Ballard Power Systems (TSX:BLDP) Q4 2020 Earnings Call

0:00 Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems Q4 and full year 2020 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. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Guy Macri, Director of Investor Relations. Please go ahead. Thanks very much, and good morning, everyone. Welcome to Ballard's fourth quarter and full year 2020 Financial and Operating Results Conference Call.

0:49 With us today on the call, we've got Randy McKeown, our President and CEO, and Tony Gugelman, our Chief Financial Officer. We'll 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. So today, Randy is going to provide his perspective on Ballard's progress throughout 2020, as well as our focus for the current year. Tony is then going to review Q4 and full-year financials, followed by a Q&A session. I'll turn the call over to Randy. Thanks, Guy, and welcome everyone to today's conference call. I'd like to start today's call by thanking all of the members of Ballard's global team.

1:34 I'm immensely proud of how our team responded to the global pandemic. We were guided by our purpose to deliver fuel cell power for a sustainable planet and by our cultural values. In every decision we made, we put the safety, health, and well-being of our employees, customers, and partners first. And we demonstrated once again Ballard's resilience and ability to adapt with both care and speed. I want to provide a brief summary of Q4 and full year 2020 results. Valid revenue was $28.6 million in the final quarter of the year, with total 2020 revenue of $103.9 million, consistent with our internal projections with the impact of COVID-19. Full year 2020 gross margin was 20%, adjusted EBITDA was negative $38.9 million, Year-end cash reserves were $763.4 million, and we ended the year with a 12-month order book for delivery in 2021 of $83.5 million.

2:36 While Fowler's operations continued uninterrupted through the year, some customers, suppliers, partners, and end users were forced to shut down temporarily at points during the year, and some also deferred capital expenditures. So while our sales pipeline was very robust, growing 55% in 2020, reflecting the continued increase in market interest, order flow is muted. Looking forward to 2021, the impact of the pandemic continues to be uncertain. As a result, inconsistent with our practice in the early stage of market development and adoption, we're not providing specific financial guidance for 2021. What I do want to share with you is how excited and confident I am about our business, about the important work we're undertaking in 2021 and our long-term future.

3:29 Customer engagement in all of our medium and heavy-duty motor market segments, bus, truck, rail, and marine, are at record levels. We're well positioned with technology, products, field experience, customer relationships, partners, brand, and financial strength. As reviewed in our September Investor and Analyst Day, we have a clear strategy and deliverables in 2021, including on technology innovation, product cost reduction, capacity expansion, our HIBeller JV, and our relationship with Mali. So the company's never been in a stronger position than right now at this very moment. We're attacking big problems, decarbonization of mobility in large, attractive, addressable markets, bus, truck, rail, and marine.

4:17 We're making solid progress in each of these market segments. I believe we'll exit 2021 with a growing sales pipeline and order book that will start our ramp for scaling with a steepening growth curve between 2024 and 2030. Importantly, we have a strong cash position. During Q1 2021, we completed a further equity transaction that added incremental net proceeds of approximately $528 million to our cash balance, which currently exceeds $1.2 billion. This positions us to aggressively pursue our two themes, acceleration and expansion. These two themes cut across three specific areas for planned deployment of our capital, The first is product innovation that will help accelerate market adoption by levering next generation stacks and modules for bus, truck, rail, and marine applications, including expanding the range of power product levels available in our portfolio and continued cost reduction.

5:24 The second area involves investments in the expansion of production capacity and localization. We're currently finalizing the expansion of MEA production capacity at our Vancouver facility. and we have established gigawatt production capacity in China through our joint venture with Weichai. We're now carefully considering further localization opportunities in China as well as the potential to deepen our manufacturing presence in Europe. And finally, we plan to invest in M&A. We have a growing pipeline of corporate development activities. Our focus is on opportunities that help to simplify the customer experience by reducing adoption friction points and reducing costs.

6:10 We also see M&A as a path to more fully participate in the secular growth of the hydrogen economy and continue to strengthen our competitive position in the market. At the macro level, the pandemic appears to have strengthened global resolve to confront the climate crisis. Indeed, the decarbonization agenda has gained remarkable momentum in the past year. There are now close to 50 countries with carbon pricing initiatives and 75 countries with net zero carbon emission targets. And notably, the growing importance of hydrogen in the future energy mix continues to be signified by supportive policy measures around the world. There are now 32 countries representing over 70% of global GDP that have announced hydrogen roadmaps.

7:02 The CEO-led Hydrogen Council, after being launched by only 13 founding members in 2017, now has 109 member companies. The group has escalated its advocacy work to raise the profile of hydrogen, and a growing number of sizable corporate investments, joint ventures, collaborations, and green hydrogen projects are being announced seemingly almost daily in our industry. Now in California, transit agencies began filing zero-emission bus rollout plans, as required by CARB's innovative clean transit program. And in 2020, CARB introduced its landmark advanced clean truck regulations that mandate the scaled adoption of zero-emission commercial trucks in that state.

7:49 In addition, 14 other states signaled their support in 2021. through an MOU supporting a target for 30% of new truck purchases being zero emission by 2030. In China, the government updated its fuel cell policy in September last year, which we expect to have a significant impact on commercial activity going forward. And I'll comment further on this in a moment. In 2020, Bloomberg NEF projected that clean hydrogen could reduce greenhouse gas emissions by up to 34% over the coming decades at a manageable cost. Its report concluded that renewable hydrogen could be produced for as little as $1.6 per kilogram in most parts of the world before 2050, making it a highly competitive fuel globally, with falling hydrogen costs enabling fuel cell market penetration along the way.

8:47 During 2020, we made considerable progress in the execution of our growth strategy while working to transparently provide stakeholders with insights into our business, including strategy and current market position. We shared details on our six times increase in MEA production capacity, module assembly capacity in our Vancouver facility, in addition to commissioning our joint venture facility in China. And we shared our planned reduction in fuel cell stack and module product costs by more than 70% We also detailed the estimated $130 billion annual market for engine sales into the bus, truck, rail, and marine segments by 2030, which represents a multi-billion dollar revenue opportunity for Ballard.

9:32 Importantly, during our Investor and Analyst Day 2020 last September, we also emphasized the significance of ESG reporting and Ballard's commitment to it. including the issuance of our first ESG report with the company's 2019 annual report in April last year and our second ESG report that will accompany the 2020 report later this month. We're excited with our goal to achieve net carbon zero at Ballard by 2030, as well as our continued work on diversity and inclusion. Now, I'd like to briefly review specific commercial developments in key geographies during 2020, beginning with China. As we previously shared, the Weichai Ballard Joint Venture is now operational.

10:17 During 2020, the facility construction and commissioning activity was completed to enable bipolar plate production, stack production, along with module assembly. Furthermore, Ballard Products manufactured the JV passed a series of quality audits so that the joint venture is now a qualified supplier to a number of bus and truck OEMs in China, including OEMs within the Weichai Group. China's state government has set a target of 20% of all vehicle sales being new energy vehicles by 2025, growing to 50% by 2035. In parallel, the government is targeting the fuel cell electric vehicle deployments reaching 1 million in the 2030 to 2035 timeframe.

11:03 In support of these targets, China's government updated its fuel cell policy last September with a focus on a number of hydrogen demonstration clusters. Numerous applications for demonstration region status were submitted to the national government, and we anticipate the selection of initial demonstration collections to be announced soon. We expect this announcement to help unlock considerable pent-up demand for FCEVs as the market slowed over the past year, awaiting regulatory clarity. Now, I recently returned from an important six-week trip to China. What I can report at this time is that the way CHI Ballard joined venture operation is very impressive. We believe this is now the largest fuel cell production facility focused on the bus and commercial truck markets.

11:53 Supported by our Ballard team, our JV team has done an exceptional job with our infrastructure and with production capabilities, including optimizing production equipment and processes over the past six months. We're now seeing production yield metrics at the JV already similar to yield results in Vancouver. The JV has also made important progress on localizing a significant portion of the bill of materials of our new joint venture modules. We expect this work will translate to exciting cost reductions at the module level. In addition to meetings with Chairman Tan of Weichai and important strategic initiatives to further strengthen our business in China, I also had the opportunity to meet with key government officials and policy influencers, as well as new vendors emerging on the supply chain side.

12:46 I also saw many fuel cell buses and trucks on the road while I was in China and with Ballard Technology inside. I also rode the world's first operating fuel cell tram line with five CRRC trams powered by Ballard engines, which started operation more than a year ago. At the current time, Ballard products are inside approximately 1,100 buses and 2,200 trucks in China, representing a market share of about 45%. Ballard has an industry-leading 70 million cumulative kilometers of on-road vehicle experience that Ballard has achieved to date. Ballard was also very active in Europe last year and into 2021.

13:33 In 2020, we announced a key strategic collaboration with Mahle, a major tier one supplier to the transportation industry, for the development and industrialization of advanced fuel cell engines to power various classes of trucks, initially classes six to eight in Europe. Mahle's expertise in powertrain design and mechanics, together with Ballard's fuel cell technology and know-how, creates a formidable partnership to address requirements of a zero-emission heavy-duty truck market in Europe. We're currently working with Mahle on design of a prototype 240-kilowatt engine for the heavy-duty commercial truck market, which we expect to have ready for testing by the end of this year.

14:18 In Europe's bus market through 2020 and to this point in 2021, we've received orders for a cumulative total of 135 modules under the Jive funding program. including 65 modules with right bus for buses to be deployed in a number of UK cities, 60 modules from Solaris for buses to be deployed in the Netherlands, Germany, and Sweden, and 10 modules for Van Hul for buses to be deployed in the Netherlands. In 2020, we delivered 29 of these 135 modules. I would note in summary that Ballard's share of the fuel cell modules for all buses deployed in order to date under the Jive program now exceeds 85%. In the train segment of Europe, our work with Siemens Mobility on development of a 200-kilowatt fuel cell engine for the Morale Plus H train is on track, and we understand that Siemens is now quoting this train to its customers.

15:16 In addition, earlier this year, we announced an order from Arcola Energy in the UK to power its passenger train, which is planned for demonstration during COP26 in Glasgow. In Europe's marine segment, we launched our FC Wave 200 kilowatt modular engine last year, and our Marine Centre of Excellence is now in operation at Ballard Europe's facility in Denmark. And finally, in the backup power segment last year, we announced the sale of our initial 500 air-cooled FC Gen 1020 fuel cell stacks to ADCOR and FC Energy, with a potential for up to 1,500 stacks in systems at radio tower sites in Germany. We also announced a collaboration agreement with Eltech Nordic for backup power solutions focused on countries such as Norway, Denmark, and Iceland.

16:06 In North America, early this year, we announced an MOU with Chart Industries for joint development of an integrated system solution that includes a fuel cell engine with onboard liquid hydrogen storage and vaporization. The ability to equip vehicles with a liquid hydrogen supply, whether it be in a bus, truck, train, or marine vessel, will address very long-haul use cases, since liquid hydrogen provides two to three times the energy by volume as compared to compressed hydrogens. And earlier this week, we jointly announced with Canadian Pacific that Ballard will be supplying 1.2 megawatts of fuel cell product for CP's pioneering hydrogen locomotive program to power the first ever fuel cell powered line haul freight train.

16:54 CP, with its fleet of 1,300 locomotives, has made a strong commitment to sustainability, including a vision that includes sustainable freight transportation. Once the fuel cell freight train is operational, CP plans to conduct rail service trials and qualification testing to evaluate the technology's readiness for the freight rail sector. This exciting program with a major North American transcontinental railway will expand our work in the rail segments from trams in China and passenger trains in Europe to freight trains in North America. In addition to these activities in our key geographic markets, we've been experiencing increased customer interest in other geographic markets.

17:40 For example, in Australia, New Zealand, and India. In Australia, last year, we signed an MOU as a consortium partner to establish the H2OZ bus project for the evaluation and deployment of fuel cell electric buses for use in public transit in that country. FCEBs offer an excellent option for public transit in Australia's challenging conditions, and green hydrogen from renewable energy will offer a flexible, scalable, and low-carbon fueling solution at bus depots. Announced in Australia earlier this year, Ballard signed an MOU with Global Energy Ventures to design a multi-megawatt power solution for its CH2 ship. a tanker-sized marine vessel that will store and transport hydrogen from Australia to other parts of the globe, consistent with Australia's ambition to become a net supplier of hydrogen to the world.

18:36 So 2020 was a critical year on the hydrogen fuel cell industry. And here in Ballard, while meeting operating challenges posed by the pandemic, we made significant progress on critical strategic initiatives to position the business for growth over the years to come. We have a range of zero emission mobility opportunities that we believe present large attractive market opportunities for Ballard's technology and products over the long run. With a strengthened balance sheet, we're increasing our investments in 2021 to seize these opportunities. In 2021, we'll increase our investment in talent, competencies, technology innovation, product development, and customer experience related to our core markets of bus, truck, rail, and marine. will continue to invest in our strategic partnerships with Weichai in China and Mali in Europe.

19:27 We'll also consider investments in further production capacity and localization in key geographies, as well as strategic partnerships and acquisitions. Before finishing, I'd like to address the CFO transition at Ballard. As you would have seen in yesterday's press release, Paul Dobson will be joining the company as Senior Vice President and Chief Financial Officer, effective March 29th. Paul has 25 years of global financial operations and leadership experience, including as CFO and Interim CEO at Hydro One and as CFO at Direct Energy. His skills and experience will serve Ballard well as we seek to scale our business over the coming decade. At the same time, Tony Gugelman will be staying on in an advisory role until May 31, supporting the smooth transition of this role.

20:22 On a personal note, I want to thank and acknowledge Tony as he moves into retirement. He served in the CFO role at Ballard for over 10 years, delivering significant value to the company, including through his professional leadership of our finance and administration functions, his important strategic contributions and there's leadership on numerous corporate and finance transactions. Everyone here at Ballard wishes Tony well in his retirement. And with that, I'll turn the floor over to Tony to briefly review the financials. Well, thanks, Randy, and good morning, everyone. Top-line revenue in Q4 was $28.6 million, down 32% year-over-year, and on a full-year basis, revenue was $103.9 million, down 2% from 2019.

21:10 For the full year, Power Products revenue increased 19%, while Technology Solutions revenue decreased 20%. Within Power Products, full-year heavy-duty motive was up 35%, to $47.7 million. This was due to a year-over-year increase in product shipments to customers, particularly sales to the Weichi Ballard JV and the Synergy Ballard JV in China. We also saw higher shipments of backup power products to customers in Europe. The decrease in technology solutions revenue to $45.3 million was due primarily to decreased amounts earned from the TS program with Audi, the Siemens Development Program, and the H.I. Ballard Joint Venture Technology Transfer Program.

22:01 Gross margin was 20% for the quarter and for the full year, declines of one point in each time period. The Q4 and full year declines were the result of the decrease in total revenue and a shift in overall product mix. Cash operating costs increased 25% in Q4 to $16.4 million, and for the full year increased 29%, or $11.2 million to $50 million. This was primarily the result of higher research and product development costs in next-generation MEAs, stacks, and modules. We do expect higher cash operating costs again in 2021, as we increase our investment in additional technology and product innovation and the development across our key product markets of bus, truck, rail, and marine.

22:56 Adjusted EBITDA in Q4 was negative $14.5 million compared to negative $7 million in the same quarter the prior year and negative $38.9 million for the full year compared to negative $26.6 million. For the full year, This included Ballard's $12.6 million share of losses in joint venture investments in China, largely related to the Weichai Ballard JV. Ballard's net loss in Q4 was negative $14.4 million compared to negative $9.8 million in Q4 last year. And for the full year, negative $49.5 million compared to negative $35.3 million in 2019. Earnings per share was negative 5 cents in Q4 compared to negative 4 cents in 2019.

23:48 And for the full year, EPS was negative 20 cents compared to negative 15 cents for the prior year. Both the net loss and EPS numbers include the balance share of losses from our China JVs. Cash used by operating activities was $6.7 million in Q4 Consisting of cash operating losses of $6.7 million and flat working capital changes. For the full year, cash used in operating activities was $42.9 million, consisting of cash operating losses of $25.8 million and working capital outflows of $17.1 million. We ended 2020 with cash reserves of $763.4 million, up 417% from $147.8 million at the end of 2019, and up 111% or $401.7 million from the end of Q3.

24:38 These cash reserves reflected three equity transactions in 2020 that generated total net proceeds of approximately $695. and others. These included two at-the-market or ATM programs that generated net proceeds of $309 million, as well as a bought deal transaction that closed in Q4 and generated net proceeds of $386 million. In addition, as Randy noted, we completed a further bought deal transaction in the first quarter this year, generating additional net proceeds of approximately $528 million.

25:29 In addition to areas where we expect to deploy capital in 2021, as outlined earlier by Randy, we also have a commitment to contribute $11.4 million in 2021 toward our 49% ownership position in the Wachai Ballard JV. At the end of 2021, we expect to have contributed a cumulative $69.1 million towards our total capital commitment of $79.5 million for our Pro Rata ownership share. Finally, we ended 2020 with a total order backlog of $117.8 million, a decrease of $10.3 million over the order backlog at the end of Q3. The 12-month order book at the end of 2020 was $83.5 million, up $3.9 million from the end of Q3. And as Randy noted, we have a robust sales pipeline of qualified commercial opportunities, up 55%.

26:29 from the end of the prior year. Now, before I turn the call back to the operator for questions, I did want to say a couple of words about my pending retirement. This will be my last investor call as CFO of Ballard. I first wanted to thank and acknowledge many of you on the call today whom I've come to know and work with over the past 11 years. It's been a pleasure to get to know you, and I do hope we can stay in touch. I also retire with confidence knowing Ballard's future is in good hands with a strong executive team and a dedicated workforce, as well as a very strong balance sheet. Lastly, I'll look forward to working with Paul on a smooth transition over the coming weeks. With that, let me turn the call back over to the operator for questions.

27:15 Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. We will pause for a moment as callers join the queue. The first question comes from Samir Joshi with HC Wainwright. Please go ahead. Thanks, Randy. Thanks, Tony, for taking my call. And Tony, congratulations and good wishes for the retirement. Thank you, Shamir. So my first question is about the China JV and revenue contributions from that. At what level of revenue contributions from China do you see Your equity distribution also breakeven. This year, I think you had over $12 million of equity distribution losses from that JV.

28:23 How should we look at 2021? Should we expect that contribution to be a positive contribution this year? Yeah, hi, Smritas, Tony. Yeah, so you're right. The equity contribution was negative in 2020, and we expect it to be negative as well in 2021. As Randy mentioned, we're expecting a fairly significant ramp-up in deliveries from the China JV, but they'll likely take place more in the second half of the year once the policy framework gets finalized. So we don't expect 2021 to be the break-even year for the joint venture, largely as a result of the delay in China policy. So I think realistically, we're looking more into 2022 that we would expect to start to see, you know, the JV getting closer to break even based on, you know, continued ramp up. So 2021 will continue to be negative, negative contribution at a level, not quite at the same level as 2021, but it will continue to be negative.

29:28 Understood. Thanks for that. You just mentioned the order backlog as of December 31st, I assume, was around $118 million, which was down around $10 million year over year. How does that contrast with the strong sales pipeline? Are there delays in order conversion, or what's the reason for the drop in that backlog? Yeah, Sameer, thanks for the question. We have seen this very significant increase in customer interest really across the board. If you look at our sales pipeline, up 55%, you know, a very significant portion of that comes from the medium and heavy-duty motor markets of bus, truck, rail, and marine, and relatively speaking, a very good diversification across the markets as well as across the geographic markets too.

30:26 As I pointed out, in 2020, we did see a number of customers defer capital expenditures and not signing orders as a result, in some cases, of COVID-19. A lot of organizations were reducing their CapEx budgets to moderate cash flow, as you'd expect. I do think that had a fairly significant impact, but I think as we look forward, What we see is the sales pipeline, a significant part of that we would hope to convert into orders in 2021 and 2022. It is important to remember that lots of times the sales pipeline takes time from the time we receive interest, translate that through the sales force, different grades we have in the pipeline, ultimately to order book because they're It's a long sales cycle for these markets. So I think you'll see some very good movement in 2021 and into 2022 as well.

31:29 Understood. One last one before I step back in queue. You listed a bunch of investments in various bank acquisition and upgrades. So what is the budget for these investments? Are there any capital expenses associated with this investment as well? Certainly on the product innovation side that I refer to, that would be in the operating budget. In terms of production capacity expansion and localization, There could be additional capex spend as we look to deepen our manufacturing presence in China and Europe, for example.

32:18 No dollar amounts specifically that we can share today. And then as we look at M&A, of course, that would be investment of cash and potentially stock as well for potential transactions. Got it. Thanks a lot for taking my questions. Sure. The next question comes from Rupert Mayer with National Bank. Please go ahead. Good morning, everyone. And once again, congratulations on your retirement, Tony. All the best. Thank you, Rupert. I'd like to start with the expectations for R&D this year. Can you talk about what we may see in R&D expenditures? And if you can give some color on the activities you're going to focus on this year and maybe Expected deliverables you could see this year from your R&D program?

33:12 Sure, Rupert Stone here. Yeah, so the R&D, the total budget from like looking at 2020 over 21, we do expect to increase our investment in the OpEx area, which as Randy mentioned a moment ago, probably going to be up 20 million plus dollars this year, year over year. So it is a fairly significant increase. And this will kind of flow through our cash OpEx and reported OpEx. And that investment is across a number of programs. Certainly the work that we're doing on next generation high power density modules focus particularly on the truck market. That's one particular area. We're also launching some next generation You know, MEAs and stacks this year. So it's across a range of power levels and across MEA stacks and modules, as I say, with a focus particularly on the truck market. So, as I say, think about a potentially $20 million plus increase in our investment in the cash optics area this year.

34:19 And would that include your activities with MOLLE? Well, that would include some of the development work, yes, with MOLLE. That doesn't include any specific investment. If you're thinking about, or as has been discussed earlier, about any localization or joint venture, that's all to come. But yes, this would include the development work on this heavy-duty, or on the truck program that Randy alluded to in his remarks, yes. On your investor day, you talked about a three-year goal to reduce your costs by 70%. So is it fair to assume that Your R&D expenditures this year are in programs that are going to be over the next three years, and maybe we shouldn't expect too many deliverables in the 12-month timeframe.

35:06 Yeah, when you look at a couple of things, when you look at the MEAs and plate work that we're doing, we saw some very good progress last year, and in fact, our product cost reduction in 2020 was higher Thank you very much. and also around expansion of the product portfolio with different power ranges.

35:54 And remember now we're focused on bus, truck, rail and marine. So each of these markets in some cases have different market requirements. So really trying to address the unique market requirements at the module level while continue to drive standardization at the MEA plate and stack level. There will be announcements this year on product improvements on cost reduction at the stock level and at the module level. But you're right, some of the more earlier stage R&D activities do take, you know, crossover into multiple years. And certainly with the 3x3 plan, a cost reduction for 70% cost reduction over that into 2024 timeframe, there are clear timelines and deliverables in each year and I'm very confident about the progress we're making against that.

36:50 Okay, great. Thanks for the color. And secondly, just a quick follow-up on China. Your disclosures highlighted you still have some optimization work to do at the Weichai Ballard JV on the production side. Just wondering if you can give some more color on what activities you have left in China. Yeah, so the key areas for optimization really are around yields on plate assembly. You know, the production of plates, we just in December and into January have now achieved yield results that are consistent with what we're seeing in Vancouver. There are some pieces of equipment that some suppliers are making some small changes to that should even help that further. So I actually believe we'll have higher yield from the Wai Chai Ballard JV than we'll see here in Vancouver in the coming months.

37:46 So that's very encouraging. These are minor adjustments we're talking about here, nothing major in terms of time or spend. It's really about fine tuning. You know, I think the more important really deliverable is the unlocking of that market to get the policy framework clear so order flow can be released and production can scale. It sounds like you have some time for optimization while you're waiting for those policies to come through. Anyway, I'll leave it there. Thank you very much. Yeah, thanks, Rupert. One thing I'd note, too, is, you know, looking at our own yield results in Vancouver over the last number of years, where we have the higher production runs, higher volume production runs, yield results are higher.

38:31 So we're looking forward to seeing that occur in the JV as well. Great. Thank you. The next question comes from Pierce Hammond with Simmons Energy. Please go ahead. Pierce Hammond, your line is live. Sorry, I was on mute. Congrats on your 2020 accomplishments, and Tony, all the best in your retirement. Thank you. In the earnings release, it seemed very clear that you could expand your geographic focus beyond your three core areas of China, California, and Europe this year.

39:16 What markets are you looking at? What are some of the criteria for entering those markets? Does it have to do with subsidies and market structure? Lastly, would this be entering with a new JV partner or an existing partner? Thank you. Yeah, Pierce, thanks for that. So we are looking at a couple of new geographic markets. I commented on some progress that we've already made, for example, in Australia. We're seeing progress in New Zealand. I think you'll see something on that fairly soon. And India is a market that we're seeing very strong interest coming out of the hydrogen fuel cell space at this point. And as we kind of look at markets, we think about, you know, what's the policy framework and support in those markets? What's the size of the addressable market, particularly for bus, truck, rail, and marine?

40:04 And what's the competitive dynamics and how are we positioning those markets? So those are a couple of things that we would look at. Whether we say enter those markets, whether we do that independently or with partners, every market is different. India is a very unique market. That's a market I think we certainly would look at a collaboration there. But other markets like Australia, New Zealand, Very easy for us to set up an office with sales and support capabilities, service capabilities in those markets as well. Tony, just to supplement too, I think, just if I could to Randy's comment too, I think what we're also starting to see as well is the demand pull from some of our customers in some of the newer markets that we're looking at. Many of these customers are global by nature.

40:57 And so we'll end up being looking at new markets, you know, for, you know, things like, you know, the mining, mining and marine, which are truly international markets. So I think we'll probably we may find ourselves following some newer customer opportunities around the world because of where the customers are located as well. That's great. Thank you for that color. And then my follow-up is you've talked a little bit about some of the initiatives on fuel cell cost reductions that you've talked about, but is there any specific like technical or scientific advancements that you'd want to highlight today that's helping reduce fuel cell costs? Yeah, I think we went through this fairly significantly during the September Investor and Analyst Day where we looked at different technical parameters that we're looking at today, tomorrow, and even a number of years from now. So things like current density, power density, operating temperature, free start capabilities, the different parameters that we currently have and what those targets will look like as we move out in time.

42:07 So a lot of activity underway, a lot of exciting work that's been done in 2020. As an illustrative example, the ability for us to have thinner plates to help improve power density was a pretty significant development for us in 2020. The ability to have new materials, in some cases thinner materials or lower cost materials or materials with higher performance. There's a lot of work that needs to be done, in many cases actually working collaboratively with the supply chain to help them with their specifications in order to improve their material set. Excellent. Thank you for taking my questions. Sure. Thanks. The next question comes from Michael Glenn with Raymond James.

42:54 Please go ahead. Hey, good morning and congratulations, Tony, on the retirement. Just to start with, Randy, you do seem to be speaking more Favorably or optimistically, say, for this China roadmap, I'm just wondering if there's anything in particular driving that. And as we see that information come out, are there particular aspects of that roadmap that you'll be looking to see? Yeah, I think there are a couple of important developments. Even in December, China released a policy document that really goes to what they call encouraged industries.

43:39 So the fuel cell industry has now been designated as an encouraged industry, which really means that they're supporting the localization in China of international companies. And those companies, in theory, should be treated very similarly to domestic players. And you can do that without having a JV controlled by a Chinese partner. And so as we think about Thank you very much. that are now entering as potential supply chain partners. And that to me was very encouraging because we're seeing, let me just use Catalyst as an illustrative example, a number of new Catalyst companies that are looking to move into this space and we're working with now collaboratively to help them design the appropriate Catalyst that can dramatically improve performance and lower costs. So there's a lot of work going on in the supply chain That is very compelling. And then actually seeing vehicles on the road, which you don't see anywhere else in the world in any scale at all.

45:11 Visiting, I think I was in 10 different cities, and probably five cities I was in, I actually saw vehicles on the road. This is, you know, very compelling. And so there's a lot of activity going on. You know, I got to meet with many politicians and policymakers at very senior, senior levels. and I have a very high conviction level on the growth we're going to see in the China market and a very high conviction level on the role that Weichai Ballard will play going forward. Okay, and just any specific aspects that you're particularly looking for as that roadmap comes into form? Is there certain aspects that you are hoping will be contained in that?

45:57 Well, I think there probably won't be any surprises, in my opinion, in terms of the next phase. The question will be which demonstrations are awarded initially. And I think there's probably an understanding at this stage that at least three regions will be included. We expect that to be Shanghai, Guangdong, and Beijing. And those are the three regions where you're seeing a lot of support. In fact, Shanghai just recently issued another policy document supporting the deployment in scale of fuel cell vehicles. So I think that's a very attractive marketplace. And there are other policy frameworks that will be announced, I believe, in 2021 beyond this cluster demonstration that's being financed through the Ministry of Finance. I think you'll see other developments coming out of the Ministry of Science and Technology, for example, that will support deployment of fuel cell vehicles in a very substantive way.

46:59 Okay, and just in terms of the recent meetings that you had with your JV partner, have they given you any insights into how they view the ramp, how they expect the ramp to take place in terms of volume? And just in terms of something you mentioned last year on a conference call, Did you happen to have the discussion with them about a potential IPO of the Weiche Ballard JV? So we discussed both while I was there. And we are, you know, there's a lot of interest right now in the China market for fuel cell and hydrogen companies coming to market. In fact, there's a company currently going through the IPO process, ReFire, Shanghai Reinventing Fire is currently going through the IPO process in China.

47:50 That's a very good test case and we're studying that case with a lot of interest, of course. So yes, I would say there's an alignment of interest and view on long-term looking at the opportunity to IPO the vehicle. When to do that and what the right circumstances are will be things we'll continue to discuss. On the production ramp, we have a couple of different scenarios for 2021 and 2022 depending on when and how the policy framework gets clarified. And so, you know, hopefully that will be soon. You know, Congress is meeting currently in Beijing right now. There are expectations that coming out of Congress there should be more clarity on this. When the policy gets announced is, you know, difficult to know for certain.

48:39 But if that gets announced soon, I think that will add more certainty and then we can trigger one of our, you know, different scenario plans that we have at the JVC. Okay, that's great. Thanks for taking the questions. Yep, thank you. The next question comes from Aaron McNeil with TD Securities. Please go ahead. Hey, morning all. Paul, if you're on the line or listening, congrats on the new role. Tony, I'll join everybody else and congratulate you again on your retirement. Thank you. Randy. You referenced it in your prepared remarks, but based on the press release activity in Q1, it seems like the cadence and the magnitude of order flow has increased.

49:27 And would you characterize this as sort of a lumpy group of announcements just based on pent-up demand due to COVID? Or can we view this kind of pickup in the first quarter as something... More sustainable and indicative of some of the broader secular trends as it relates to fuel cell commercialization. Yeah, I think the history of the industry has been, you know, lumpy announcements and very project-based work, right? And I think you're right that we've seen here recently an increasing in cadence and I think relative importance of some of the announcements as well. and the indicators that some of those projects could lead to longer-term volumes as well. When you're meeting with the counterparties right now, I just recently met with CP, for example, and got to hear directly from them their vision on decarbonizing locomotives.

50:27 And just the passion and the interest that the counterparties have today is really quite different than you would have seen two or three years ago. and you know I think that that's reflective of at the board level these are important issues. You know ESG investing is really driving a lot of this as well in my opinion across a number of different markets and so I think the commitment level to decarbonize is much stronger and the understanding of the role that hydrogen can play to decarbonize is also much stronger. So you know I'd like to hope that this is a An indicator of what will happen going forward, but I think history has taught me not to be so bullish about that quite yet. I do think that the sales pipeline, rather than the announcement order, the sales pipeline to me is a stronger indicator of where the business is headed than necessarily the timing and lumpiness of press releases.

51:28 Understood. And then I know this has kind of been brought up already as well. But can you say how your backlog is broken down in terms of fuel cell sales and then the technology solutions piece? And are those different sort of buckets moving in different directions right now? Like, can you give us any sense of kind of what that looks like in more detail? Yeah, I think actually in my mind, the sales pipeline is probably a better indicator of where the trends are as compared to the order book. And if you look at the sales pipeline, it's interesting, a couple years ago, we targeted trying to have diversification of effectively 40% from China slash APAC, 40% from Europe, and 20% from, I'll call it North America or rest of the world.

52:19 And if you look at the sales pipeline, that's the relative geographic split is very similar to that target we had set some years ago. And then, of course, we're seeing a very heavy weighting. As you would expect, bus, truck, rail, and marine, we characterize those four markets in that order because we believe that's the sequence of adoption for those markets, bus, truck, rail, and marine. And we have what we call the scaffolding effect. Whereas the bus market will start to see penetration and scaling, then the commercial truck market will add on top of that. And as the bus and commercial truck market both scale, the rail market will add on top of that and sequentially with marine. And what's been surprising to me is the rail and marine market, I think, will surprise to the upside. We're seeing a lot of interest in those two markets.

53:17 that's showing up in the sales pipeline and customer engagement that isn't even reflected in the sales pipeline. But I think for us, progress in 2021 on the commercial truck market is critically important. We're very pleased with the positioning we have in this market in China. The fuel cell policy in China is weighted towards commercial trucks. If you look at the The number of vehicles and platforms that have Ballard Technologies certified in that market, as well as the wage high positioning in the truck market in China, that's very encouraging. And then the progress we'll make with Mali in 2021 on the commercial truck market is critically important. And then, of course, there are other activities we have that aren't disclosed yet.

54:03 So I think the sales pipeline is probably a better way to think about it than the order book. and that relative geographic split as well as a fairly heavy weighting on the four applications, bus, truck, rail and marine, and a really good diversification among those markets is showing up. Understood. Maybe I'll just close up with a bit of an oddball question, but One of your competitors has essentially given away warrants to its customers in order to incentivize spending. For obvious reasons, it's a double-edged sword. But as it relates to Ballard, are you worried that investors may not be familiar with those details of how that customer engages with major customers?

54:51 and how your backlog versus their backlog may differ, or are you worried that this model will make that competitor a bit stickier with large potential customers or future customers, just given a growing and fairly high-profile reference base of work? Yeah, I mean, for us, we're just going to focus on technology innovation, product improvement, great customer experience, and make sure we're positioned well in the markets. I'm not going to second guess what that company did. They're doing very well in the forklift material handling market and they've got a very entrenched position and kudos to them.

55:38 Okay, great. That's all for me. I'll turn it over. The next question comes from Greg Wesikowski with Weber Research. Please go ahead. Hey, good morning, guys. Thanks for taking my questions. Just wanted to go off a point you just made, Randy, and seeing an exploration in the marine market. I'm just curious, can you give us an update on the project that you have going with ABB? And then secondly, just from the marine market as a whole, can you give us your thoughts on a timeline that we could see an acceleration in? for larger capacity hydrogen carriers, as well as the potential for hydrogen being used as a propulsion for longer haul tankers, cruise ships, and container ships. Obviously in the future, but your updated thoughts there would be great.

56:35 Yeah, so the focus in 2021 is to actually get the type approval for our FC Wave product. It's a 200 kilowatt modular product. This will be the first product, first fuel cell product, that I'm aware of that will have type approval, which means it's specifically designed to meet the rigorous marine requirements. We've seen a lot of interest from customers and now have, I think, close to 15 orders in the marine market. So it's very compelling, the uptake we've had already. And these, of course, are all demonstration projects, right? It's very early stage. These customers want to sample these products, trial them, pilot them, and then move, like we did in the bus market, from trials to larger opportunities. So, you know, that's the timeline that we're on right now.

57:31 In terms of ABB, ABB is a giant in the marine segment. We're very pleased with the relationship we have with them and a number of these projects we have ABBs involved. and, you know, continue to look for opportunities to expand that relationship and work together. In terms of, you know, propulsive power for larger vessels, in my opinion, this is many, many years away. You know, we need to have a compelling hydrogen storage solution. Costs need to come down as well on the product side. And, you know, we need to have reliabilities at much higher Thank you very much.

58:39 and some of the balance of plant components, things like compressors and hydrogen recirculation blowers. And what we see is that the new suppliers, companies like Mahle that are entering into the market and looking at developing new balance of plant components with higher reliability and lower cost are going to help address these markets where reliability requirements need to be higher. and we're talking about longer extended range requirements. So I think those markets are a ways away. I'm very encouraged by the work that Chart's doing on looking at liquid hydrogen and vaporization.

59:24 A very talented company with a lot of innovation and very aggressive on the M&A and strategic collaboration front. I think they'll be a key player in this market as well. Great. That's really helpful. Thank you. And then along those lines, talking about the Global Energy Ventures, MOU, it seems like Asia Pacific is at least the initial focus there. So specifically with China, I'm wondering what kind of appetite you've seen from China and understanding that that still could be very much policy dependent. But is it something that you could ultimately facilitate or even promote given your presence there? Yeah, great question.

1:00:09 I'm going to suggest probably 10 different meetings I was at during that six-week period where people raised the opportunity to collaborate with Ballard in the marine market. The Yonsei River Delta, the Pearl River Delta have a number of marine vessels of all different kinds with decarbonization challenges. So I believe China will be a very attractive market for the marine segment and it's an area of activity for us going forward. Awesome. Sounds good. All right. That's all I got. And Tony, wish you well in your retirement. Thanks, Rick. The next question comes from Rob Brown with Lake Street Capital Markets. Please go ahead.

1:00:56 Hi. Good morning. Good morning. Question on capacity additions. I think, you know, you said you're doing a 6x capacity expansion in Vancouver. What does that give you in terms of revenue capacity and then maybe what you're thinking on adding capacity in Europe in particular in terms of timeline? Yeah, so the 6x capacity expansion we've discussed is for MEA capacity here in Vancouver and and we see that MEA, that capacity investment taking us out through to about 2025 roughly before we have to increase capacity again. So I won't put a revenue target, a revenue number on it because obviously a lot of those MEAs are going into our product and including some shipments to China. But think about capacity through the mid part of the decade.

1:01:50 and much beyond that, we're kind of focused on MEAs. The incremental cost to increase capacity again in MEAs is relatively modest. We're talking $10 to $20 million to increase capacity of a like magnitude on MEAs. And of course, whether we think longer term about MEA localization in other markets, The bigger question, I think, or the bigger capital question is more on capacity for stacks and modules. So China, of course, we're well situated with the joint venture to satisfy that market. With regard to our capacity on stacks and modules out of Vancouver, we're certainly capacitized for the next couple of years, but I think that's an area that we are looking at.

1:02:39 We've talked in the past, and one of our potential programs is Localization of Capacity in Europe as an area of consideration for stacks and modules. So I think it's safe to say between now and 2025, we will need to make some additional investment in stack and module capacity ex-China, which is fine. And the order of magnitude on that to replicate a facility to do that could be in the $100 million range for a stack and module assembly facility, maybe a little higher. But that's kind of how we think about capacity over the next five years. Okay, great. Thank you for that, Keller. And then specifically in Mali, I think you talked about some product development milestones next year.

1:03:28 Could we see customer project activity in 2021, or would that be thereafter? Well, we're certainly involved in customer discussions already with Molle and end customers, so users, OEMs. So don't know what announcements we, you know, the timeframe for announcements. I think to be more cautious, we'd probably say 2022 because the product will be effectively unveiled in 2021. And so a lot of important work going on to get the product optimized for Truck Platforms, as well as with the right balance of plant components for higher reliability and lower cost. Okay, thank you. I'll turn it over in best wishes.

1:04:15 I'll add my best wishes to Tony and his return. Great. Thanks so much. Thanks, Rob. Thanks, Rob. The next question comes from PJ Jivakar with Citi. Please go ahead. Yes. Hi. Good morning. You know, Looks like some of your orders, Randy, were slow to come in 4Q due to COVID. Do you think they were pushed into 1Q? You know, you recently won an order of 50 buses from Wright-Bruss and then more orders from Van Hool. You know, does that put you ahead of schedule in 1Q from where you thought you were? And I guess related to that, you know, for all these buses in Europe, who is supplying hydrogen fueling and hydrogen fueling stations for this? and are you limited by how quickly that hydrogen infrastructure builds up?

1:05:10 Yeah, so let me take, first of all, the questions on the order book. I do think we should expect to be cautious still here. COVID-19 is not finished yet, obviously, and I think in terms of order inflow, we should be cautious for the next couple of quarters still. But I think I'm very encouraged by what I've seen and I'm even more encouraged by the robust sales pipeline of very qualified commercial opportunities we have. In terms of supply of hydrogen at fueling stations and are we limited by fueling stations, I think it's important to remember we focus on these use cases where you have centralized depot refueling and don't need to have a distributed refueling infrastructure. So that's an important point to understand.

1:05:58 And many of the end users are already used to having a diesel refueling station at their site. And so their operation isn't disrupted. All they're doing effectively is replacing a diesel refueling station with a hydrogen refueling station. And so in terms of who's actually typically supplying that, there are a number of different companies that have been doing that. Linde, Air Liquide, Air Products, the industrial gas giants, and then you have companies like Shell and BP that have been active in that market as well. And then you have some additional players, companies like Rise in the UK that are supplying hydrogen for bus and other applications. So a number of different players.

1:06:45 I think what's encouraging is that there's a universal conviction that the cost of delivered hydrogen will go down circa 70% over the next decade. Great. Thank you for that color. And then I guess my next question is, you know, you're really good at making MEAs and FC stacks. You know, that's the same technology for electrolyzers. And so would you potentially consider getting into electrolyzer production in the future? And that will give you some hydrogen capability as well to be a bit more of Vertical Integrator. Yeah, so a very good point. To clarify, not only are we good at MEAs and plates and stacks, we're also good at modules as well. But yes, you're right.

1:07:35 There is some overlap because electrolysis and fuel cell technology are effectively reverse processes and do use some of the same materials like membranes, like catalysts, like gas diffusion layers, for example. And so there's a lot of merit to your commentary. We are not looking at developing electrolysis greenfield in-house. You know, we would consider strategic collaboration and M&A opportunities on the electrolysis side, but we aren't looking to set that up internally on a standalone basis. Thank you very much. Great. Thank you.

1:08:20 The next question comes from Craig Scheer with Tuohy Brothers. Please go ahead. Good morning. Congratulations on all the commercial progress lately. I just want to dig a little deeper on Aaron's order flow and Greg's maritime questions. If I'm understanding it correctly, the Canadian Pacific Freight Train and the Global Energy Ventures hydrogen carrier opportunities are like step changes from what you laid out in your September Analyst Day 2030 TAM outlook because of the multifold increase in unit kilowatt requirements. If these initial demonstrations work out, How material can those markets become, and how soon do you think we'll know if those demonstration projects are working out?

1:09:17 Yeah, so great question. I think as we look at these markets, there's no doubt in my mind these markets will be decarbonized. And then you say, okay, how can the rail market be decarbonized? And I'll just use locomotives in North America as an illustrative example. It's something like under 1%. of locomotive rail is electrified in North America. So you have two options. You can go with overhead catenary wire, which is very expensive, or you can look at hydrogen. Those are, in my opinion, the only two viable options for decarbonizing mobility, you know, rail mobility in North America for freight. So I think the market opportunity is compelling. And if you look at markets where I think the price of CO2 will, you know, prices, CO2 pricing and costs will increase over time.

1:10:10 That could be quite additive to the model as well. I think from a market adoption perspective and a sequencing perspective, you should think about these pilot projects roughly taking a couple of years, two to three years. What I would suggest is you will see likely, you know, the CP locomotive demonstrated in 2021. and then you'll see, you know, over a two-year period that trial and results from that trial. And what we've seen is that, you know, from the bus, our experience from the bus market is that, you know, once users get comfortable with the technology, comfortable with the safety protocols and comfortable with, you know, working with new technology from an operator perspective like bus drivers or rail operators, You know, usually they're very excited about it.

1:11:06 I think this is a, both these markets, we characterize the size of those markets during the September conference call. I think we were very conservative in that characterization. And what I've seen, even since September, suggests to me those numbers are probably fairly muted. Great. Thank you for that. And Digging deeper into the fuel cell truck market, it seems more than the others we just talked about that the competition is just simply heating up. Westport recently announced a hydrogen combustion engine effort. Plegg is working with Renault.

1:11:52 Daimler and Cummins recently announced the link up. Can you elaborate on your Mali relationship and what you view as your competitive positioning in the pending hydrogen fuel truck marketplace? So I think that's a fair observation. We are seeing, of course, many players rush to this market. And why? Because it's an attractive, addressable market that fuel cells are uniquely positioned to address. And so, yeah, we are seeing an increased competitive landscape. that validates our thesis for some time on the attractiveness of this market. What I think is important, very important to understand, is that Ballard has already proven the durability of our fuel cell technology in the field.

1:12:43 So as we mentioned earlier, over 70 million kilometers of in-revenue service of now 3,300 buses and trucks in operation. No one else, no one else, has that type of install base for buses and trucks. And if you look at some of the units we've had in the field operating in some cases over eight years, we've seen 38,000 hours of durability on the same fuel cell stack. So these are industry durability records. And we're not talking about the passenger car market here where you need 5,000, maybe up to 10,000 hours of durability. We're talking about a market where you need 30,000 to 40,000 hours of durability.

1:13:28 And so we've proven that out in the field, not as a lab exercise or as a concept. And I think as you look at, you know, brands looking to put technology into their vehicles, you know, they're going to want to make sure they have not just safety and reliability, but also the durability for a total cost of ownership. So I think we have a significant advantage on total cost of ownership because of our durability, proven durability. And I also think if you look at the Mali relationship and their positioning in the commercial vehicle market and what areas they have expertise in, it's highly complementary to the work that we can do to increase performance and reduce costs on the stack.

1:14:16 And if you look at some of the balance of plant components that they're currently designing and will be launching and integrated into our advanced fuel cell engine for the commercial truck market in Europe. I think it's an exciting collaboration, and if I was to compare it to other collaborations, I think it should be very strongly positioned. Great. Thank you. And my last one, The order book at year end was almost $118 million with $83.5 million to be delivered in 2021. But since year end, to the point in prepared remarks, you announced the Canadian Pacific trade opportunity, the global energy hydrogen carrier opportunity, the UK passenger trade opportunity, and the bus orders with Wright Bus and Solaris. And we're kind of guesstimating just those combined might be $11 million in orders. Could your order book for 2021 delivery already be approaching $100 million right now as we speak?

1:15:20 Yeah, to me, what I would prefer to focus on is, you know, directionally, what is the order book going to look like perhaps at the end of 2021? And I think with the sales pipeline activity we have, we expect to see some great conversion in 2021. But I don't want to in any way suggest what the 2021 outlook on revenue is going to be just because with COVID-19 and the early stage of the market, you know, our position is not to provide financial guidance. Okay. Thank you. The next question comes from Jonathan Lammers with BMO Capital Markets. Please go ahead. Good morning. Most of my questions were asked On simplifying the customer experience, could you expand on what the customers are looking for there, what Ballard would be looking to acquire or could develop in-house?

1:16:20 Great question, Jonathan. Basically, what we want to do is simplify the ability for customers to and here I'm thinking of vehicle OEMs and then ultimately end users. But at the vehicle OEM, how do they integrate a fuel cell module into their vehicle platform? How do they integrate it into a powertrain and then onto the vehicle itself? And so today our scope of work is typically to provide the fuel cell engine. The vehicle OEM needs to take that engine pair it up with a DC-DC converter, pair it up with a storage solution, integrate it into an electric powertrain, and then also make sure that the packaging for everything into their vehicle platform is effective and efficient as well. And in some cases, customers have that in-house capability. In other cases, initially, they're using third-party systems integrators.

1:17:20 and really what we want to do is simplify that experience for them to bring more scope and importantly to optimize the solution. So as an illustrative example, and by the way, I should have mentioned that that package also includes batteries as well. So as an example, what's the right DC-DC converter for a certain application? What's the right amount of fuel cells versus batteries for a certain application and use case, duty cycle? and so we want to provide more value and simplify that experience for the customer to reduce customer friction points and enable an accelerated adoption while also getting more value for Ballard in the process. That optimization will also lead, in my opinion, to cost reduction.

1:18:12 Right, thanks. And one question on China, Randy. You mentioned that your trip increased your confidence that OHIJV will play a meaningful role as the market grows. Did you uncover any updated sense on the competitive dynamics, whether the competitors' products will meet the technical requirements needed to qualify for the subsidies as well as Ballard's products can? I would say it was the opposite. I actually had the opportunity to meet with a number of companies that could be competitors to Ballard and came away recognizing they have a lot of work to do to catch up. Thanks. And for Tony, on the technology solutions business, the Audi program appears to be winding down from a revenue contribution perspective. Are there any replacements for that business on the horizon?

1:19:12 Yes, and you're quite right. So the Audi Pro, as we've announced previously, that program is starting to reach the end of its TS program life. And so, yeah, the revenue has ramped up. Yeah, you know, Randy, I'll go back to the pipeline and, you know, referring to the pipeline Randy mentioned earlier, we do have a fairly significant number of TS programs that are in the pipeline at the moment. You know, hopefully we'll be able to convert some of those over the course of the year. So nothing that I think we can point to or want to point to at this particular point, but lots of interest coming from different markets. You know, we've kind of talked about some new and evolving and developing markets. Some of those could generate some additional engineering service and TS programs in some new markets. So hopefully we'll have more to be...

1:19:59 We can talk a bit more specifically about some of these this year, but there is a decent amount of TS in that pipeline that Randy mentioned. Randy, you want to supplement? Yeah, I think one important point, too, is we've had a significant portion of our engineering labor force allocated against our technology solutions programs. And for us, the ability to actually... Reallocate some of that talent towards some of the in-house programs, albeit increasing our cost structure, is, I think, a really interesting opportunity because this, again, feeds into the point about acceleration. Okay. And one really basic question. On the sales pipeline, does the dollar base for that 55% increase – Just a bit larger than the company's consolidated sales.

1:20:54 How should we think about that? It's significantly higher. Yeah, okay. I'll leave it there. Thanks. The next question comes from Mac Whale with Cormark Securities. Please go ahead. Thanks, guys, for letting me ask the question. I know it's going on a bit long here. Just very quickly... Randy, you talked about pent-up demand in China. When the announcements come out, do you think there is enough time left in 2021 where you can deliver into that pent-up demand so that maybe your estimates of what the market would be in 2021, like I said a year ago, might still be valid? Or can you not just catch up?

1:21:41 Yeah, great question. I think there's a couple of layers to it. First of all, we need to make sure how are the policies structured. In some cases, the policies may be structured so that first to use gets highest subsidies or get access to those subsidies if there are limited subsidy pools in certain pockets as well. So there could be a race in some case to use some of the higher subsidies that might become available. So we'll have to see how the policy is structured and whether that incents rapid deployment, first of all. The second thing is that, of course, the JV does have some inventory. And really what we want to see, of course, initially are more deployments out of the JV that relieve that inventory and allow us to recognize deferred revenue. So that will be helpful.

1:22:36 and then of course the third will be as we move through that inventory at the JV and then move into additional sales beyond that, triggering more MEA volume purchase orders from Ballard to support the JV activities. So that's the way I would think about it. Okay. Having followed the state for two decades now, It's interesting to the comments that you say about the competition not being ready. I can wholeheartedly back that up if that matters to anyone. But it's interesting to me, I would say your position then is one in which you're willing to allow, or I'm going to phrase it another way, you can disagree, but it's almost as if you're not that threatened by what you see.

1:23:24 But is there not a risk that you let a customer try some competitor and They come away disillusioned with the capability of fuel cells and the industry loses a believer as opposed to Ballard losing a customer. Could you not take your big balance sheet, drop pricing, drive demand, win big market share, and dominate the industry and have happy customers? I'm just wondering how you see the balance sheet in that game. Yeah, I want to clarify something. The question about competitors and what status they're at, I, again, believe we have a strong leadership position in these medium and heavy-duty mode of markets.

1:24:15 And I was commenting specifically on some of the development activity, company development activity and product development activity in China. Of course, there are other competitors, Toyota, Hyundai, you know, Daimler, etc. Again, most of them have been focused on the passenger car market and they're now pivoting. And if you look at the timeline, for example, for Cellcentric, which is the JV between Daimler truck and Volvo truck, the timeline is many years after our timeline with Molle. So, I think we're well positioned there. Of course, you have other companies, you know, Bosch, for example, is active and Cummings is active. So, There are credible competitors here.

1:25:01 I don't want to be dismissive of the competition, to be clear. But what I do think is that you mentioned, you know, will some customers potentially work with others and have bad experiences? We have seen that over the last number of years, and those customers are now with Ballard. I could, you know, there are quite a few examples of that, particularly in the bus market where they've tried others. And there's a reason we have over 85% market share because not only are we providing a product that has the highest performance in the field, but we take care of the customers from a customer service and customer experience perspective. So I think as we look at opportunities going forward, I think the commitment level from customers isn't so...

1:25:55 I think it will enable them to turn to others. And if they're having bad experiences, they're always welcome to come to Ballard. Great. Thanks, Randy. And just an appreciation to you, Tony, over the years with all your hard work and insight. So thanks and good luck. Thanks, Mike. Appreciate it. This concludes the question and answer session. I would like to turn the conference back over to Randy McEwen, the CEO, for any closing remarks. Great. So the call went a little longer today and appreciate your patience for that. So thanks, everyone, for joining. Paul Dobson, our new CFO, effective March 29th, and I look forward to speaking with you in early May when we'll discuss our results for Q1 2021.

1:26:53 This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.