by operating activities was $20,300,000 42% improvement versus Q2 of last year, reflecting lower cash operating losses combined with improved working capital.

We closed the quarter with $550,000,000 in cash and cash equivalents, no bank debt and remain confident in our ability to fund operations and strategic initiatives without near term financing. Finally, we expect full year capital expenditure and operating expenses, excluding restructuring charges, to come at the low end of our guidance ranges for 2025. Including restructuring charges, operating expenses are now expected to be at the high end of our guidance range. As we continue with our recently initiated corporate restructuring to further reduce our operating cost structure and capital spend, we will update both our operating expense and capital spend guidances as part of Q3 reporting as appropriate. With that, I’ll turn the call over to the operator for questions.

Conference Operator: Thank you. We will now begin the question and answer session. You will hear a tone acknowledging your request. If you’re using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2.

We ask we ask callers to kindly limit themselves to one question and one supplemental. The first question comes from Rob Brown with Lake Street Capital Markets. Please go ahead.

Marty Meese, President and CEO, Ballard Power Systems: Hi. Good morning. Just on the markets that you see that are that are sort of seeing near term activity, I think, you know, rail and marine, particularly, you’ve talked about. But but, you know, what what are the kind of the near term markets you you’re pursuing, and and maybe how how do you approach those markets now with with sort of the different cost structure? Yeah.

So thanks for the question, Rob. The the in addition to the rail and and marine market that you mentioned, we’re seeing really good traction and a value proposition of significance in the bus market, both in North America and in Europe. And what what really is the driver there is the total cost of ownership delivered for the asset owner operating a fleet or a bus. And hydrogen has a very strong role to play there and is winning specifically when you start seeing larger fleets where, let’s say, battery electric buses are limited in their ability to scale up infrastructure and the cost of the additional infrastructure required for charging and other things in battery electric make those markets a little less attractive and make hydrogen a more favored solution as you go forward. So we’re we’re seeing that transition playing out in real time.

Okay. Great. And then could you give some color on the marine order that you announced at the quarter end? Sort of what’s what’s sort of driven that and some of the the outcomes you’re looking for there? Yeah.

So that order, to my knowledge, is about a two year sales cycle to get that order over the goal line. So this is this is not a a product life that lends itself to, like, every three months, you do another another one of these kinds of shifts, if you will. So that was a couple years in the making, and I’m it’s if I’m not mistaken, 6.3 megawatts in in size, which is great. It’s using our FCWave product that was developed considerably a while back, put it that way. And that value proposition starts looking like an interesting vertical over the long run because it’s got the right kind of range requirements, the right kind of route requirements, the right kind of fueling infrastructure, ability to adapt to that kind of fueling infrastructure.

And so it’ll be interesting to see how that market evolves as more and more people get familiar with how to do that kind of transition of a marine vehicle or vessel, if you will, and what that might mean to route optimization going forward with hydrogen infrastructure growing in the in the key ports around the this geography in question. Okay. Thank you. I’ll turn it over.

Conference Operator: The next question comes from Jeffrey Hawthorne with TD Cohen. Please go ahead.

Marty Meese, President and CEO, Ballard Power Systems: Thank you. Good morning. And just a couple of questions on my side. I was curious if we could just run through the OpEx cadence that you had in Q2, and then it sounds like there’ll be more detail on Q3, but just trying to figure out what the the new run rate will be. Is it similar to Q2?

Or any any details you could help articulate that? And then any restructuring charges that would flow through in Q3 that we should be modeling, or was all of that incurred in q two? Yeah. So it was not all incurred in q two. And and, Jay, do you wanna provide a little bit more color from there?

Yeah. We did recently announced Most of the charges related to that will be incurred in q two. We’re not disclosing the amount now as we continue to work through the details of that. There was a CEO transition in there, and part of those costs are reflected in the q two restructuring numbers.

I would say this recent restructuring in July is expected to reduce go forward operating costs by another 30% with most of those realized in 2026. We’ll see some benefit in the last half of the year, but not full benefit. Got it. And then if I heard you right, you talked about realigning the business to be cash flow positive exiting ’27 or it was unclear if it was exiting or for the full year of ’27. But do you have like a framework on what you’re aiming to achieve to get there?

Is that sort of 15% to 20% gross margins? And then the OpEx cuts that you’re announcing now are aligned to match that and get you to sort of EBITDA cash flow neutral? Or just how how do we think about, like, what the financial parameters are to make that statement? Yes. So it is it is exiting 2027.

It’s not for the full year 2027. And yes, we have essentially a ten quarter waterfall of how we’ll get the gross margins expanded to the appropriate level and the cost reduced to the appropriate level. And we’re refining it refining that model as we progress through q three. And just to go back a second, just a quick annotation. Jay Jay mentioned the restructuring charges were in q two.

He meant some of the restructuring charges were in q two. The bulk of the restructuring charges will be in q three. So just making that quick edit on the fly. So the the size and change in q two, it’ll be something meaningfully higher than that in q three, but you’re not quantifying that? Is that the right way to think about it?

That’s correct. Got it. I think that’s all I had. As it relates to the pipeline of orders that you’re chasing for the second half of the year, alluded to strength and following up on Rob Rob’s question, rail and bus, etcetera. But I think you mentioned more in material handling.

What are you seeing in that market? Yeah. We’re seeing some green shoots in stack replacements. We’re we’re not actively doing battery box replacements or anything like that. That’s that’s not our core.

However, we are seeing various integrators and OEMs talking to us about stack replacement as as they start seeing the need for higher performing stacks with greater durability, and they’re looking for ways to lower their total service costs of of addressing that space. And we play extraordinarily well in that domain with the the stack lifetimes that we’ve been able to achieve. So they’re quite interested. Perfect. That’s all I had.

Thank you.

Conference Operator: The next question comes from Matt Blair with Cormark Securities. Please go ahead.

Matt Blair, Analyst, Cormark Securities: Hi. Just had a question on whether

Marty Meese, President and CEO, Ballard Power Systems: there are

Matt Blair, Analyst, Cormark Securities: some concerns you may have that if you focus on the markets that are ready now, like like you noted with the bus TCO looking attractive, will it will it sort of would a decline in your technology development necessarily be allow you to be ready for when the other markets like trucks start to see an improvement? Because that technology, I think, does need a steeper cost decline and probably a better performance increase. Can you just speak to how you’re sort of future proofing yourself on on that front?

Marty Meese, President and CEO, Ballard Power Systems: Yeah. I I would say that a a couple of things. One is the core technology that continues to evolve and and improve is the stack. And when you think about the fungibility of a stack across all the different applications, making meaningful progress on durability and lifetime and efficiency and and all the the key customer metrics, that translates across all the verticals. So that March is going on now.

Additionally, we’re seeing markets like truck being more like 2030 and beyond. And so we’ve got plenty of time as you start thinking about market signals. If we were needing to adapt further, we could we could adapt from there. Lastly, I’d say that all of the markets are, let’s say, commercially sensitive and understanding the total cost of ownership explicitly end to end is the work product that we’ve got going on now that will serve us no matter what market we’re entering now or in the future. And really, that’s about getting the delivered value explicitly characterized so that we know exactly what the CapEx is, what the OpEx is, and the lifetime of the asset we’re trying to serve and making sure that we’re developing a product and a service portfolio that addresses it appropriately.

Matt Blair, Analyst, Cormark Securities: Okay. So that would yeah. It would be helpful next year looking forward to that capital markets data to dig in a lot of these issues. So Absolutely. Yep.

Great. Thanks.

Conference Operator: Our next question comes from Craig Gattari with Raymond James. I

Marty Meese, President and CEO, Ballard Power Systems: think in the quarter, though, there was a $2,000,000 backlog adjustment being pulled out. Could we see more pieces of the business being exited? What are some of the margin profile of the backlog? And are there pieces of the business that you may view as suboptimal or unattractive? Yeah.

So in in the case of that particular reversal, Jay, do you have the the particular on that particular cover? Not right now. No. Okay. So sorry.

But I’m not gonna be able to get you the the exact name of that particular reversal or what that market was. It’s too new for me at the moment. That said, we are establishing and improving our pricing disciplines and what opportunities meet a threshold and a hurdle rate and what opportunities do not. And when an opportunity does not meet a hurdle rate, that doesn’t mean that we suspend work in that particular vertical or that customer account. Means we have to be more creative on the the balance between a CapEx and an OpEx model and understanding what the customer is solving for.

Are they are they solving for upfront costs? Are they solving for lifetime costs? And do we know the difference in how to price it accordingly? So I would just say that we’ve got more maturation to do in value pricing and making sure that the markets we’re serving and the and the products we’re delivering to those markets have a fit, and they have a value proposition that wins, and the customer recognizes that value and is willing to pay for it, whether it’s upfront in the CapEx or whether it’s ongoing in the services. Okay.

And I see in the in the MD and A, there’s still mention of the Rockwell, Texas facility, I think, pushed out to be reviewed in 2026. Just wanted to know internally, what are you looking at specifically to give you the confidence if the the the the future were to get a go ahead? What sort of metrics are you going to sort of think

Matt Blair, Analyst, Cormark Securities: about that?

Marty Meese, President and CEO, Ballard Power Systems: Yeah. And this this is part of my kind of operational heritage, if you will. The the first order effect for me as a former ops person is you you always strive for more out of your installed capacity. And so as we look for ways to be more process efficient and to see the benefits of our automation coming in, we’ll keep looking at our overall capacity and understanding how much available capacity we have to address the markets that we’re targeting and then what the role of the Texas facility would or would not do to help us on the capacity front. As we sit today, we’re still on pause in Texas with without a need for that additional capacity on the on the horizon.

So we’ll revisit that statement as we see the market evolve over the next couple of quarters. But as we head into 2026, we should be able to get to a a more certain outcome. Okay. Thanks.

Conference Operator: The next question comes from Craig Irwin with ROTH Capital Partners. So

Marty Meese, President and CEO, Ballard Power Systems: Marty, definitely appreciate the fresh look at the business model over at Ballard. You know, as the cash flows by the ’27, you know, not so many fuel cell companies have had positive cash flows even for very brief periods. Much more important milestone, I think, for investors is positive gross margins and maybe margins above a certain threshold of maybe 15% or 20. Can you maybe talk about what might have you pause as far as putting out the margin targets for investors? Do we need to get past commitments in backlog where pricing might not have used the same discipline that you’re going bring over the next couple of years?

Or are there other structural items that we might need to consider as as you work towards this impressive goal of positive cash flows? Yes. I would I would say it this way. I think there’s an opportunity for us to to do a few things at the same time. So while we have a backlog of orders that was derived in in prior to me times, let’s say, that doesn’t mean that we don’t have active engagements with those strategic customers, and we’re not actively looking at ways to deliver lower product costs for them, while at the same time improving our own margins simultaneously.

So we share the benefit of a cost roadmap, and at the same time that helps them, that helps us. And so I would say that when you think about the backlog, you think about how would we improve that order book and how would we exchange value with those customers. And when I say that, that includes at the CapEx level and on the overall servicing of the account level. So think of it as total delivered value from the customer service standpoint with upfront and follow on cost reductions and service improvements. Understood.

That makes sense. So then one of the pieces of the equation that was kind of missing a ballot in the past that, you know, at least from my opinion, right, and many investors was a field strategy. Right? A lot of what Ballard was doing is just saying our customers will figure it out rather than taking a more active and strategic approach. Can you talk about whether or not considerations around fuel strategy are a part of what you’re looking at these days?

How do you feel the team tracked on their support for customers with fuels over the last several years? It’s just people are looking at different ways of buying hydrogen. You know, is this something that, you know, is worth a close look as as you focus on these positive cash flows in the future? Well, I’ll I’ll give you a a quick response, which is I just spent four years trying to develop partnerships on the other side of the table as a molecule producer. And so the partnerships required to deliver the total cost of ownership end to end for any one of our verticals require thoughtful partnerships on fuels.

To the extent that we can be more of a value add in that discussion with the right kind of strategic partners and bring the right type of imputed mileage, if you will, to bear on their offtake requirements, I think those are exchanges that would be welcome from molecule producers. Put it this way, if if I had an opportunity to have partnered with Ballard at my last company, I would have loved to have done so. Fantastic. I knew you’d bring some new perspectives. Thanks for taking my questions.

Conference Operator: The next question comes from Joe Koenig, private investor. Please go ahead.

Marty Meese, President and CEO, Ballard Power Systems: Can you hear me? Absolutely. Yes. Welcome aboard, Marty. My question has to do with China.

Can you sum up our activities, our present activities in China and the outlook there? Thank you. Thanks for the question, Joe. And and we are on materially a pause on China. We we have not invested in any way, shape, or form over the last quarter.

And as we look forward, we’re looking to make clear where or where it does not fit in our portfolio. We are continuing to buy components from China. It becomes a it’s a critical supply chain node for us. It’s less clear of the demand environment of how the China market is available for us to address. And so we’ve just stopped approaching the the demand side of the China market and instead have been using the supply side on the supply chain to help us lower cost for customers.

Thank you.

Conference Operator: This concludes the question and answer session. I would like to turn the conference back over to Marty Meats for any closing remarks. Please go ahead.

Marty Meese, President and CEO, Ballard Power Systems: Thank you for joining us today. As I mentioned, Ballard is focused, aligned and operating with urgency. We will continue to take decisive actions to build a more capital efficient, disciplined and commercially focused company. We look forward to updating you on our progress next quarter. Thank you very much.

Conference Operator: This brings you close today’s conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

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