Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems first quarter 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 one 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 McAree, Director of Investor Relations. Please go ahead.
Thanks very much. Good morning, everyone. Welcome to the Ballard First Quarter 2020 financial and operating results conference call. With us today on the call, we have Randy MacEwen, Ballard's President and CEO, and Tony Guglielmin, our Chief Financial Officer. We're going to 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 just want to note as well that we're planning an Investor and Analyst Day on September 29th, later this year. Our original intent was to hold this as a face-to-face event in New York City. In view of the COVID-19 pandemic, we are now planning to host a virtual Investor and Analyst Day event with a live video stream.
We're gonna be confirming additional details once arrangements are finalized. On today's conference call, Randy is gonna provide his perspective on the COVID-19 situation and notable industry developments. Tony will then review first quarter 2020 financials, we'll follow that by a Q&A session. I'll pass the call over to Randy now.
Thanks, Guy. Welcome everyone to today's conference call. Today, I'd like to spend some time providing an update on the COVID-19 situation at Ballard, discussing recent noticeable industry developments, providing some initial thoughts on longer-term structural implications for our industry as a result of the COVID-19 pandemic. I want to start today by commenting on the status of our business and operations in the face of this extraordinary environment. Our top priority always is the health and safety of our people, customers, and partners. We continue to monitor and comply with the most conservative public health guidelines. We've taken decisive action and implemented important measures to mitigate the impact of the COVID-19 pandemic on our people and on our business. We also remain firmly committed to serving our customers and meeting their needs.
This means we have taken actions that align with employee safety and risk mitigation, while also preserving business continuity to support our customer deliverables. While we have about two-thirds of our global workforce working productively from home, we also continue to operate our essential manufacturing and testing operations in Burnaby and continue to provide essential field service support to our customers in China, Europe, and North America. In our facilities, we've implemented precautionary and prudent measures, including relating to hygiene, sanitization, procurement supply of PPE, temperature screening, and physical distancing. We've made certain changes in our facilities and operations in Burnaby and in Hobro, Denmark, to support physical distancing and employee safety. We've also been busy stabilizing our supply chain to understand potential disruptions and choke points.
While some of our critical suppliers temporarily suspended operations, almost all of them have resumed operations already or expect to be resuming production shortly. We have taken a number of steps to support our supply chain partners and mitigate risks during this period, including by increasing certain stock levels, increasing the frequency of deliveries for certain materials, obtaining commitments on supply minimums and delivery timing, flexing our production schedule, and accelerating activities to qualify additional suppliers. Based on the information we have at this time, while we see some impacts in Q2, we're not expecting any major supply chain disruptions that should impact our overall expectations for full year 2020. As we've seen, the situation remains fluid and geographic specific. We will continue to closely monitor and manage our supply chain.
Moving from the supply side to the demand side, we're not seeing any demand pullback as a result of COVID-19. In fact, we're experiencing high levels of quoting activity. Further, we believe our long-term markets and business opportunities may be stronger, given some of the long-term implications we've seen arising from COVID-19. More on this in a moment. In the near term, there are potential COVID-19 risks on the timing of new deployments for our customers and from end customers. A number of our customers have had their operations suspended, and certain customers remain shut down at this time.
Visibility is even murkier. The uncertainty is further exacerbated as you move to the end customers and try to determine when their operations will stabilize, when hydrogen refueling infrastructure will become available, when deliveries of new zero-emission fuel cell buses and other vehicles will occur, and therefore, when deliveries of Ballard modules or Weichai-Ballard JV modules to customers will be made. While we don't have any information today on material delays, there is uncertainty on the delivery schedule. When taken together, the dynamic environment presented by COVID-19, potential customer delays, the potential for additional supply chain challenges, and even potential disruption in our own operations, we believe the responsible and prudent approach is to withdraw our 2020 revenue outlook. We entered the COVID-19 pandemic from a position of financial strength. We added to that strength in the first quarter.
Notwithstanding the COVID-19 backdrop, we delivered record Q1 revenue of $24 million, up 50% from last year, gross margin of 22%, and ending cash reserves of $181.6 million. We further fortified our balance sheet with the execution of an at-the-market equity program. As you would expect in the current environment, we have also been reviewing our cost structure. While toggling certain costs with market conditions and prudent cost management, we're also continuing to move forward with critical investments for long-term competitive positioning, including in our people, technology, products, product cost reduction, customer experience, advanced manufacturing, and our Weichai- Ballard joint venture. We believe this will further strengthen our position as the economy emerges post-COVID-19 and as decarbonization again takes center stage. I want to turn now to recent notable industry developments.
While the world has understandably been focused on the COVID-19 news feed, there have been important industry developments in each of China, Europe, and California that we want to draw your attention to. As they've been underreported to date, we want to put a spotlight on these items. Let's start with China, where we continue to have conviction that our joint venture partnership with Weichai provides Ballard with a strong competitive advantage in the Chinese market. We believe we're well positioned in the large China market, where there appears to be continued strong government support for new energy vehicles, including FCEVs. Although our Weichai-Ballard JV facility in Shandong Province has experienced some construction and program work delays resulting from COVID-19, construction and staffing levels of the JV have resumed to pre-COVID-19 levels.
We are making great progress and expect commissioning of stack and module assembly lines around midyear 2020. Most of the major manufacturing equipment has been installed and is currently undergoing qualification and commissioning. Importantly, on April 23rd, China's government announced immediate changes to new energy vehicle, or NEV, subsidy programs, which include both fuel cell electric vehicles as well as battery electric vehicles. The overarching goal of NEV programs is for 20% of vehicle sales to be new energy vehicles by 2025. NEV subsidies will be extended until 2022, with no decline this year for public transportation vehicles, including transit buses and commercial trucks. We expect further favorable policy developments in China, with specifics on future FCEV support schemes to be released by Q3.
Over the past few months, the Weichai-Ballard joint venture has worked with four vehicle OEMs, Yutong, Zhongtong, Asiastar, and Sinotruk, to certify new buses and trucks powered by our JV FCmove fuel cell module into the China MIIT program promotion catalog, bringing the total vehicle models powered by Ballard technology to 55. At this time, Ballard technology can be found in approximately 50% of the 6,300+ fuel cell electric vehicles registered in China. Vehicles powered by Ballard have now accumulated over 23 million kilometers of service by public transportation and logistics vehicles operators. We expect the deployment of FCEVs to continue to accelerate, with 60 new hydrogen refueling stations expected to be put in service in 2020, doubling the current service capacity. Next, let's move to Europe.
Since the start of the year, we've been pleased to receive some exciting new orders in Europe, including 45 fuel cell modules to power Solaris buses, 25 buses for deployment in Germany and 20 for deployment in the Netherlands. A few weeks ago, three fuel cell buses started operation in Aalborg, Denmark, which is about 30 minutes from our facility in Hobro. We've also been excited with the European Commission's posture on moving to carbon neutrality and the important role of hydrogen in decarbonizing mobility, decarbonizing industry, and serving as an energy storage medium for renewable energy. The European Commission's Green Deal is a set of policy measures and actions with the aim of transforming the EU's economy for a sustainable and climate-neutral future by 2050. This has meant accelerating Europe's 2030 emission reduction targets to at least 50% and towards 55%.
There are eight specific priorities, including from mobilizing industry for a clean and circular economy to accelerating the shift to sustainable and smart mobility. On March 4th, the European Commission proposed the European Climate Law, which would enshrine the 2050 climate neutrality objective into legislation. On March 10th, the European Commission set out a new European industrial strategy with an aim to maintain European industry's global competitiveness and ensure that industry paves the way to climate neutrality. The strategy expressly includes, in its top priorities, measures to modernize and decarbonize energy-intensive industries, as well as to support sustainable mobility. As part of this strategy, the Commission announced the creation of a Clean Hydrogen Alliance to accelerate the decarbonization of industry.
The alliance will bring investors together with governmental, institutional, and industrial partners, building on the successful template of existing industrial alliances and the great work that's been done under the framework of the FCH JU. Finally, let's move on to California. CARB had already set a statewide goal for public transit agencies to gradually transition to 100% zero-emission bus fleets by 2040, and now CARB has released a final draft of the Advanced Clean Trucks standard. This standard is part of California's proposed approach to a large-scale transition to zero-emission, medium, and heavy-duty vehicles. The proposed regulations have a manufacturer sales requirement and a reporting requirement.
Similar to what happens with passenger cars, manufacturers who certify medium and heavy-duty chassis or complete vehicles with combustion engines would be required to sell zero-emission trucks as an increasing % of their annual California sales starting in 2024. The final draft is much stronger than previous drafts, doubling the number of zero-emission trucks required through 2035. The final draft increased the % requirements between 2024 and 2030, and extended the requirements to 2035 and beyond. Zero-emission sales targets were increased across all vehicle categories, and now with the continued increases through 2030, rather than flattening out in 2030.
The final draft is now proposing that for model year 2024, 9% of all on-road class four to eight truck sales must be zero-emission vehicles, scaling up to 50% of sales for 2030 and 75% for 2035 and beyond. For the class seven to eight tractors group, the requirements are 5% for 2024, 30% for 2030, and 40% for 2035 and beyond. The sales requirement for class seven to eight tractors were increased to better align with the Clean Air Action Plan for the ports of Los Angeles and Long Beach, which has a goal for 100% zero-emission tractors for the population of drayage trucks at the ports, currently at about 16,000, and expected to increase over time. The zero-emission tractor deployments will also benefit disadvantaged communities burdened by truck and freight emissions.
The policy will apply to truck manufacturers that sell more than 500 trucks annually in California, and these are the categories of trucks that we're focused on at Ballard, medium and heavy-duty motive. In a December 2019 report, it was estimated that America's 28 million trucks and buses make up 10% of all vehicles, but are disproportionately responsible for 28% of total carbon emissions in the transportation sector, with heavy-duty vehicles contributing 45% of NOx and 57% of direct PM2.5. Those are some notable regulatory updates from China, the EU, and California. We've previously discussed many of the important commercial announcements that have happened over the past eight quarters, including the announcement from Weichai and Ballard, and subsequent announcements from major players like Bosch, Cummins, Iveco, Michelin, and Faurecia, to name a few.
We can now add two more blue-chip names, making highly visible investments in the hydrogen fuel cell industry for commercial trucks. In April, Daimler Truck and Volvo Group signed a preliminary, non-binding agreement to establish a 50/50 joint venture focused on developing, producing, and commercializing fuel cell systems for heavy-duty vehicle applications, in particular, commercial trucks. All Daimler fuel cell activities will be consolidated in the new JV, which has an initial valuation of EUR 1.2 billion. This is an exciting development that will increase momentum in the adoption of fuel cell solutions for the global trucking market. In the press release announcing the deal, the parties noted that CO₂ neutral transport can be accomplished through electric drivetrains, with energy coming either from batteries or by converting hydrogen on board into electricity.
For trucks to cope with heavy loads and long distances, they see fuel cells as an important answer. They noted that electrification of road transportation is a key element of delivering the Green Deal. Further, they noted that using hydrogen as a carrier of green electricity to power electric trucks in long-haul operations is one important part of the puzzle and a complement to battery electric vehicles and renewable fuels. By forming this joint venture, Daimler Truck and Volvo Group are clearly showing that they believe in hydrogen fuel cells for long-term commercial vehicle applications. We believe this is yet another strong validation of Ballard's strategy to focus on medium and heavy-duty motive use cases.
As OEMs and Tier 1 suppliers further develop their strategy to decarbonize their vehicles and powertrain offerings, we believe Ballard will be viewed as an attractive fuel cell technology partner for commercial vehicles. I also want to take a few minutes to discuss possible long-term implications of COVID-19 on our industry. While COVID-19 is the clear priority for governments and corporates at this time, we still see the fundamental drives of sustainability as motivating change in the background. While it's still early, we wanted to share some initial thinking on the new normal post-COVID.... These are some potential trends to watch for over the next six-24 months. First, we do not expect any deferrals of softening of CO₂ emission targets. We believe the transition to green mobility will forge ahead.
Second, recent studies have found a correlation between long-term exposure to PM2.5 and COVID-19 mortality rates. We believe this will be another factor pushing cities to aggressively promote and accelerate zero emission mobility to improve urban air quality, including further restrictions and bans on PM2.5-emitting diesel trucks. Third, the increase in e-commerce during COVID-19 will lead to higher penetration of online shopping in the new normal. We believe this will result in more commercial trucks to support deliveries of online purchases, which has traditionally been a challenging segment of mobility for emissions abatement. Fourth, we're seeing positive signs that stimulus packages in the EU, China, and the U.S. will include infrastructure spend. We view hydrogen refueling infrastructure as a potential beneficiary in these infrastructure stimulus and green recovery plans.
We may also see new subsidies to support the purchase of zero emission vehicles as part of a green recovery package. Fifth, given the economic strains resulting from COVID-19 and contraction in near-term new vehicle demand, we believe many of the vehicle OEMs and Tier 1 suppliers will have insufficient budgets to continue fully investing in internal combustion engines, as well as the ACES trends. This presents opportunities for technology companies. They may continue to invest in battery electrification for passenger cars, while seeking to collaborate with fuel cell technology partners for commercial vehicle markets, for example. In addition, we expect COVID-19 to accelerate industry consolidation among the OEMs and Tier 1 suppliers. Sixth, the long-term growth trajectory for renewables should remain intact. With growing support for electrolysis, we see continued cost reduction non-renewables strengthening the hydrogen opportunity.
Seven, we do not expect the current temporary low oil prices to present long-term barriers to the adoption of zero emission solutions. Interestingly, the current oil shock has laid bare the challenge in the oil industry around storage. We believe with low oil prices, the energy majors will increasingly invest more in low carbon energy and hydrogen. We note recent announcements by BP and Shell on their net zero carbon targets. Eighth, we believe COVID-19 will cause many countries to become more protectionist and reconsider national security, energy security, and supply chain security in critical industries, not just in food supplies, healthcare, and pharmaceuticals. There'll be increased pressure on domestic supply chains with more focus on security and resiliency. On a relative basis, we believe green hydrogen and fuel cells offer important advantages from a supply chain perspective compared to battery electrification.
We see a brighter spotlight on the vulnerability of the supply chain for critical minerals and rare earth materials used in consumer goods, military applications, and electrification. Again, it's still early, and these ideas represent some of our initial thinking on potential long-term implications for our industry from COVID-19. Now, let me conclude with two final remarks. First, we believe we're taking the right steps to build a great business that will drive long-term growth, improved financials, and value for our shareholders. Second, as a final word, I'd like to thank each of our global Ballard team members, who've demonstrated true Ballard resilience and dedication to safety and our customers during this challenging period. With that, I'll turn the call over to Tony to briefly review the Q1 financials.
Thanks, Randy, and good morning, everyone. As Randy mentioned, top line revenue in the first quarter was a Q1 record of $24 million, up 50% year-over-year. In the quarter, power products revenue was up 95%, and technology solutions revenue increased 20%. Within power products, heavy-duty motive was up $7.8 million to $10.4 million. This was largely due to a year-over-year increase in sales of module parts, kits, and MEAs to the Weichai-Ballard JV in China. The increase in technology solutions revenue to $11.6 million was due primarily to the Audi program and the technology transfer program with our Weichai-Ballard JV. Now, this was despite the temporary slowdown in China and JV activities in the quarter. Gross margin was 22% in Q1, up eight points year-over-year.
The improvement was the result of the 50% increase in total revenues, combined with a shift in mix to higher margin product and service revenue. Cash operating cost increased 31% year-over-year to $12.2 million, primarily attributable to increased expenditures in technology and product development. These increases stem largely from new hires made throughout 2019 to support investments in our next generation fuel cell products. Adjusted EBITDA in Q1 was - $9.1 million, an increase of $0.5 million compared to the same quarter last year. This included Ballard's $2.5 million share of losses related to the Weichai-Ballard JV.
Ballard's net loss in Q1 was -$13.5 million, compared to -$12 million in Q1 last year, and earnings per share was -$0.06 in Q1, compared to -$0.05 in Q1 2019. Both the net loss and EPS numbers include the Ballard share of losses from the Weichai-Ballard JV. Cash used by operating activities was $10.1 million in Q1, consisting of cash operating losses of $7 million and working capital outflows of $3.1 million. In terms of liquidity, during March, we began executing our $75 million ATM program. During the quarter, this generated net cash proceeds of $52.6 million.
We ended the quarter with cash reserves of $181.6 million, 10% higher than the same period last year, and 33% higher than the end of the prior quarter. We also added an additional $12.3 million to cash reserves in April under the ATM program. In total, the ATM transactions have added $64.9 million to cash reserves to this point in 2020. This was accomplished with no price discount, relatively modest transaction fees, and limited dilution to existing shareholders. Finally, we ended Q1 with an order backlog of $169.5 million and a 12-month order book of $105.8 million. Our sales pipeline remains robust, with significant qualified commercial sales opportunities.
With that, let me turn the call back over to the operator for questions.
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 two. We will pause for a moment as callers join the queue. Our first question comes from Rob Brown with Lake Street Capital Markets. Please go ahead.
Good morning. Randy, I just wanted to clarify what you said on the JV operation with Weichai. Did you say that was gonna be running kind of midyear here? Maybe could you clarify the steps that need to happen thereafter to kind of ramp that production?
Great, thanks for the question, Rob, and good morning. We had, in the last conference call, identified we expected the JV to start and be fully commissioned midyear, so that timeline hasn't changed. When we had the call last time, we did know that there was some delays that was occurring. We basically had a contractor that was out of Hubei province that, you know, wasn't able to support the JV construction for a period of time. Weichai and the Weichai-Ballard JV is back to full staffing now for some time, and in fact, we have a JV board call tonight. And, you know, the facility is basically fully constructed.
All of the equipment, almost all of the equipment has arrived, I believe now, and is in the process of being commissioned. You know, achieving midyear, there aren't really a lot of long poles in the tent at this point. It's really a matter of optimizing, you know, getting equipment fully commissioned, and optimizing, you know, doing sample runs and stuff like that. I think we're in very good shape. In fact, there was a kind of a preliminary, soft opening of the JV. There are some activities currently underway on some temporary lines. There's a lot of work going on there, including with the vehicle OEMs and in terms of qualifying new vehicles and new platforms and on the sales side.
We're expecting a, you know, a good finish to 2020 with the JV, as well as a very strong 2021 with the JV.
Okay, good. Thank you. Then, in the U.S. market, you mentioned some pull from California or some moving toward regulatory pull. What are the steps in the U.S. market that you sort of see playing out as a result of that, and sort of the timelines you kind of think, can develop there?
Yeah, I think the highlight that we wanted to focus on was the Clean Truck Standard, we've been actively involved helping kind of shape this legislation in California as well. Still up for, you know, in a final draft, so it's not law yet, of course. I think the direction we're seeing and the change from the previous version to this final draft are very, I think, supportive of a strong outcome. You know, moving to a regime in some ways similar to what Europe did last year, where you have very clear emission reductions for Class A trucks here in California. Now we're talking about from 2B all the way up to Class A trucks.
We see, you know, this annual increase from 2024 through to 2035 is a very powerful requirement. I think companies like Daimler and Truck and Volvo, these type of announcements are, you know, while they're initially gonna be focused, I think, on Europe, there's clearly a requirement for these truck OEMs to meet the requirements that are coming in California. What we've seen in the U.S., of course, while we don't necessarily have good visibility in what's gonna happen at the national level, what we see is that California is a very significant influence on, you know, climate policy and air emission policy in the U.S. Typically, you know, some of the good regulatory work that's done in California is adopted eventually in other states.
We think it's really important what California is doing. We're very supportive of the activities there. I believe we'll likely see a favorable outcome on this front in 2020 and starting to get very clear requirements for these truck OEMs to start decarbonizing their platforms for 2024. If you kind of look at that timeline of 2024 to 2035 and you look at the increasing percentage requirements each year, not just for the class seven, eight tractors, but class four through eight, we see lots of opportunity there for fuel cell technology that I think uniquely satisfies the requirements, particularly for long you know, long and heavy payloads, long routes and heavy payloads.
We believe Ballard is very well positioned, and, you know, we need to continue to do great work on collaboration as well as, you know, continuing to progress the technology and the products, including, importantly, product cost reduction, which is a very big emphasis for us here in 2020.
Great. Thank you. I'll turn it over.
Our next question comes from Amit Dayal with H.C. Wainwright & Co. Please go ahead.
Thank you. Good morning, guys. With respect to, you know, all these positive industrial developments in the longer term perspective, how is this competitive environment shaping up, Randy? Could you talk about, you know, how difficult it may be for new competitors who are now trying to enter this market to go around your IP and your history in this space?
Yeah. Good morning, Amit, and thanks for the question. I apologize. Maybe I'm gonna ask you to repeat the question. It was very difficult to hear you.
I was just asking how you guys are positioned competitively, with a lot of these positive longer term industry developments taking place, you know, how difficult would it be for newcomers in this space to go around your IP and your history of, you know, involvement here?
Great question. I think, there are, you know, new companies coming to the hydrogen and fuel cell space. You know, I think when you look at it was interesting to me, I was listening to the, you know, the conference call between Daimler Truck and Volvo. I don't know if you had a chance to listen to that call. They just highlighted how difficult it is for... You know, they said making fuel cell technology work is no small undertaking for any company. We've had this a lot longer, and they highlighted, you know, that they have a history of a couple hundred passenger cars and some buses, and, you know, kind of millions of kilometers driven.
Just in China alone, we have over 23 million kilometers of service with vehicles that have Ballard technology inside. Outside of China, of course, we've got a long history and the largest fleet of fuel cell buses. You know, I think from a competitive positioning, when you look at talent, when you look at technology leadership, whether it's durability and power density, reliability, you know, uptime and availability in the field. When you look at product offering, you know, with the characteristics required to meet the market requirements, when you look at service support that we have, we have very high uptime or availability of our vehicles in the field. We do an excellent job on the service side as well.
When you look at, you know, brand and reputation, and importantly, partnerships. You know, on the supply chain side, we've been working with a lot of key partners there to qualify materials, and we're very encouraged with the opportunity for product cost reduction going forward, at the system level, at the stack level, at the MEA level, plate level. A lot of work being done with the supply chain. When you think about partners, on the market access side and strategic partners like Weichai, you know, we have, I believe, the strongest possible platform in the China market and a huge competitive advantage because of our relationship and our joint venture with Weichai.
It's a very compelling company, and they continue to prove that every week. I think overall, we have a very strong position, and aligned with a lot of these, I believe, long-term implications for structural industry change as a result of COVID-19. We do believe that, decarbonization will be front and center, and we're very well-positioned. We've been talking about the medium and heavy-duty motive industry for a number of years now. We've always highlighted, you know, the three key reasons to be focused on that industry is the value proposition for fuel cells are strongest, where you have long range, a need for fast refueling and heavy payload. Number 2, these are markets where, you typically can have opportunities for return to base refueling.
Solving the refueling side is much easier than, say, on the passenger car market, where you need to distribute fueling infrastructure. Then third, you're hitting a market segment that's very difficult to abate. I don't believe batteries are gonna be able to satisfy the use cases for a number of these class heavy-duty trucks. Fuel cells really offer the only viable solution, in my opinion, at this time, for zero emission decarbonization of these vehicles. These are the vehicles, as we pointed out, that have disproportionate contribution to emissions. I think we're very well positioned. We still have lots of work to do. We're continuing to improve our operations.
We're investing in advanced manufacturing, and, you know, I think at the end of this year, hopefully, some of the travel restrictions will abate. You know, Amit, if you had the opportunity, for example, to come out in late year, and we invite others as well, we're making great changes in our facilities here in terms of how we manufacture our products, that, you know, increasing in robotics, you know, shrinking tack times, you know, really, compressing steps and expanding capacity and lowering costs. We're very excited about what's going on, not just technology improvement, but on advanced manufacturing and on all the operation side as well.
still a lot of work to do to meet the demanding requirements for these markets in high-volume commercialization, but we believe we're making the right investments and engaging the right partnership to make it happen.
Appreciate that, Randy. Maybe just one more time on my side. With all these developments that are taking place, and many of you seem to be still in the early stages of, you know, taking shape, but are you seeing, you know, a big change in inbounds you're getting with requests to test or pilot some of your offerings?
Yeah. What's been surprising, frankly, is that, you know, we knew for a long time that the bus and truck markets were gonna be very important markets. They're large addressable markets. We have a very good positioning in these markets. What surprised me, frankly, is the activity levels we're also seeing in some of the other market segments, so, rail, marine, you know, forklift, but also even stationary power. You know, increasingly, there's more activity on the DG side. I think there are a number of markets that are gonna surprise to the upside, and, you know, I would probably put a spotlight on... Each of these markets will take time. You know, you're not gonna see high revenue values next quarter from these markets, to be clear.
I've the level of quoting activity and the level, you know, the proposals that we're looking at, and the customer collaboration opportunities we're negotiating are very exciting, and we're seeing new geographic markets pop up as well. I think there's a, there's a lot happening that in my mind, has been accelerated, and I don't know if it's COVID-19 necessarily. We started feeling this just before, you know, late 2019 and early 2020, but it's really accelerated in the last few months as well.
Thank you, Randy.
Right.
I think my other questions are offline.
Yeah. Thank you, Amit.
Our next question comes from Mac Murray Whale with Cormark Securities. Please go ahead.
Hi, good morning. You mentioned, Randy, about the hydrogen programs in China, expecting some developments to be revealed in Q3. Can you speak, first of all, whether there's any involvement of Ballard, Weichai, or the JV in shaping that program, and whether there's any sort of insight you can provide in terms of the size or the timing of the types of stimulus?
Yeah. Good morning, Mac. Thanks for joining, and thanks for the question. I think what we'll likely see, and it could be as early as June or July, you know, we're always reluctant to give a time, particularly when you're talking about regulatory environments. They always seem to take longer. We actually expected these to be in place earlier this year, of course, COVID-19, you know, has caused some delays on that front. We might see something happen as early as June or July, to be cautious, I think, you know, I kind of think about it as Q3. That's the timing in terms of the announcement.
You know, I think there's a lot of discussion in the market about what may the new fuel cell subsidy scheme may look like, and I think a number of parties have been influential in helping shape this. You know, there are industry groups, and there are companies that have access to regulatory authorities at the national level and provincial level. You know, I don't want to get into detail on how we, you know, get to influence this or, how our partner influences this, but I believe that Weichai has a very loud voice in the market. They're the largest, you know, manufacturer of diesel engines in China.
you know, the fuel cell platform that they're building out with Ballard is, I believe, gonna be the leading fuel cell business in the country. I think there's a lot of support for Weichai in terms of transitioning over time, their portfolio to provide for zero emission solutions. In terms of what the scheme might look like, our understanding is that there likely will be five or six key regions that are identified as regions where there will be significant policy support and subsidy support. you know, these regions or clusters will have kind of special fuel cell and hydrogen recognition and a lot of subsidy support that will support not only the adoption of fuel cell vehicles, particularly in heavy-duty motive, bus and truck-.
but also, hydrogen refueling infrastructure. I think we're gonna need to wait to see this come out, but I believe it'll be highly supportive of long-term growth in this market. I believe there'll be long-term visibility. I don't think this is something where every six or 12 months we need to wonder what the policy is gonna be. I think they'll provide sufficient visibility so companies can make the appropriate investments. I think it's gonna be highly supportive, and very I'm quite excited about it. I think you'll also see, following that, a number of provinces also come out with cascading subsidy announcements as well.
I believe Shandong, in particular, is gonna be a very strong advocate for the adoption of hydrogen fuel cell solutions, not just because Weichai is located there, but Shandong has some unique attributes, including access to hydrogen, that positions them very well. They have, you know, 15 cities or so that I'd expect to see some fuel cell activities, you know, coming out. We're pretty excited about the national level support that the industry is likely to see. You know, we can't be firm on this, but we're optimistic and excited about it. We believe there'll be some cascading provinces as well, that come out with some policy updates that will be very supportive, too.
Just following up on visibility. On the 2,000 units committed by Weichai, do you have any additional insight into where they'll be deployed, or by whom, or what the plan is there?
We do. We're gonna follow Weichai's lead on their communications on this, Mac. You know, they have commented publicly that they expect these primarily to be buses. There will be some trucks as well. There are different regions that they'll go into, but primarily in Shandong province.
Okay. Just a couple things, perhaps, from Tony, just in terms of modeling over the next couple quarters. If we were to see revenue pushed out, can you remind us of the fixed versus variable overhead and sort of the cost of goods sold, whether we'll see a big jump in the burn rate because there'll be fixed overhead not being covered? I'm wondering about that. Second question is just, can you go over the anti-dilution rights that Weichai has, given how that works with the at-the-market financing?
Sure. let me... Thanks, Mac. Let me deal with the second question first.
Okay.
Regard to the Weichai anti-dilution rights. Weichai does have has the right to top up with regard to any new financing, public market, or private financing. We do top up to 19.9% related to the financing. With regard to the ATM specifically, this is the $75 million program. You know, Weichai has indicated to us they do intend to top up to maintain their 19.9%. That would be off of, you know, off of, thus far, would be about a $16 million relative to what we've issued thus far. If we complete the program, that might move that 16 to, you know, $17 million or $18 million. Of addition, Now, this would be funded under a private placement with Weichai.
At this point, they have indicated they will top up. It's just really, right now, a question of timing. We, you know, we expect that to, you know, would close sometime, but likely in the second quarter. But, at this point, we don't have a firm window on it. Those are the anti-dilution rights specifically that they have, and we do expect them to exercise. That's on the Weichai side of things. Other question with regard to, you know, the cadence of revenue and fixed and variable overhead.
I gotta say, I don't have the numbers in front of me right now, Mac, but I will say Q1 is somewhat illustrative, you know, at a revenue number of around $25 million, you know, $24 million-$25 million, as was, you know, highlighted, or as you've seen. We did see a bump up in gross margin from Q4 last year, particularly where we were at a lower level of revenue and certainly Q1 of 2019. So we're already with that 22% gross margin in Q1, we're already starting to see that type of absorption of the overhead. If I can find the numbers, I'll certainly get back to you on the call. If not, we'll take it offline.
As we think about Q2 and the rest of the year, you know, we had kind of signaled that we would, you know, we expected to see, you know, a decent Q1, which I think we, which we've seen, you know, a little bit below, I think, where consensus was, but all things considered. You know, we are expecting to see some improvement into the second quarter, notwithstanding some of the delays that Randy mentioned. Of course, we would expect as we, you know, signaled in the past, a fairly strong second half of the year. Of course, assuming that there isn't a sort of a round two, if you will, of any COVID situation. Let me get back to you on a little bit of the numbers.
Sure.
I would expect to see the gross margin that you see, you saw in Q1 at that revenue level will. That's, you know, we expect to see that actually improve slightly as revenue goes up and we absorb more.
Okay. Okay, yeah, we can do that offline. Just as well, I probably have a question about the pricing that Weichai will get, like, whether it will match the average sort of prices that market was buying in.
Yeah, yeah. I could touch on that quickly, because just it is an important point, and again, it all ties to timing. Weichai has the right to top up. We, in our, in our investor rights agreement, Mac, we've offered them the ability to top up at the end of the quarter or at the end of the ATM program. If, depending on which option they choose, yeah, they do get the benefit of the weighted average price under the ATM, but there is a TSX restriction on pricing. If they close, they get that VWAP, but if the closing is delayed and the stock price rises appreciably, then they would have to be subject to whatever restrictions the TSX has on maximum allowable discount to the closing date.
In theory, they would get the benefit of the VWAP. You know, the numbers can be figured out, but the VWAP for the ATM shares that were issued thus far is a bit over $8, but $8.13, if I recall, was the VWAP under the shares issued today. In order to get that, they'd have to close fairly quickly. Whether they enjoy that or not, it's going to be a function of the closing.
Yeah, Mac, it's Randy. I just wanted to supplement that. What, whether, I do believe Weichai will top up, and whether it's at the 8.13 VWAP or some higher price, because of the TSX restrictions, it's a really good signal in my mind. You think about they invested back in, you know, late 2018, where they invested at $3.54 U.S. With them topping up at these levels, it's a very good indicator of the value they place on Ballard.
Yeah, thanks. I should have said that $8.13, by the way, of course, that's U.S. dollar price as well, as was the $3.54 that they originally invested in. Those are off at Nasdaq prices.
Okay, excellent. Thanks.
Our next question comes from Jeff Osborne with Cowen and Company. Please go ahead.
Thanks. A lot has been discussed, Randy, maybe just on China, is there any update outside of Weichai and the JV to share with any other potential customers or avenues to revenue growth?
Thanks for the question, Jeff. Thanks for joining. On the rail side, it was just late December, early January, when the first tram line in the world really started a commercial operation in on the Gaoming line in Foshan, Guangdong Province. There was some disruption to the operation of that tram line during the COVID-19 situation. You know, that would be, I'll call it, the activities from CRRC have been kind of on pause while they continue to want to get data off the first in deployments there. There's, I think, increasing investment likely to occur in China on the rail side. We see, you know, zero emission rail as a key part of that.
I do believe there's lots of opportunity, not just in Europe, with Siemens, but also in China with CRRC on the rail side. Of course, that's outside of the joint venture. The passenger car market is another market that we've been looking at. We've had discussions with a number of different vehicle OEMs, as well as a Tier 1 suppliers on the opportunity for the Chinese passenger car market. It's evolving slowly, particularly over the last few months, but we'll see how that shapes. We do think there are opportunities in that market.
The other thing that's interesting in my mind, this is in the joint venture, is the material handling market, is a market segment that we're seeing, you know, some interest in, globally. We have kind of three key projects we're working on the material handling side, for fuel cell-powered forklifts. I believe that, China is a market longer term, where we're going to see some traction, for fuel cell forklifts as well, particularly as logistics increasingly become so important there. I'd just point to rail, the passenger car market, outside of the JV. Inside the JV, we haven't talked much about, the material handling market, but I do view that as a long-term market.
Weichai, with the something around 45%-47% ownership position of Kion, you know, has a good partner there for the European market as well. You know, kind of other markets that we see in the China market are off-road markets, so construction equipment and mining equipment. We've got some activities in other jurisdictions in these markets as well, but these are markets that we see potentially working with Weichai in some of these off-road markets as well, because they have a strong competitive position in those markets, too. Those are some additional markets. We still have our legacy Nine SSL technology that is being used at the Synergy Ballard JV.
There are continuing sales by the JV to users of the Nine SSL stack. That's another revenue source of opportunity going forward as well.
Got it. It's very detailed. Real quick, you know, with the Green Deal in Europe and obviously a lot of moving parts there, is there any risk to the JIVE program maybe slowing down and then things like that are one-offs getting rolled into a broader infrastructure package or vision?
That's a possibility. I think what we've seen is that, you know, it's every time there are European bus demonstration programs, it always takes longer than parties would like. You know, we're seeing progress, of course. We announced some orders, obviously, in the past, you know, 120 days, particularly on with Solaris. We're seeing lots of opportunities in the European market that are kind of bubbling below the surface, where the volumes look to get to that next stage on the bus side. Of course, the commercial truck market is gonna be a huge market, I believe, in Europe.
I do think, you're gonna see more announcements on the bus side, both in, I'll call it mainland Europe as well as in the UK.
Got it. That's all I have. Thank you.
Thanks, Jeff.
Our next question comes from Joseph Osha with JMP Securities. Please go ahead.
Hello, everybody. Long time, Randy.
Hey, Joe. How you doing?
Just fine. I'm curious about what you think of some of the soup to nuts competitors. Nikola brings to mind, there are some others that seem to believe they can do everything from the fueling to the truck, to the powertrain, to the fuel cell. Do those companies ultimately represent potential customers, or do you see them sticking with the, you know, kind of the not invented here mentality?
Yeah, I won't comment specifically on Nikola, but just that overall model, we are seeing others potentially talk about these models, where you basically offer, you know, transportation that is based on our per-kilometer driven or a lease rate. Then they say, "We'll take care of, you know, designing and manufacturing the vehicle. We'll take care of supplying the hydrogen refueling infrastructure, and we'll take care of the financing." It takes a lot of capital and a lot of business complexity to deal with all of those variables. You know, partnering is a very key way to mitigate that risk, and I think a very important driver of whether or not that type of model is gonna be successful.
I think as companies look at this space, the technology on fuel cell is not easy. If it was easy, it would have been commercialized a long time ago. So, you know, Ballard is in a leadership position on the technology front. I think as companies, you know, scratch more at the surface and invest time, understanding, where the challenges are on, really commercializing high durability, high power density, high-performing fuel cell technology, I believe they're gonna need partners.
You know, going back to the vehicle OEMs, whether it's, you know, trucks, buses, passenger cars, and going back to the Tier 1 suppliers for all of these markets, including the commercial vehicle market, a number of them, I think, are gonna be looking at Ballard as a company that has technology and would make sense to partner than to try and do it in-house. You know, particularly as they look at trying to invest in autonomy and connectivity and electrification on the battery side, shared mobility and even, you know, continued investments in internal combustion engines. I think companies are gonna recognize, like, I believe Daimler and Daimler Trucks and Volvo Group, that collaboration is perhaps a more powerful model than trying to do it all yourself.
Even in these type of organizations that do believe they're going to be able to accomplish everything internally, you know, I think over time, Ballard will have opportunities in those companies. You know, the number of kilometers we're getting is just increasing every day in the field. You know, our uptime availability rates is increasing every day in the field. You know, our technology is getting more mature, our products are getting more mature. Customers that are putting, you know, end customers or users who have, whether it's their brand on the front of a truck or on the front of a bus, or their brand on, you know, promising delivery of materials or people, you know, this durability and reliability is gonna be very important.
Thanks. Just a follow-on. It's I guess kind of a related question. I'm wondering if you've had any conversations with some of the folks looking at electrolysis. In particular, I'm hearing from, say, New Fortress Energy and then some other folks about this idea of doing hydrogen production with zero or even negative cost wind power, in particular in the middle of the day. What potential exists for your business to cooperate with some of the fueling infrastructure businesses? Thanks.
Great question. You know, we've long been looking at electrolysis technology. Our belief is that there are two home run opportunities in the hydrogen fuel cell industry. There are, of course, others. The two home run opportunities we see in the hydrogen fuel cell industry is fuel cell technology for medium and heavy-duty motive applications, number one. Number two is electrolysis, you know, to generate green hydrogen and really support the Paris Climate Accord objectives. Yes, we follow and track electrolysis very closely. We're familiar with all of the companies in this space.
You know, it's been kind of interesting to see some of the positioning that's happened over the last year, where you had, you know, Cummins acquiring Hydrogenics, not just for the fuel cell technology, but for the electrolysis. Air Liquide had invested in Hydrogenics just before that as well. You've got Linde and other gas companies making investments in electrolysis companies and setting up joint ventures. I'd say the gas giants are increasingly getting more invested in electrolysis. See opportunities there. You have jurisdictions like Australia and Saudi Arabia, who are really looking at electrolysis and green hydrogen as ways to decarbonize and even economic development opportunities. You know, I mentioned earlier, BP and Shell looking at, you know, net carbon zero mandates over the long term.
You know, I think you'll see Aramco starting to join this type of course, looking at hydrogen roadmaps in the future, electrolysis is gonna be a key part of this. We don't have any proprietary technology at Ballard focused on electrolysis. There's always been the theory that fuel cell technology and electrolysis is reversible technology. It hasn't really proven out to be that way practically. There are a lot of challenges with that. There are a lot of core competencies and a lot of technology know-how that are directly relevant to both of those technologies, though. You know, it is a strategic area of opportunity as we think about things like M&A opportunities. It's one of the topics that we look at frequently.
I do think that we've been focused on partnering for that part of the value chain and ecosystem, and it's really important that we're focusing on the e mobility ecosystem and bringing to bear not just you know, fuel cell technology, but solutions for end customers. That's why, for example, as an illustrative example, last year, we announced the H2BusEurope program that brought together a consortium, you know, tank provider, hydrogen fuel cell technology from Ballard, and also electrolysis technology and hydrogen refueling infrastructure solutions, and on the bus side, with Wrightbus. you know, we do partner and collaborate, and it's a strategic area that I think there's gonna be a lot more emphasis.
If you look at the McKinsey report that came out with the Hydrogen Council in January, they're forecasting something like a 40x-50x increase in electrolysis, you know, over the next 4-5 years, with most of that booked already. You know, really identified projects and, in a lot of cases, significant orders. Electrolysis is gonna scale up, you know, in the next 5+ years, and we're gonna see massive cost reduction, and I think those that have the leading electrolysis technology are gonna have a lot of value.
Excellent. Thanks for the insights.
Thank you, Joe.
This concludes the question and answer session. I would like to turn the conference back over to Randy MacEwen, the CEO, for any closing remarks.
Great. Thank you for joining us today. We look forward to speaking with you again in August, when we'll discuss results for Q2 2020. Thanks again.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.