Ballard Power Systems Inc. (NASDAQ:BLDP) Q3 2024 Earnings Call Transcript

Ballard Power Systems Inc. (NASDAQ:BLDP) Q3 2024 Earnings Call Transcript November 5, 2024

Ballard Power Systems Inc. misses on earnings expectations. Reported EPS is $-0.19 EPS, expectations were $-0.13.

Operator: Hello and welcome to the Ballard Power Systems’ Third Quarter 2024 Results Conference Call. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Sumit Kundu, Manager and Investor Relations. Please go ahead.

Sumit Kundu: Thank you, operator, and good morning. Welcome to Ballard’s third quarter financial and operating results conference call. With us on today’s call are Randy MacEwen, Ballard’s CEO; and Kate Igbalode, Chief Financial Officer. 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 will now turn the call over to Randy.

Randy MacEwen: Thank you, Sumit, and welcome everyone to today’s conference call. We’ll keep our prepared comments today relatively brief to allow sufficient time for Q&A and I think there can be no question as this is a difficult moment in the hydrogen and fuel cell industry. In the context of an uncertain macroeconomic and geopolitical outlook and amid protracted policy uncertainty, we observe a multi-year push out of hydrogen project development and the availability of low cost, low carbon hydrogen and hydrogen refueling infrastructure. We also observe a continued deterioration in the financing environment for companies in the hydrogen fuel cell industry complex including reduced access to capital and continued compression in industry valuations.

Taken together, the push out in market adoption in the challenging capital markets environment is putting pressure on the financial position of many industry players across the value chain. Many participants are taking restructuring actions to reduce their cash burn, improve their liquidity and extend their cash runway. This industry context presents a significant headwind to our corporate growth plan. Accordingly, in Q3, we made the difficult decision to initiate a global corporate restructuring to moderate our investment intensity and pacing to better align with delayed market adoption. Our restructuring includes a sizable workforce reduction, rationalization of product development programs, consolidation of global operations and facilities, and a reduction in planned capital expenditures.

In addition, given continued policy and other challenges in the China fuel cell market and the underperformance of the Weichai Ballard joint venture, we reduced our corporate cost structure in China and initiated a strategic review of our China strategy with consideration of all options including related to the Weichai Ballard JV. Given this industry context, we do not see a business case for production capacity expansion investments in the foreseeable future. Accordingly, we have also repositioned our previously planned Texas gigafactory expansion program to an optionality plan, where we will defer our final investment decision to 2026 pending clear market adoption and demand indicators, while still preserving our over $94 million of awarded government funding.

With no material capital investments made during this optionality period, we will reassess the underlying business case in 2026. We expect our global restructuring to reduce total annualized operating costs by more than 30% with a substantial part of the annual cost savings to be realized in 2025. These actions will meaningfully extend our cash runway. Importantly and a differentiator for Ballard, we entered the quarter with a strong cash position. Our Q3 results are reflective of this challenging industry context in near term outlook with weak revenue, soft new order intake, adverse order book adjustments, a restructuring charge of $16.1 million and non-cash goodwill and PP impairments totaling approximately $147 million. I want to comment on the order backlog.

We removed certain previously booked orders from our order backlog and 12 month order book. While these orders have not been canceled by our customers, we believe these removals are prudent given heightened concerns on the relevant market adoption risks and customer risks. While we had disappointing new order intake of only $7.1 million during Q3, we see a pickup in new order intake in Q4, including secured orders from two customers over the past few days that I want to highlight. First, we received a new order from New Flyer for the supply of 200 fuel cell engines representing 20 megawatts with delivery plan for 2025. This represents the second order under our previously announced long-term supply agreement with a doubling from the New Flyer order of 100 fuel cell engines for 2024 delivery.

We believe this new order for 200 engines is the largest order in the history of the industry for fuel cell engines in the North American bus market Second, we also received a repeat order from an undisclosed European bus OEM customer, where we previously signed a long-term, framework, supply agreement. This order is for the supply of 80 fuel cell engines planned for delivery in 2025 and 2026. As we look to our long-term strategic plan and our retuned capital allocation, we continue to have high conviction on hydrogen and PEM fuel cells playing an important role in decarbonizing select heavy mobility and stationary power applications. We see compelling use cases where customers are attracted to the differentiated PEM fuel cell value proposition of long range, fast refueling, heavy payload operation in all weather, climates and zero tailpipe emissions.

We remain focused on our customers and our controllables, including the development of next-generation, low-cost fuel cell products, while maintaining disciplined spending and balance sheet strength for long-term competitiveness and sustainability. With that, I will now pass the call over to Kate.

Kate Igbalode: Thank you, Randy. In Q3, Ballard delivered orders totaling $14.8 million, a decrease of 45% year-over-year, due to slowing customer demand, reflective of a push out in the adoption curve for hydrogen and PEM fuel cells. Decreases were recorded in most verticals with the exception of Bus revenue which increased 33% totaling $11.2 million in the quarter. Product sales accounted for approximately 93% of total revenue, continuing an increasing trend as we transitioned to a commercial products company. We expect 2024 revenue to be heavily indexed to Q4. Lower revenue, changes in our revenue mix and onerous contracts and inventory provisions, resulted in a gross margin of negative 56%, 45 points lower compared to the same period last year.

In the quarter, total operating expenses were $54.9 million, 58% or $20.2 million higher year-over-year. This is primarily due to a restructuring charge of $16.1 million and $7.9 million of impairment of certain trade receivables. With our restructuring actions, we expect total operating expense excluding restructuring charges to be at the low end of our guidance range of $145 million to $165 million for the year. With restructuring charges included, we expect to be at the higher end of the range. We also expect a modest additional restructuring charge in Q4 in the $2 million to $5 million range. Cash operating costs in the quarter were $28 million. Capital expenditures totaled approximately $12 million in Q3. And for the full year guidance on capital expenditures, as a reminder, we reduced our guidance range in the previous quarter to $25 million to $40 million.

With the delay of a final investment decision for the Texas facility, as well as reductions in capital investments due to scope reductions from our restructuring activities, we expect capital expenditures for the year to be at the low end of this range. As Randy commented on earlier, during the quarter we incurred approximately $147 million of non-cash impairment charges. As a result of the decline in our market cap, our global corporate restructuring, and indicators of slowing hydrogen and fuel cell policy implementation and market adoption, we have updated our goodwill and non-financial asset impairment tests due to these potential indicators of impairment. This resulting impairment is made up of approximately $40 million of goodwill and $107 million of PP&E to impair these assets to their estimated residual value.

This PP&E impairment charge is as a result of the accounting treatment and is not reflective of our belief in the ability for our investments to deliver value to Ballard through product development, testing and manufacturing. We continue to have a strong balance sheet, ending the quarter with approximately $635.1 million in cash and cash equivalents. And with that, I’ll turn the call over to the operator for questions.

Q&A Session

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question will come from Rob Brown with Lake Street Capital Markets. Please go ahead.

Rob Brown: Good morning, Randy and Kate.

Randy MacEwen: Good morning, Rob.

Rob Brown: Just wanted to get a little bit of sense on kind of the order environment, good to see some bus orders here, but are you seeing, I guess, continued bus activity and really that’s it or that’s maybe a little extreme, but maybe just kind of where are you seeing activity now and what are you hearing, I guess in the heavy-duty truck market and some of the other heavy-duty markets?

Randy MacEwen: Yes, a great question, Rob. And notwithstanding kind of the muted order book new intake for Q3, we had a lot of activity in Q3, advancing opportunities with customers to late stages in our sales pipeline. So we feel very good about new order intake for Q4. And the New Flyer announcement is one illustrative example, obviously, the European bus OEM that I referenced as a second. But there will be more coming in Q4, so we’re pretty excited about some of the developments there. And they are primarily in bus, rail and stationary. I would say the two markets that are really not tracking as quickly as we had expected particularly would be the truck market and the marine market. Certainly the marine market is very, very slow for us this year compared to prior year and the truck market for a variety of reasons, I continue to see that get extended.

And that’s – when we kind of look at the delayed market adoption, the truck market is a very significant contributor there because of the size of that market. So those are the two markets, truck and marine, where we’re seeing pretty significant challenges securing orders. We feel very good though, about the bus, rail and stationary markets where we continue to see progress and I think we’ll see additional order flow coming out of those market applications in Q4 into next year.

Rob Brown: Okay, great. And follow up on kind of the CapEx comments. What’s sort of the baseline or sort of maintenance level CapEx, you think you’ll be able to run at before you get some clarity in the market?

Kate Igbalode: Yes, thanks. Pardon me. Good morning, Rob. Thanks for the question. I think as we look into 2025, obviously we haven’t put out our guidance expectations and ranges for next year as of yet. But I think if you kind of look at our current guidance range for this year of kind of that 24 to – $25 million to $40 million, you take that midpoint. I think that the low to mid end of that range is a reasonable expectation as we look into 2025.

Rob Brown: Okay, thank you. I’ll turn it over.

Randy MacEwen: Thanks, Rob.

Operator: The next question will come from Jordan Levy with Truist Securities. Please go ahead.

Jordan Levy: Good morning, all. Given the timing, I guess I’ll first ask around the election. Can you just give us a sense of how you see the outcome of the U.S. election today impacting anything on the adoption timeline and then maybe just a second part of that, if you think that there was any holdup from any U.S. customers you were in potential order discussions with during the third quarter ahead of the timing of the election?

Randy MacEwen: Yes. So first of all, Jordan, thanks for the question. We were expecting a question on the U.S. election just given today’s date here. We’re not really basing our business plan on any one administration in any one country. So we really look to make sure we have a plan that’s resilient around different administrations. What I would say is that we were – I think, pleased that we saw some indicators that we are expecting guidance, final guidance, to move to policy implementation on 45V by the end of this year. So we certainly have seen in indicators from the IRS and the DOE that there’s an expectation that should happen by the end of the year notwithstanding what happens in the election. So that’s a recent statement.

So hopefully that is the case. You’ll recall this was supposed to be finalized under the rules August 23, 2023. The IRS came out with their guidance last December. So this is fairly significantly delayed. And I think that, in my opinion is causing significant delay on the development of hydrogen projects, which is having implications for all hydrogen applications, including mobility applications in the U.S. market. Now, as a reminder, we are focused on projects and opportunities where you have centralized depot refueling, which does mitigate a little bit on the refueling infrastructure side but of course, a clean hydrogen is a big part of the landscape moving forward to make sure zero tailpipe emissions really means zero tailpipe emissions.

Jordan Levy: Got you. Now that makes total sense. Maybe just a follow-up, just wanted to see if we could get any more insight into the $39 million in removal, not asking for any specific customers obviously, but from I know you called out China in the comments as included in that, but I just wanted to see were there any insights you could provide us with there. Were there orders that were more weighted toward any particular segment or geography or anything like that?

Randy MacEwen: Yes, yes. Certainly for the two largest ones that, that we moved out, certainly the Weichai Ballard JV and the – as we’re doing a strategic review here, we’re reassessing really everything on the table in terms of the product roadmap for the joint venture, future investments, governance, but also the tech transfer program that we’ve been working on and what we do on that tech transfer program going forward. We’re completing existing deliverables but what the next stage of that is and so we’ve taken that out at this stage given the level of uncertainty in that strategic review. And then there is one other customer, I won’t name the customer but they are having liquidity challenges and we thought this was a prudent thing to do given that it’s unclear whether they’re commercialization plans.

We have a take or pay contract with that customer. That being said, their commercialization plans are not materializing at the pace they expected and they’re going through a financing process. So with those two variables we thought this was the prudent thing to do.

Jordan Levy: Thanks so much.

Operator: The next question will come from Saumya Jain with UBS. Please go ahead.

Saumya Jain: Hey, how are you guys looking at order backlog going forward, and I guess how does it – I know you guys had 122 at the end of Q3. How do you see that as reflective of a greater trend across the space or do you see that changing?

Randy MacEwen: Yes. I think certainly, the trend across the broader space is as we characterize is a deferred delayed market adoption that’s both protracted policy uncertainty and the availability of low cost, low carbon hydrogen are compounding factors for sure. For the market applications that we’re focused on, we still enjoy a relatively high market share. I think we have visibility on most opportunities and what most customers and end customers are doing, particularly in the bus and rail and stationary markets where we’re seeing continued attraction there. So I feel like we’re going to have additional contributions to the order book, as I mentioned in Q4, but I think it will be very weighted as it has been with bus. And just to give you an example, the bus market is contributing the lion’s share of revenue through 2024. We expect that to continue in 2025.

Saumya Jain: Okay. Got it. And then how are you guys seeing, I know last quarter you mentioned the cost per kilowatt sold to customers coming down. Do you still see that or how is that playing out?

Randy MacEwen: Yes. Like from on a quarter-to-quarter base, so we haven’t seen any material change on that front. But we do expect and contemplate in our financial model annual reductions in selling price and we do plan for annual cost reductions as well. So both those are in our plans and we expect to see that continuing trend. There is pressure in the marketplace. There are a number of competitors who are trying to get their demonstration projects, trying to get pilot projects and field experience is a major competitive advantage we have with our market share and our field experience and others are trying to get into the market and are using pricing as a mechanism to achieve that.

Saumya Jain: Thank you.

Operator: The next question will come from Ameet Thakkar with BMO Capital Markets. Please go ahead.

Ameet Thakkar: Good morning. Thanks for taking my questions. Just wanted to follow-up, I guess, Randy on your comment regarding just part of the write down to the backlog or the removal of it, you mentioned you had a customer with a take or pay contract that was in some sort of financial distress. Is that what also drove the – I think the $7 million – $8 million write down on trade receivables? Is it the same customer?

Randy MacEwen: No, no, different situation.

Ameet Thakkar: Okay. And then I think, at your Capital Markets Day back in 2023, I mean, you kind of highlighted you had kind of nine customers that were kind of in that deployment phase where you kind of see – kind of a critical massive orders and kind of maybe in the hundreds for fuel cells. I was just wondering if you could kind of level set us right now and how many customers you have in that kind of deployment phase. I mean, certainly flyover looks like they’re one of them, maybe Solaris. But I was wondering if you could kind of maybe level set us on that. Thanks.

Randy MacEwen: Yes. So the bus market is clearly where we’re seeing that occur. We have a number of bus OEMs in the European market that I would characterize as on long-term supply agreements now, framework agreements, repeat orders, moving from a handful to larger deployments. And so when I look at the bus market, just as an illustrative example, I think probably over the last 12 months by my count, we’ve secured orders for about 1,600 fuel cell engines for fuel cell buses in Europe and North America with the largest orders obviously in both of those regions respectively. And there are probably about five key bus OEMs that I would characterize in that category as being real players now for fuel cell buses, there is one other we expect to sign up and secure in Q4.

We’ve been working with that customer for about a year and expect to sign a long-term supply agreement with them as well. So I think we probably have five or six key customers on the bus side that I would characterize as moving past demonstration and into real deployments. So that’s very exciting on the bus market. When you’re talking about 1,600 buses ordered in one year, 1,600 engines for buses in one year, it’s no longer a pilot program. I don’t think when you look at truck and marine, we see anything similar to that at this time. I do think on the rail side, there are probably three customers on the rail side that I’d highlight as moving into areas where the volume of either agreed contracts we have or that we expect in the next six months would put them into that deployment category.

Two of them are in the commuter rail market and one of them is in the freight locomotive market. And then on stationary, just to pause for a minute on stationary, because I think this is kind of a very interesting market and it’s a market that’s going to take some time to develop. But some interesting developments over the last quarter, Caterpillar, a partner we’ve worked with, won a U.S. Department of Energy 2024 Hydrogen Program Merit Review Award for system development and integration. This is on a project in collaboration with Microsoft and Ballard where they tested the feasibility of a large format hydrogen fuel cell for reliable backup power over a simulated 48-hour outage at a data center. That was a data center basically hosted at a Microsoft site in Cheyenne, Wyoming.

And that included a 1.5 megawatt Ballard fuel cell solution. And so that kind of a important development in the quarter. And we recently shipped and commissioned another system over 1 megawatt for an unnamed customer at this stage, one of the world’s largest companies doing a field trial. And we expect to have more to say on that as that customer prepares for disclosure on that project. And then the last thing on the stationary market, we have announced previously our co-development work with Vertiv and that continues and I think is a very important collaboration for us, particularly focused on stationary backup power solutions for the data center market. So a couple of customers on the stationary side, they’re still in demonstration phase at this point, but they are blue-chip customers that have a lot of understanding on the market requirements, particularly for the data center market.

And we’re continuing to work with some of these partners to advance the opportunities there.

Ameet Thakkar: Great. Thank you for all the color.

Randy MacEwen: Sure. Thank you.

Operator: The next question will come from Craig Shere with Tuohy Brothers. Please go ahead.

Craig Shere: Good morning. So first, any further details on that China receivable write-off and implications for – I mean, is it just geopolitical? Is it there’s no money there? What’s driving that? And are you in your strategic review of Weichai JV at all contemplating a full exit from the market? Or is this just something that would go into hibernation possibly until China eventually does become the largest hydrogen market in the world?

Randy MacEwen: Yes. Craig, thanks for the question. First of all, you mentioned China as the largest hydrogen market in the world. It is the largest hydrogen market today with one-third of global demand, about 28 million tons per year, I think more than double the U.S. It’s the largest renewable energy market, as we know. Largest market for fuel cell buses today, probably 90% of the fuel cell buses globally, more than 90% are in China and probably more than 95% of fuel cell trucks on roads today are in China. And about one-third of hydrogen refueling stations globally are in China today. So a lot of indicators of a market that’s not just the largest today, but we think will be the largest in 2030 and 2050. On the Weichai-Ballard JV, the various options you mentioned kind of hibernation, exit, all those are on the table.

Absolutely, all of those are on the table. This is a full strategic review. I don’t want to presume the outcome because there’s discussion underway with our partner in that market. But we are looking at the structure of the JV, we’re looking at governance, we’re looking at the roadmap. The JV is currently fairly well capitalized. There’s no investments required for 2024 and 2025, but we are revisiting our tech transfer program there, we’re looking at our equity investment. So all things are on the table and we’ll report on that as we conclude that. In terms of the receivable that you asked about, that’s really a situation where this is a receivable with the joint venture. And we in our discussions with the JV have had disagreements on milestone – kind of milestone developments under our technology program.

So there’s a lot happening there, a lot of moving pieces and so we’ve taken an impairment on that receivable to be prudent. But that’s kind of where we are right now.

Craig Shere: Thank you.

Randy MacEwen: Yep, you’re welcome.

Operator: The next question will come from Rupert Merer with National Bank. Please go ahead.

Rupert Merer: Hi. Good morning, everyone. So as part of your restructuring, your rationalizing your product development plans, can you give us some more color on how the plans could change? What are you able to give up from your plans and where are you going to keep your focus?

Randy MacEwen: Yes, a couple of things I would highlight, Rupert, is that we’ve really reduced the amount of continuation engineering and investment in legacy products and current products and really focus the investment going forward on the next generation higher performing, low cost product, particularly what we call our small core and our medium core products. So a couple of market applications where we have effectively discontinued investment. So the marine market, we have a product today, the FCwave. We are not working on a next version of that FCwave product, given what we’ve seen in the marine space. And on the truck market, the much larger engines required for the truck market, we’ve deferred our investment programs for large engines out into future years.

So those are some of the decisions we’ve made based on the market indicators that we’re seeing and where we’re seeing market adoption, both from a rationalization as well as a sequencing perspective. I would say as well, moving from the engines to the core stacks. Similarly, we’ve reduced the amount of investment on legacy stacks and are really focused on the next generation stacks that have higher performance and much lower cost. So the big emphasis for us on our investment going forward, we feel like we understand a lot about the market requirements and how technology translates to safety, reliability, durability and what the big focus for us is really around product cost reduction to help obviously expand the market opportunities. But obviously gross margin expansion is a key driver for us moving forward.

Rupert Merer: So as a follow up, you have a little bit more time now before mass commercialization. And as you identify there is a cost to carrying legacy products or commercializing products, does this give you time to delay the, say the next generation, push the technology and the cost a little further before finalizing your designs?

Randy MacEwen: Yes. So in terms of prioritization, as I mentioned, given the traction we’re seeing in the bus market, so our next generation bus products is really where the big focus is over the next 24 months, 48 months, or I should say really 12 months, 24 months. And then over the next 36 months, 48 months is where we’re looking at starting to bring on the larger truck modules, given the timeline for adoption is out multiple years.

Rupert Merer: Great, thank you for the color. I’ll leave it there.

Randy MacEwen: Yes, thanks, Rupert.

Operator: The next question will come from Mac Whale with Cormark Securities. Please go ahead.

Mac Whale: Hi, just following up on a couple issues. Maybe you’ve sort of answered this, but if you look at the backlog and it sounds as if that’s weighted more, say to the bus market than it has in the past, maybe there was more truck. Would we expect to see – are there positive implications then for margins on that? Like how does – how does the shifting in the backlog speak to the possibility of getting the margins in that positive territory? Or does it?

Randy MacEwen: Yes. So, I would say for customers that are using, current products and legacy products, the margin profile is not that attractive for us in the bus market, particularly in Europe, where the pricing pressure is more pronounced not just for the fuel cells, but also for the buses themselves, in terms of the cost of the bus as well as battery packs selling prices as well for buses. So I would say margin profiles are slightly better in the U.S. or North American environment. But I think really what we’re looking at is introducing next generation products for the bus market is where we’re going to see that leg up on facilitating cost like selling price reductions, but also facilitating gross margin expansion.

Mac Whale: Okay. And so when you think about – when you put in your backlog some orders, are they really on how do you – do they go in there on pricing and margin as it is now? Or is it based on future developments that you expect to have in place over that time of the contract?

Randy MacEwen: Yes. So I characterize it a bit of a hybrid. So effectively, first of all, we’re only putting into the order book notwithstanding. We’ve had things come out of the order book. We’re only putting in real orders, right? So these are signed contracts, signed purchase orders, and in a number of cases there are take or pay commitments as well, just to start there. Secondly, when we approve a contract at Ballard, we do a review of that contract, looking at the pricing, looking at the gross margin, looking at the payment terms, looking at the commercial terms, et cetera. And one of the things that gets the most scrutiny is the contribution margin related to that opportunity, including the selling price and the cost assumptions.

On the cost assumptions, when we’re selling current products for current period year or even in the following year, we have very good visibility on what our costs are going to be. There might be some modest assumptions on some components, but we typically have most components locked in on the pricing side. So we’re not taking huge risks on the cost side there. But as you look at longer-term supply agreements where we’re supplying pricing indicators out two and three years, there are cost assumptions embedded in those plans. We typically don’t have orders out two and three years. We typically have a pricing indicators for those subsequent years and then the orders get confirmed both by the customer and for us on the pricing side. I’ll use New Flyer as an illustrative example.

We signed a long-term supply agreement. We signed up our purchase order in early 2024 for the 2024 deliverables. We’ve just signed up our purchase order for 2025. Again, we’ve now locked in our selling price to New Flyer as an illustrative example. And our costs are understood [ph] and in many cases, given the lead time for materials, a lot of those costs are already underway.

Mac Whale: Okay. Okay. That’s helpful. And then I just wanted to – the last question was just on the restructuring. Are you – have you – the restructuring charges you’ve taken to date, does that get you the 30% savings you expect next year or is that a process over a number of quarters where we could expect some more?

Randy MacEwen: Yes. I’ll just make some comments and Kate can supplement as well. So first of all, most of the cost reduction will be coming out in 2025. There’s some modest costs that we’re carrying very modest in the first part of 2025 as part of the closure of operations in our Hobro, Denmark facility. So we have a facility in Denmark that’s doing manufacturing of our marine fuel cell engines. We are effectively transferring the production of those engines to Burnaby. And so to facilitate that transfer, there’s some activities that will occur in early 2025. Once that’s completed, we’ll see basically the cost there drop off fully. So overall, by mid next year, I think the new annualized operating costs should be fully expressed, but most of it should be realized in Q1 of 2025 as well.

Kate Igbalode: Yes, I think thanks for the question, Mac, I think if you’re kind of just looking at kind of 2025, again, kind of similar to the earlier question around capital. Right now, if you kind of take our current guidance midpoint, reduce that by 30%, I think would be a fair proxy going into 2025 on a full year basis.

Mac Whale: Okay, helpful. Great. Thanks guys.

Kate Igbalode: Yes.

Operator: The next question will come from Martin Malloy with Johnson Rice. Please go ahead.

Martin Malloy: Good morning. I just wanted to ask kind of a bigger picker question here. Assuming there’s positive guidelines coming out of treasury for 45B [ph] and projects get sanctioned next year for supplying blue or green hydrogen. When do you think that would start to impact the market adoption for your products and when do you think that would start to impact your orders? Is that out in 2028 kind of timeframe?

Randy MacEwen: Yes. I think three, four years is kind of the earliest that you would see that occurring. It’s going to take time for these projects once guidance is in place to understand that guidance and then for project developers to work with financers and then to build a project. So it’ll take a number of years before hydrogen is actually available. So in terms of moving from – the kind of moving from city buses deployments and looking at adding a really sizable truck fleet and adding a really sizable freight locomotive fleet, for example, in the U.S. market, I think you’re looking at that 2028 and to 2030 timeframe.

Martin Malloy: Okay. And then for a follow up question, I just wanted to ask about if you’re seeing any interest from customers in using methanol as a fuel source for PEM fuel cells?

Kate Igbalode: Yes. So we used to have many years ago a methanol based business for stationary power where methanol would be reformed right inside the total system and then that reformed methanol would end up with hydrogen that would be used in the PEM fuel cell. We sold that business a number of years ago. It was primarily focused on backup power, including the telecom market. I haven’t really seen, if you go back, the customer that bought that business actually buys from us stacks for those systems. And what I’ve seen is that there hasn’t really been any takeoff in that market from five years ago to today. Say the numbers are still relatively modest. And I don’t see that changing for the foreseeable future. I haven’t seen any massive demand for methanol based stationary power applications and certainly not in mobility.

Martin Malloy: Okay, thank you. I’ll turn it back.

Randy MacEwen: Sure.

Kate Igbalode: I should mention, Martin that for marine applications there’s lots of opportunity for methanol, particularly for large freight going sea freight. I think methanol is a very viable candidate. But not used in PEM fuel cells used in engines or possibly in solid oxide fuel cells.

Martin Malloy: Thank you.

Randy MacEwen: You’re welcome.

Operator: The next question will come from Kashy Harrison with Piper Sandler. Please go ahead.

Kashy Harrison: All right. Good morning and thanks for taking my question. So just one for me. I was wondering if we could get a bit more detail on how to think about 4Q revenues. Kate, I know you indicated that its back end weighted, but just any additional color would be greatly appreciated. Thank you.

Kate Igbalode: Thanks, Kashy for the question. I think historically we’ve been messaging, we’ve somewhere between kind of a 30% to 40% H1 versus a 60% to 70% H2 revenue split. The last few years we’ve been sort of a 30%, 70% split between H1, H2. I think this year, just given Randy’s comments and the protracted revenue outlook and all the factors that are kind of being, I think that are now flowing through our numbers, I think we can expect this year to be more of a 40%, 60% split H1, H2.

Kashy Harrison: Thank you.

Kate Igbalode: No problem.

Operator: The next question will come from Buchian Aliani [ph] with Jefferies. Please go ahead.

Unidentified Analyst: Hi, yeah, this is Buchian from Jefferies. Thanks for taking my questions. I just want to go back to the China JV with do you think that’s going to impact Weichai’s 15% ownership in Ballard as you guys review the JV?

Randy MacEwen: I don’t think at this time that’s, that’s something that Weichai is interested in doing. But I can’t speak for Weichai.

Unidentified Analyst: Thank you. And then just on the Texas Gigafactory, as you guys defer that option, is there any risk to the $94 million funding based on the election outcome?

Randy MacEwen: I don’t think so. The funding has been awarded already. So, would be a situation where we are, if we move forward, we will already have an awarded fund that we’re working against. So this isn’t a new award that’s required under a new administration.

Unidentified Analyst: Got it. Thank you.

Randy MacEwen: You’re welcome. Thank you.

Operator: The next question will come from Craig Irwin with Roth Capital Partners. Please go ahead.

Unidentified Analyst: Hey guys, it’s Andrew on for Craig. Quick one for me because most of my questions have been answered but you guys talked about, cost per kilowatt coming down. I was wondering if you guys had any update on pricing trends you guys are seeing in the market.

Randy MacEwen: Yes, Andrew, good question. I would say depending on the market application, depending on the volume, you were still probably in the $700 per kilowatt to $1,000 and plus sometimes depending on the application in that range.

Unidentified Analyst: Great, thanks. I’ll hop back in the queue.

Randy MacEwen: Yes, thanks Andrew.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Randy MacEwen for any closing remarks. Please go ahead.

Randy MacEwen: Thanks, Chuck. And thank you all for joining us today. Kate, Sumit and I look forward to speaking with you next quarter.

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