Condensed Consolidated Interim Statements of Financial Position

Unaudited (Expressed in thousands of U.S. dollars)

			Note			March 31, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents						$	863,772		$	913,730
Short-term investments						2,011			2,011
Trade and other receivables			5			43,312			48,696
Inventories			6			64,406			58,050
Prepaid expenses and other current assets						9,729			6,020
Total current assets						983,230			1,028,507
Non-current assets:
Property, plant and equipment			7			91,200			82,361
Intangible assets			8			4,797			5,214
Goodwill						64,268			64,268
Investments			9			66,315			66,357
Other non-current assets						370			370
Total assets						$	1,210,180		$	1,247,077
Liabilities and Equity
Current liabilities:
Trade and other payables			10			$	37,017		$	40,333
Deferred revenue			11			7,190			8,030
Provisions and other current liabilities			12			20,825			20,910
Current lease liabilities			13			3,991			3,895
Total current liabilities						69,023			73,168
Non-current liabilities:
Non-current lease liabilities			13			10,883			11,836
Deferred gain on finance lease liability			13			797			902
Provisions and other non-current liabilities			12			1,814			1,805
Employee future benefits						460			455
Total liabilities						82,977			88,166
Equity:
Share capital			14			2,421,042			2,420,396
Contributed surplus			14			302,188			300,764
Accumulated deficit						(1,594,677)			(1,560,759)
Foreign currency reserve						(1,350)			(1,490)
Total equity						1,127,203			1,158,911
Total liabilities and equity						$	1,210,180		$	1,247,077

Subsequent events note 22.

Approved on behalf of the Board:

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss

Unaudited (Expressed in thousands of U.S. dollars, except per share amounts and number of shares)

									Three months ended March 31,
			Note									2023			2022
Revenues:
Product and service revenues			15									$	13,345		$	21,047
Cost of product and service revenues												18,896			21,255
Gross margin												(5,551)			(208)
Operating expenses:
Research and product development												25,697			21,112
General and administrative												6,477			6,237
Sales and marketing												3,863			2,824
Other expense			16									1,480			138
Total operating expenses												37,517			30,311
Results from operating activities												(43,068)			(30,519)
Finance income (loss) and other			17									10,294			(7,491)
Finance expense			17									(282)			(347)
Net finance income (loss)												10,012			(7,838)
Equity in loss of investment in joint venture and associates			9 & 18									(862)			(2,238)
Loss before income taxes												(33,918)			(40,595)
Income tax recovery												—			200
Net loss for the period												$	(33,918)		$	(40,395)
Other comprehensive income (loss):
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences												140			(121)
Total comprehensive loss for the period												$	(33,778)		$	(40,516)
Basic and diluted loss per share
Loss per share for the period												$	(0.11)		$	(0.14)
Weighted average number of common shares outstanding												298,429,215			297,824,989
See accompany notes to condensed consolidated interim financial statements.

Condensed Consolidated Interim Statements of Changes in Equity

Unaudited (Expressed in thousands of U.S. dollars except number of shares)

Condensed Consolidated Interim Statements of Cash Flows

Unaudited (Expressed in thousands of U.S. dollars)

						Three months ended March 31,
			Note			2023			2022
Cash provided by (used in):
Operating activities:
Net loss for the period						$	(33,918)		$	(40,395)
Adjustments for:
Depreciation and amortization						3,167			3,109
Unrealized loss on forward contracts						(490)			(347)
Equity in loss of investment in joint venture and associates			9 & 18			862			2,238
Net decrease (increase) in fair value of investment			17 & 21			456			8,574
Accretion on decommissioning liabilities			12			9			40
Employee future benefits						11			20
Employee future benefits plan contributions						(6)			(3)
Share-based compensation			14			2,315			2,329
Deferred income tax recovery						—			(200)
						(27,594)			(24,635)
Changes in non-cash working capital:
Trade and other receivables						5,218			(1,195)
Inventories						(6,356)			(6,002)
Prepaid expenses and other current assets						(3,219)			(3,097)
Trade and other payables						(4,715)			(6,942)
Deferred revenue						(840)			115
Warranty provision						951			68
						(8,961)			(17,053)
Cash used in operating activities						(36,555)			(41,688)
Investing activities:
Net decrease in short-term investments			21			—			1,010
Contributions to long-term investments			9			(869)			(2,456)
Additions to property, plant and equipment			7			(11,637)			(3,887)
Investment in other intangible assets			8			(11)			(300)
Investment in joint venture and associates			9 & 18			—			(3,279)
Contingent consideration related to acquisition of Ballard Motive Solutions			12			—			(4,800)
Cash used in investing activities						(12,517)			(13,712)
Financing activities:
Principal payments of lease liabilities			13			(947)			(802)
Net proceeds on issuance of share capital from stock option exercises			14			162			472
Cash used in financing activities						(785)			(330)
Effect of exchange rate fluctuations on cash and cash equivalents held						(101)			—
Decrease in cash and cash equivalents						(49,958)			(55,730)
Cash and cash equivalents, beginning of period						913,730			1,123,895
Cash and cash equivalents, end of period						$	863,772		$	1,068,165

Supplemental disclosure of cash flow information (note 19).

The principal business of Ballard Power Systems Inc. (the “Corporation”) is the sale of PEM fuel cell products and services for a variety of applications including Heavy-Duty Mobility (consisting of bus, truck, rail and marine applications), Stationary Power, and Emerging and Other Markets (consisting of material handling, off-road, and other applications). A fuel cell is an environmentally clean electrochemical device that combines hydrogen fuel with oxygen (from the air) to produce electricity.

The Corporation is a company domiciled in Canada and its registered office is located at 9000 Glenlyon Parkway, Burnaby, British Columbia, Canada, V5J 5J8. The condensed consolidated interim financial statements of the Corporation as at and for the three months ended March 31, 2023 and 2022 comprise the Corporation and its subsidiaries.

(a)    Statement of compliance:

These condensed consolidated interim financial statements of the Corporation have been prepared in accordance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”), on a basis consistent with those significant accounting policies followed in the most recent annual consolidated financial statements except as noted below, and therefore should be read in conjunction with the December 31, 2022 audited consolidated financial statements and the notes thereto.

The condensed consolidated interim financial statements were authorized for issue by the Audit Committee of the Board of Directors on May 9, 2023.

(b)    Basis of measurement:

The condensed consolidated interim financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position:

•Financial assets classified as measured at fair value through profit or loss (FVTPL); and

•Employee future benefits liability is recognized as the net of the present value of the defined benefit obligation, less the fair value of plan assets.

(c)    Functional and presentation currency:

These condensed consolidated interim financial statements are presented in U.S. dollars, which is the Corporation’s functional currency.

(d)    Use of estimates:

The preparation of the condensed consolidated interim financial statements in conformity with International Financial Reporting Standards (“IFRS”) requires the Corporation’s management to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

(d)    Use of estimates (cont'd):

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Significant areas having estimation uncertainty include revenue recognition, asset impairment, warranty provision, inventory provision, employee future benefits, and fair value measurement. These assumptions are unchanged in these condensed consolidated interim financial statements and are the same as those applied in the Corporation’s consolidated financial statements as at and for the year ended December 31, 2022, except for fair value measurement (note 3).

(e)    Future operations:

The Corporation is required to assess its ability to continue as a going concern or whether substantial doubt exists as to the Corporation’s ability to continue as a going concern into the foreseeable future. The Corporation has forecast its cash flows for the foreseeable future and despite the ongoing volatility and uncertainties inherent in the business, the Corporation believes it has adequate liquidity in cash and working capital to achieve its liquidity objective. The Corporation’s ability to continue as a going concern and realize its assets and discharge its liabilities and contractual commitments in the normal course of business is dependent upon the Corporation having adequate liquidity and achieving profitable operations that are sustainable.

The Corporation’s strategy to mitigate this uncertainty is to continue its drive to attain profitable operations that are sustainable by executing a business plan that continues to focus on revenue growth, improving overall gross margins, maintaining discipline over cash operating expenses, managing working capital and capital expenditure requirements, and securing additional financing to fund operations as needed until the Corporation does achieve profitable operations that are sustainable. Failure to implement this plan could have a material adverse effect on the Corporation’s financial condition and or results of operations.

The accounting policies in these condensed consolidated interim financial statements are the same as those applied in the Corporation’s consolidated financial statements as at and for the year ended December 31, 2022, except for fair value measurement.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Corporation has access at that date. The fair value of a liability reflects its non-performance risk.

A number of the Corporation’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

When one is available, the Corporation measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as “active” if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If there is no quoted price in an active market, then the Corporation uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. This involves developing estimates and assumptions consistent with how market participants would price the instrument. Management bases its assumptions on observable data as far as possible but this is not always available. In that case, management uses the best information available. Where they are available, the fair value of investments is based on observable market transactions. Estimated fair values may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date.

The best evidence of the fair value of a financial instrument (including other long-term investments) on initial recognition is usually the transaction price – i.e. the fair value of the consideration given or received. If the Corporation determines that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique for which any unobservable inputs are judged to be insignificant in relation to the measurement, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value on initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable date or the transaction is closed out.

Critical judgments in applying accounting policies:

Critical judgments that management has made in the process of applying the Corporation’s accounting policies and that have the most significant effect on the amounts recognized in the consolidated financial statements are limited to management’s assessment of the Corporation’s ability to continue as a going concern (note 2(e)).

Key sources of estimation uncertainty:

Key assumptions concerning the future and other key sources of estimation uncertainty that have significant risk of resulting in a material adjustment to the reported amount of assets, liabilities, income and expenses within the next fiscal year include the following: revenue recognition, asset impairment, warranty provision, inventory provision, employee future benefits, and fair value measurement. These assumptions are unchanged in these condensed consolidated interim financial statements and are the same as those applied in the Corporation’s consolidated financial statements as at and for the year ended December 31, 2022, except for fair value measurement (note 3).

Contract assets primarily relate to the Corporation's rights to consideration for work completed but not billed as at March 31, 2023 for engineering services and technology transfer services.

			March 31,
Contract assets			2023
At January 1, 2022			$	12,781
Additions to contract assets			1,782
Invoiced during the period			(2,965)
At March 31, 2023			$	11,598

Information about the Corporation's exposure to credit and market risks, and impairment losses for trade receivables and contract assets is included in note 21.

During the three months ended March 31, 2023, the write-down of inventories to net realizable value including onerous contract adjustments amounted to $1,013,000 (2022 – $542,000) and the reversal of previously recorded write-downs and onerous contract adjustments amounted to $365,000 (2022 – $3,000), resulting in a net write-down of $648,000 (2022 – $539,000). Write-downs and reversals are included in either cost of product and service revenues or research and product development expense, depending upon the nature of inventory.

The Corporation leases certain assets under lease agreements, comprising primarily of leases of land and buildings, office equipment, and vehicles (note 13).

Depreciation expense on property, plant, and equipment is allocated to operating expense or cost of goods sold depending upon the nature of the underlying assets. For the three months ended March 31, 2023, amortization expense of $2,844,000 (2022 - $2,364,000) was recorded.

Additions to property, plant, and equipment assets in 2023 total $11,637,000 (2022 - $3,887,000).

Amortization expense on intangible assets is allocated to research and product development expense or general and administration expense depending upon the nature of the underlying assets. For the three months ended March 31, 2023, amortization expense of $428,000 (2022 - $849,000) was recorded.

Additions to intangible assets in 2023 of $11,000 (2022 - $300,000) consist primarily of costs to enhance the capabilities of the ERP management reporting software system.

For the three months ended March 31, 2023, the Corporation recorded $862,000, (2022 - $2,238,000) in equity loss of investment in JV and associates, comprising of equity loss in Weichai Ballard Hy-Energy Technologies Co., Ltd. ("Weichai Ballard JV") of $862,000 (2022 - $2,238,000) and equity loss in Guangdong Synergy Ballard Hydrogen Power Co., Ltd. ("Synergy Ballard JVCo") of $nil (2022 - $nil).

			March 31,			December 31,
Investment in Weichai Ballard JV			2023			2022
Beginning balance			$	24,026		$	28,982
Capital contribution to JV			—			9,272
Recognition of 49% profit on inventory not yet sold to third party, net			166			549
Equity in loss			(862)			(11,599)
Cumulative translation adjustment due to foreign exchange			241			(3,178)
Ending balance			$	23,571		$	24,026

Weichai Ballard JV is an associate in which the Corporation has significant influence and a 49% ownership interest. During the three months ended March 31, 2023, the Corporation made committed capital contributions of $nil (2022 - $3,279,000 (RMB 20,825,000 equivalent)) to Weichai Ballard JV.

The following tables summarize the financial information of Weichai Ballard JV as included in its own financial statements as of March 31, 2023, adjusted for foreign exchange differences, the application of the Corporation's accounting policies and the Corporation's incorporation costs.

Synergy Ballard JVCo is an associate in which the Corporation has significant influence and a 10% ownership interest.

In addition to the above equity-accounted investments, the Corporation has also acquired ownership interest in various other investments.

During the three months ended March 31, 2023, changes in fair value and foreign exchange adjustments for long-term investments totalling $456,000 (2022 - $8,588,000) were recognized as an unrealized loss in the consolidated statements of loss and comprehensive loss and included in finance loss and other (note 17).

In October 2021, the Corporation acquired a non-controlling 9.77% equity interest in Forsee Power SA ("Forsee Power"), a French company specializing in the design, development, manufacture, commercialization, and financing of smart battery systems for sustainable electric transport.

For the three months ended March 31, 2023, changes in fair value and foreign exchange adjustments totalling $742,000 (2022 - $8,398,000) were recognized as an unrealized loss in the consolidated statement of loss and comprehensive loss and included in finance income (loss) and other (note 17), resulting in net fair value investment in Forsee Power of $17,728,000 as of March 31, 2023, compared to net fair value of $18,470,000 as of December 31, 2022.

In June 2022, the Corporation acquired a non-controlling 7.169% interest in Wisdom Group Holdings Ltd. ("Wisdom Motor"), a Cayman Island holding company with operating subsidiaries whose business includes the design and manufacture of vehicles, including zero emission fuel cell electric buses, trucks, and battery-electric vehicles.

For the three months ended March 31, 2023, changes in fair value and foreign exchange adjustments totalling $nil (2022 - $nil) were recognized as an unrealized gain (loss), respectively, in the consolidated statement of loss and comprehensive loss and included in finance income (loss) and other (note 17), resulting in net fair value investment in Wisdom Motor of $10,000,000 as of March 31, 2023, compared to net fair value of $10,000,000 as of December 31, 2022.

In September 2022, the Corporation invested €5,000,000 and acquired a non-controlling 1.89% in Quantron AG, a global electric vehicle integrator and an emerging specialty OEM, to accelerate fuel cell truck adoption. In March 2023, the Corporation made a nominal cash contribution of $1,000 to exercise its option to purchase an additional 793 shares. As part of this option, the Corporation made the required additional contribution of €3,000,000 in April 2023, resulting in a non-controlling ownership interest of 3% in Quantron AG as of April 30, 2023.

For the three months ended March 31, 2023, changes in fair value and foreign exchange adjustments totalling $104,000 (2022 - $nil) were recognized as an unrealized gain in the consolidated statement of loss and comprehensive loss and included in finance income (loss) and other (note 17), resulting in net fair value investment in Quantron AG of $5,438,000 as of March 31, 2023, compared to net fair value of $5,333,000 as of December 31, 2022.

In August 2021, the Corporation invested in HyCap Fund I SCSp (“HyCap”), a special limited partnership registered in Luxembourg. In the three months ended March 31, 2023, the Corporation made additional contributions of £724,000 ($868,000) (2022 - £687,000 ($899,000)) for total contributions of £7,940,000 ($10,403,000).

For the three months ended March 31, 2023, changes in fair value and foreign exchange adjustments totalling $255,000 and (2022 - $(199,000)) were recognized as an unrealized gain (loss) in the consolidated statement of loss and comprehensive loss and included in finance income (loss) and other (note 17), resulting in net fair value investment in HyCap of $9,086,000 as of March 31, 2023, compared to net fair value of $7,963,000 as of December 31, 2022.

In December 2021, the Corporation invested in Clean H2 Infrastructure Fund I ("Clean H2"), a special limited partnership registered in France. In the three months ended March 31, 2023, the Corporation made additional contributions of $nil (2022 - €1,416,000 ($1,557,000)) for total contributions of €996,000 ($1,143,000).

For the three months ended March 31, 2023, changes in fair value and foreign exchange adjustments totalling ($73,000) (2022 - $9,000) were recognized as an unrealized gain (loss) in the consolidated statement of loss and comprehensive loss and included in finance income (loss) and other (note 17), resulting in net fair value investment in Clean H2 of $492,000 as of March 31, 2023, compared to net fair value of $565,000 as of December 31, 2022.

Deferred revenue (i.e. contract liabilities) represents cash received from customers in excess of revenue recognized on uncompleted contracts.

On completion of a review of the Corporation's "open" contracts as of December 31, 2021, it was determined that on adoption of the Amendments to IAS 37 on January 1, 2022, additional onerous contract costs of $1,200,000 were recognized as an opening balance adjustment to accumulated deficit. As of March 31, 2023, total onerous contract costs of $4,200,000 have been accrued in provisions and other current liabilities.

The Corporation will continue to review open contracts on a quarterly basis to determine if any ongoing or new contracts become onerous, and if any of the underlying conditions or assumptions change which would require an adjustment to the accrued provision.

As part of the acquisition of Ballard Motive Solutions in November 2021, total consideration included earn-out cash consideration payable by the Corporation, based on the achievement of certain performance milestones over a three year period from the acquisition date. As part of the post-acquisition restructuring of operations at Ballard Motive Solutions in the UK, there was a change in estimate in the fair value of contingent consideration in the fourth quarter of fiscal 2022 due to changes in expectation of achieving milestones. The contingent consideration provision now comprises the last remaining milestone at its estimated value of $2,078,000.

During the three months ended March 31, 2023, the Corporation made cash payments totalling $nil (2022 – $4,800,000) for successful achievement of certain performance milestones.

As part of the post-acquisition restructuring of operations at Ballard Motive Solutions, the Corporation recorded a legal provision for various contract exit and modification costs, grant adjustment charges, and legal and advisory costs, net of expected recoveries. As at December 31, 2022, costs totalling $2,968,000 were accrued in other operating expense. During the three months ended March 31, 2023, the Corporation made cash payments totalling $1,033,000 (2022 – $nil), resulting in a legal provision of $1,984,000 as at March 31, 2023.

    A provision for decommissioning liabilities for the Corporation’s head office building is related to estimated site restoration obligations at the end of the lease term. As at March 31, 2023, total decommissioning liabilities amounted to $1,814,000 (December 31, 2022 - $1,805,000), resulting from accretion of $9,000 (2022 - $40,000).

The Corporation leases certain assets under lease agreements. The lease liability consists primarily of leases of land and buildings, office equipment and vehicles. The leases have interest rates ranging from 2.95% to 8.28% per annum and expire between December 2023 and June 2032.

During the three months ended March 31, 2023, the Corporation made principal payments on lease liabilities totalling $947,000 (2022 - $802,000). The Corporation is committed to future minimum lease payments (comprising principal and interest) as follows:

Deferred gains on closing of finance lease agreements are amortized over the lease term. At March 31, 2023, the outstanding deferred gain was $797,000 (December 31, 2022 – $902,000).

						Three months ended March 31,
									2023			2022
Option Expense									$	1,284		$	1,453
DSU Expense									110			138
RSU Expense									921			738
Total Share-based Compensation									$	2,315		$	2,329

(a)    Share capital:

At March 31, 2023, 298,560,025 common shares were issued and outstanding.

(b)    Share options:    

During the three months ended March 31, 2023, compensation expense of $1,284,000 (2022 – $1,453,000) was recorded in net loss, based on the grant date fair value of the options recognized over the vesting period.

During the three months ended March 31, 2023, 92,884 (2022 – 138,740) options were exercised for a equal amount of common shares for proceeds of $162,000 (2022 – $472,000).

    As at March 31, 2023, options to purchase 4,655,902 common shares were outstanding (2022 - 4,894,198).

(c)    Deferred share units:

Deferred share units (“DSUs”) are granted to the board of directors and executives. Eligible directors must elect to receive at least half of their annual retainers and executives may elect to receive all or part of their annual bonuses in DSUs. Each DSU is redeemable for one common share, net of statutory tax withholdings, after the director or executive ceases to provide services to the Corporation.

During the three months ended March 31, 2023, $110,000 (2022 - $138,000) of compensation expense was recorded in net loss relating to 19,728 (2022 - 11,886) DSUs granted during the period.

During the same period, 65,499 (2022 - 126,862) DSUs were exercised, net of applicable taxes, which resulted in in the issuance of 31,736 common shares (2022 - 58,990), resulting in an impact on equity of $171,000 (2022 - $753,000).

As at March 31, 2023, 663,909 deferred share units were outstanding (2022 - 641,247).

(d)    Restricted share units:

Restricted share units (“RSUs”) are granted to certain employees and executives. Each RSU is convertible into one common share, net of statutory tax withholdings. The RSUs vest after a specified number of years from date of issuance and, under certain circumstances, are contingent on achieving specified performance criteria and/or market criteria. A performance factor adjustment is made if there is an over-achievement (or under-achievement) of specified performance criteria, resulting in additional (or fewer) RSUs being converted.

During the three months ended March 31, 2023, compensation expense of $921,000 (2022 – $738,000) was recorded in net loss.

During the three months ended March 31, 2023, 87,923 RSUs (2022 - 440,953) were exercised, net of applicable taxes, which resulted in the issuance of 41,202 common shares (2022 - 206,648) resulting in an impact on equity of $236,000 (2022 - $2,411,000).

As at March 31, 2023, 2,854,714 restricted share units were outstanding (2022 - 884,751).

The Corporation's operations and main revenue streams are the same as those described in the Corporation's consolidated financial statements as at and for the year ended December 31, 2022. However, the Corporation has updated the classification and presentation of revenue by market application in the table below. Revenues from the delivery of services, including technology solutions, after sales services and training, are included in each of the respective markets. The Corporation's revenue is derived from contracts with customers.

In the following table, revenue is disaggregated by geographical market (based on location of customer), by market application, and by timing of revenue recognition.

Acquisition related costs of $658,000 for the three months ended March 31, 2023 (2022 - $118,000) consist primarily of legal, advisory, and transaction-related costs incurred on ongoing corporate development activity.

Restructuring expense of $822,000 for the three months ended March 31, 2023 (2022 - $20,000) relates primarily to cost reduction initiatives.

Related parties include shareholders with a significant ownership interest in the Corporation, including its subsidiaries and affiliates, and the Corporation’s equity accounted investees: Weichai Ballard JV and Synergy Ballard JVCo (note 9).

For the three months ended March 31, 2023, related party transactions and balances with the Corporation's 49% owned equity accounted investee, Weichai Ballard JV, were as follows:

For the three months ended March 31, 2023, related party transactions and balances with the Corporation's 10% owned equity accounted investee, Synergy Ballard JVCo, were as follows:

			Three months ended March 31,
Non-cash financing and investing activities:									2023			2022
Compensatory shares									$	396		$	876

The Corporation operates in a single operating segment, Fuel Cell Products and Services, which consists of the sale of PEM fuel cell products and services for a variety of applications including Heavy-Duty Mobility (consisting of bus, truck, rail and marine applications), Stationary Power, and Emerging and Other Markets (consisting of material handling, off-road, and other applications). The delivery of services, including technology solutions, after sales service and training, are included in each of the respective markets.

For the year 2023, the Corporation has updated the classification and presentation of revenue by market application (note 15).

(a)    Fair value:

The Corporation’s financial instruments consist of cash and cash equivalents, short-term investments, trade and other receivables, investments, and trade and other payables. The fair values of cash and cash equivalents, trade and other receivables, and trade and other payables approximate their carrying values because of the short-term nature of these instruments.

Short-term investments comprise term deposits with terms of greater than 90 days and a previously held investment in a Danish public company held by Ballard Power Systems Europe ("BPSE"). During the twelve months ended December 31, 2022, the Corporation sold its remaining Green Hydrogen shares for net proceeds of $1,010,000.

Long-term investments (note 9) comprise newly-created hydrogen infrastructure and growth equity funds: HyCap Fund and Clean H2 Fund, and an investment in Forsee Power, Wisdom Motor and Quantron AG, as well as equity-accounted investments. Changes in fair value and foreign exchange adjustments are recognized as gains or losses in the consolidated statement of loss and comprehensive loss and included in finance income (loss) and other (note 17). During the three months ended March 31, 2023, the Corporation recognized net mark to market and foreign exchange losses of $456,000 (2022 - $8,574,000).

(b)    Credit risk:

IFRS 9 Financial Instruments requires impairment losses to be recognized based on “expected losses” that will occur in the future, incorporating forward looking information relating to defaults and applies a single ECL impairment model that applies to all financial assets within scope. ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Corporation in accordance with the contract and the cash flows that the Corporation expects to receive). Under IFRS 9, at each reporting date the Corporation is required to assess whether financial assets carried at amortized cost are credit-impaired.

As a result of this review for the three months ended March 31, 2023, the Corporation did not recognize any additional estimated ECL impairment losses.

The Corporation has recently entered into an agreement to sell its 10% interest in Synergy Ballard JVCo to the Synergy Group for nominal consideration. The transaction is expected to close in the first half of 2023.

This document contains forward-looking statements about expected events and the financial and operating performance of Ballard Power Systems Inc. (“Ballard”, “the Company”, “we”, “us” or “our”). Forward-looking statements include any statements that do not refer to historical facts. Forward-looking statements are based on the beliefs of management and reflect our current expectations as contemplated under the safe harbor provisions of Section 21E of the United States Securities Exchange Act of 1934, as amended. Words such as "estimate", "project", "believe", "anticipate", "intend", "expect", "plan", "predict", "may", "should", "will", the negatives of these words or other variations thereof and comparable terminology are intended to identify forward-looking statements. Such statements include, but are not limited to, statements with respect to our objectives, goals, liquidity, sources and uses of capital, outlook including our estimated revenue and gross margins, cash flow from operations, Cash Operating Costs, EBITDA and Adjusted EBITDA (see Non-GAAP measures), strategy, order backlog, order book of expected deliveries, future product roadmap costs and selling prices, future product sales, future production capacities and volumes, the markets for our products, expenses / costs, contributions and cash requirements to and from joint venture operations and research and development activities, as well as statements with respect to our beliefs, plans, objectives, expectations, anticipations, estimates and intentions. These statements are not guarantees of future performance and involve assumptions, risks and uncertainties that are difficult to predict. In particular, these forward-looking statements are based on certain factors and assumptions relating to our expectations with respect to new and existing customer and partner relationships, the generation of new sales, producing, delivering, and selling the expected product and service volumes at the expected prices and controlling our costs. They are also based on a variety of general factors and assumptions including, but not limited to, our expectations regarding technology and product development efforts, manufacturing capacity and cost, product and service pricing, market demand, and the availability and prices of raw materials, labour, and supplies. These assumptions have been derived from information available to the Company including information obtained by the Company from third parties. These assumptions may prove to be incorrect in whole or in part. In addition, actual results may differ materially from those expressed, implied, or forecasted in such forward-looking statements. Factors that could cause our actual results or outcomes to differ materially from the results expressed, implied or forecasted in such forward-looking statements include, but are not limited to: challenges or delays in our technology and product development activities; our ability to extract value from joint venture operations; changes in the availability or price of raw materials, labour, supplies and shipping; costs of integration, and the integration failing to achieve the expected benefits of the transaction; our ability to attract and retain business partners, suppliers, employees and customers; global economic trends and geopolitical risks (such as the conflict between Russia and Ukraine), including changes in the rates of investment, inflation or economic growth in our key markets, or an escalation of trade tensions such as those between the U.S. and China; the relative strength of the value proposition that we offer our customers with our products or services; changes in competitive technologies, including battery and fuel cell technologies; product safety, liability or warranty issues; changes in our customers’ requirements, the competitive environment and/or related market conditions; potential merger and acquisition activities, including risks related to integration, loss of key personnel, disruptions to operations; warranty claims, product performance guarantees, or indemnification claims; changes in product or service pricing or cost; market developments or customer actions (including developments and actions arising from epidemics and pandemic) that may affect levels of demand and/or the financial performance of the major industries and customers we serve, such as secular, cyclical and competitive pressures in the bus, truck, rail and marine sectors; the rate of mass adoption of our products or related ecosystem, including the availability of cost-effective hydrogen; cybersecurity threat; our ability to protect our intellectual property; the severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of businesses’ and governments’ responses to the pandemic on our operations, personnel and joint venture operations, and on commercial activity and demand across our and our customers’, partners’ and joint venture businesses, and on global supply chains; climate risk; changing government or environmental regulations, including subsidies or incentives associated with the adoption of clean energy products, including hydrogen and fuel cells; currency fluctuations, including the magnitude of the rate of change of the Canadian dollar versus the U.S. dollar; our access to funding and our ability to provide the capital required for product development, operations and marketing efforts, working capital requirements, and joint venture capital contributions; the general assumption that none of the risks identified in the Risks and Uncertainties section of this document or in our most recent Annual Information Form will materialize. Readers should not place undue reliance on Ballard's forward-looking statements. The forward-looking statements contained in this document speak only as of the date of this Management Discussion and Analysis (“MD&A”). Except as required by applicable legislation, Ballard does not undertake any obligation to release publicly any updates or revisions to these forward-looking statements to reflect events or circumstances after the date of this MD&A including the occurrence of unanticipated events.

May 9, 2023

This discussion and analysis of financial condition and results of operations of Ballard Power Systems Inc. (“Ballard”, “the Company”, “we”, “us” or “our”) is prepared as of May 9, 2023 and should be read in conjunction with our unaudited condensed consolidated interim financial statements and accompanying notes for the three months ended March 31, 2023 and with our audited consolidated financial statements for the year ended December 31, 2022. The results reported herein are presented in U.S. dollars unless otherwise stated and have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Additional information relating to the Company, including our Annual Information Form, is filed with Canadian (www.sedar.com) and U.S. securities regulatory authorities (www.sec.gov) and is also available on our website at www.ballard.com.

Our disclosure controls and procedures are designed to provide reasonable assurance that relevant information is gathered and reported to senior management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), on a timely basis so that appropriate decisions can be made regarding public disclosures. We have also designed internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. During the three months ended March 31, 2023, there were no changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Our design of disclosure controls and procedures and internal controls over financial reporting includes controls, policies and procedures covering our subsidiaries including Ballard Power Systems Europe A/S, Ballard Fuel Cell Systems Inc., and Guangzhou Ballard Power Systems Co., Ltd.

An investment in our common shares involves risk. Investors should carefully consider the risks and uncertainties described below and in our Annual Information Form. The risks and uncertainties described in our Annual Information Form are not the only ones that we face. Additional risks and uncertainties, including those that we do not know about now or that we currently deem immaterial, may also adversely affect our business. For a more complete discussion of the risks and uncertainties which apply to our business and our operating results, please see our Annual Information Form and other filings with Canadian (www.sedar.com) and U.S. (www.sec.gov) securities regulatory authorities.

At Ballard, our vision is to deliver fuel cell power for a sustainable planet. We are recognized as a world leader in proton exchange membrane (“PEM”) fuel cell power system development and commercialization.

Our principal business is the design, development, manufacture, sale and service of PEM fuel cell products for a variety of applications, focusing on power products for bus, truck, rail, marine, stationary and emerging market (material handling, off-road and other) applications, as well as the delivery of services, including technology solutions, after sales services and training.

With the acquisition of Ballard Motive Solutions in November 2021, we also offer hydrogen fuel cell powertrain integration solutions.

A fuel cell is an environmentally clean electrochemical device that combines hydrogen fuel with oxygen (from the air) to produce electricity. The hydrogen fuel can be obtained from natural gas, kerosene, methanol, or other hydrocarbon fuels, or from water through electrolysis. Ballard’s PEM fuel cell products typically feature high fuel efficiency, relatively low operating temperature, high durability, low noise and vibration, compact size, quick response to changes in electrical demand, and modular design. Embedded in each Ballard fuel cell product lies a stack of unit cells designed with our proprietary PEM fuel cell technology, which include membrane electrode assemblies, catalysts, plates, and other key components, and draw on intellectual property from our patent portfolio, together with our extensive experience and know-how, in key areas of PEM fuel cell stack design, operation, production processes and systems integration.

We are based in Canada, with head office, research, technology and product development, engineering services, testing, manufacturing and after-sale service facilities in Burnaby, British Columbia. We also have sales, assembly, research and development, certain engineering services and after-sale service facilities in Hobro, Denmark and London, U.K., and have a sales, quality, supply chain, and after-sales service office in Guangzhou, Guangdong Province, China.

We also have a non-controlling, 49% interest in Weichai Ballard Hy-Energy Technologies Co., Ltd. (“Weichai Ballard JV”), located in Weifang, Shandong Province, China. Weichai Ballard JV’s business is to manufacture certain fuel cell products utilizing Ballard’s LCS fuel cell stack and LCS-based power modules for bus, commercial truck, and forklift applications with certain exclusive rights in China.

In addition, we have a non-controlling 10% interest in Guangdong Synergy Ballard Hydrogen Power Co., Ltd. (“Synergy Ballard JVCo”), located in Yunfu, Guangdong Province, China. Synergy Ballard JVCo’s business is to manufacture fuel cell products utilizing our FCveloCity®-9SSL fuel cell stack technology for use primarily in fuel cell engines assembled and sold in China.

Furthermore, we have several non-controlling and non-equity accounted investments including (i) a 3% equity interest in Quantron AG, a global electric vehicle integrator and an emerging specialty OEM, to accelerate fuel cell truck adoption; (ii) a 7% equity interest in Wisdom Group Holdings Ltd., a Cayman Island holding company with operating subsidiaries whose business includes the design and manufacture of vehicles, including zero emission fuel cell electric buses, trucks, and battery-electric vehicles; and (iii) a 9.7% equity interest in Forsee Power SA (“Forsee Power”), a French company specializing in the design, development, manufacture, commercialization, and financing of smart battery systems for sustainable electric transport. We have also invested in two hydrogen infrastructure and growth equity funds: (i) a 11% interest in the HyCap Fund I SCSP (“HyCap”), a special limited partnership registered in Luxembourg; and (ii) a 1% interest in Clean H2 Infra Fund (“Clean H2”), a special limited partnership registered in France.

2.2Strategic Imperatives

We strive to build value for our shareholders by developing, manufacturing, selling, and servicing zero-emission, industry-leading PEM fuel cell technology products and services to meet the needs of our customers in target markets. More specifically, our business plan is to leverage our core competencies of PEM fuel cell stack technology and engine development and manufacturing, our investments in advanced manufacturing and production capacity, and our product portfolio by marketing our products and services across select large and attractive addressable market applications and select geographic regions.

We typically select our target market applications based on use cases where the comparative user value proposition for PEM fuel cells powered by hydrogen are strongest – such as where operators value low emission vehicles that require high utilization, long driving range, heavy payload, fast refueling, and similar user experiences to legacy diesel vehicles – and where the barriers to entry for hydrogen refueling infrastructure are lowest – such as use cases where fuel cell vehicles typically return to a depot or hydrogen hub for centralized refueling and don’t require a distributed hydrogen refueling network. Our current target markets include certain medium- and heavy-duty mobility applications of bus, truck, rail, and marine, along with certain off-road mobility and stationary power applications.

We select our target geographic markets based on a variety of factors, including addressable market sizes of the target market applications in the geographic markets, historic deployments and expected market adoption rates for hydrogen and fuel cells, supportive government policies, existing and potential partner, customer, and end user relationships, and competitive dynamics. Our current target markets are the geographic regions of China, Europe, and North America.

While we recognize addressing multiple market applications and geographic markets in parallel increases our near-term cost structure and investments, we believe offering the same core PEM fuel cell technologies and substantially similar derivative PEM fuel cell products across multiple mobility and power market applications and select geographic regions will significantly expand and strengthen our long-term business prospects by increasing volume scaling in our operations, enabling lower product and production costs for the benefit of all markets, improving our competitive positioning and market share, enabling richly diversified revenue streams and profit pools, and improving our return on investment in our technology and product development programs and our investments in manufacturing.

Our strategy is built on 5 key themes:

•Double down in the fuel cell stack & module: invest in leading PEM fuel cell technology and products to provide leading value to our customers and end users based on a total cost of ownership basis;

•Selectively expand across value chain: extend across the value chain to capture control points, reduce technology adoption barriers, simplify, and optimize our customer offering, and accelerate fuel cell deployments;

•Develop new routes to market: creatively explore partnerships and demonstration programs to accelerate hydrogen and fuel cell market adoption and grow volumes for product sales;

•Win in key regions: invest in a competitive platform in each of North America, Europe, and China; and

•Here for Life: deliver a compelling environmental, social and governance (“ESG”) proposition for our stakeholders.

In 2020 and 2021, we materially strengthened our financial position through equity financings, thereby providing additional flexibility to fund our growth strategy. Following these financings, given strong indicators of long-term market adoption of hydrogen and zero-emission mobility, given growing customer interest in our fuel cell products, given a growing opportunity set, and given an increasingly competitive environment, we strategically decided to significantly increase and accelerate our investments ahead of the adoption curve, including investments in our 5 key themes. As a result, we have increased and accelerated our investments in technology and product innovation, production capacity expansion and localization, strategic pricing for select customer demonstration programs, customer experience, and corporate development investments. Our increased investments include significant investment in next generation products and technology, including our proprietary membrane electrode assemblies (“MEAs”), bipolar plates, stacks, modules, and powertrain systems integration including our acquisition of Ballard Motive Solutions; advanced manufacturing processes, technologies, equipment, and production localization activities in China, Europe, and the United States; and technology and product cost reduction.

Consistent with the Company’s past practice, and in view of the early stage of hydrogen fuel cell market development and adoption, we are not providing specific revenue or net income (loss) guidance for 2023. In 2023, we continue our plan to increase investments in the business ahead of the hydrogen growth curve, including expanding product offering and capabilities across the value chain, and investments in manufacturing. Our 2023 outlook continues to include:

•Total Operating Expenses: $135 million to $155 million – We continue to expect total Operating Expenses for fiscal 2023 to be between $135 million and $155 million (including $37.5 million incurred in the first quarter of 2023; compared to $145.8 million in fiscal 2022) as we continue to invest in research and product development ahead of the hydrogen growth curve by advancing new technology, product cost reduction, product innovation, and development across bus, truck, rail, marine, and stationary power markets, including next-generation MEAs, plates, stacks, and modules.

•Capital Expenditures: $40 million to $60 million – We continue to expect total Capital Expenditures (being additions to property, plant and equipment and investment in other intangible assets) for fiscal 2023 to be between $40 million and $60 million (including $11.6 million incurred in the first quarter of 2023; compared to $34.5 million in fiscal 2022) as we continue to invest in testing, advanced manufacturing, and production. Capital allocation in 2023 includes increasing testing and prototyping capabilities, including new advanced test station equipment and refurbishments of existing testing equipment in Canada, advanced manufacturing equipment in Canada for next-generation bipolar plates, and investing ahead of the hydrogen growth curve and positioning our manufacturing capabilities to support anticipated scale in key markets. We also continue to look at opportunities to

expand our presence in growing markets including our recently announced plan to invest $130 million over 3-years in a new MEA manufacturing facility and R&D center in Shanghai, China.

Our outlook expectations for 2023 are in part supported by our 12-month Order Book of approximately $73.9 million which is derived from our Order Backlog of approximately $137.7 million as of March 31, 2023. Our Order Backlog represents the estimated aggregate value of orders at a given time for which customers have made contractual commitments and our 12-month Order Book represents the aggregate expected value of that portion of the Order Backlog that the Company expects to deliver in the subsequent 12-month period.

Our outlook expectations are based on our internal forecast which reflects an assessment of overall business conditions and takes into account actual sales, operating expenses, capital expenditures, and financial results in the first four months of 2023; sales orders received for units and services expected to be delivered in the remainder of 2023; purchase and cost commitments currently in existence for fiscal 2023; an estimate with respect to the generation of new sales and the timing of deliveries in each of our markets for the balance of 2023; an estimate of purchase and cost commitments to be generated in each of our locations for the balance of 2023; and assumes an average U.S. dollar exchange rate in the mid $0.70’s in relation to the Canadian dollar for the remainder of 2023.

The primary risk factors to our business outlook expectations for 2023 are customer, production, or program delays or cancellations in delivering against existing power products and technology solutions orders and delays from forecast in terms of closing and delivering expected sales; adverse macro-economic and political conditions including trade, public health, and other geopolitical risks; changes in government subsidy and incentive programs; inadequate investment in hydrogen infrastructure and / or excessive hydrogen fuel costs, all of which could negatively impact our customers’ access to capital and the success of their program plans which could adversely impact our business including potential changes, delays or accelerations in our expected operating and capital equipment requirements; disruptions due to delays of supply of key materials and components from third party suppliers; disruptions as a result of our reliance on a limited number of technology service customers including Weichai Ballard JV, which are reliant on their internal commercialization plans and budget requirements; disruptions as a result of delays in achieving technology solutions program milestones; disruptions as a result of our reliance on a limited number of customers and certain of those customer’s internal stack development and commercialization plans; and fluctuations in the Canadian dollar relative to the U.S. dollar, as a significant portion of our operating expense commitments and capital expenditure commitments are priced in Canadian dollars.

Our Order Backlog and our 12-month Order Book are currently comprised of a relatively limited number of contracts and a relatively limited number of customers. Given the relative immaturity of our industry and customer deployment programs, our Order Backlog and 12-month Order Book are potentially vulnerable to risk of cancellation, deferral or non-performance by our customers for a variety of reasons, including: risks related to continued customer commitment to a fuel cell program; risks related to customer liquidity; credit risks; risks related to changes, reductions or eliminations in government policies, subsidies and incentives; risks related to macro-economic and political conditions including trade, public health, and other geopolitical risks; risks related to slower market adoption; risks related to vehicle integration challenges; risks related to the development of effective hydrogen refueling infrastructure; risks related to the ability of our products to meet evolving market requirements; and supplier-related risks.

Certain of our customer supply agreements are also subject to certain conditions or risks, including achievement of certain product performance milestones, completion of product development programs, or customer cancellation provisions, and it is likely that some future supply agreements will also be subject to similar conditions and risks. There can be no assurance that we will achieve or satisfy the conditions or that customers will not cancel their orders. In addition, our supply agreements may include various pricing structures or reduced pricing tiers based on various factors, including volumes and timing. In setting these reduced pricing tiers, we may assume certain future product cost reductions which are subject to execution risk, including future commodity costs, supply chain costs, and production costs, and we may not be successful in achieving the planned cost reductions. In such circumstances, these agreements may become future onerous contracts if our gross margins become negative and the value of carried inventory to support product delivery under such contracts may also be adversely impacted.

Furthermore, potential fluctuations in our financial results make financial forecasting difficult. In addition, due to the early stage of development of the market for hydrogen fuel cell products, it is difficult to accurately predict future revenues, operating expenses, cash flows, or results of operations on a quarterly basis. The Company’s revenues, operating expenses, cash flows, and other operating results can vary significantly from quarter to quarter. As a result, quarter-to-quarter comparisons of revenues, operating expenses, cash flows, and other operating results may not be meaningful; instead, we believe our operating performance should be assessed over a number of quarters and years. It is likely that in one or more future quarters, financial results will fall below the expectations of securities analysts and investors and the trading price of the Company's shares may be materially and adversely affected as a result.

4.RECENT DEVELOPMENTS (Including Contractual Updates)

Ballard Joins United Nations Global Compact Initiative

On April 5, 2023, we announced that we have joined the United Nations (“UN”) Global Compact initiative – a voluntary leadership platform for the development, implementation and disclosure of responsible business practices. The UN Global Compact is a call to companies everywhere to align their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption, and to take action in support of UN goals and issues embodied in the Sustainable Development Goals.

150-Million-Kilometer Milestone

On March 27, 2023, we announced that our PEM fuel cells have now powered FCEVs in commercial Heavy and Medium-Duty Motive vehicles for more than 150 million kilometers. This is roughly equivalent to circling the Earth over 3,700 times. To reach this milestone, Ballard fuel cells powered over 3,800 buses and trucks, providing zero-emission mobility solutions in approximately 15 countries around the world.

Order for 3.6 MW of fuel cells for zero emission stationary power

On May 3, 2023, we announced an order for 3.6 megawatts (MW) of fuel cell systems from a European provider of clean energy solutions for critical stationary power applications. We expect to deliver 36 x 100 kW systems in 2023 and 2024. Ballard’s fuel cell systems will be integrated into stationary power units which provide zero-emission power for a range of applications, including construction sites, EV charging stations, and data centers.

Order from CrossWind to supply fuel cell system for 1 MW stationary power project

On January 23, 2023, we announced an order to supply a fuel cell system to CrossWind, a joint-venture between Shell and Eneco. The Ballard fuel cell system is to be integrated in the Hollandse Kust Noord offshore wind project. The Hollandse Kust Noord offshore wind project, located off the coast of the Netherlands, is expected to have a capacity of 759 MW to generate at least 3.3 TWh of energy per year.

CrossWind intends to use various new technologies to manage the intermittent wind power generation, including the use of water electrolysis to convert wind power into green hydrogen for energy storage. Ballard’s hydrogen fuel cells will utilize the green hydrogen as fuel to regenerate stable and dispatchable power.

Ballard is to supply a containerized fuel cell power solution with a peak power capacity of 1 MW, with delivery expected in 2024.

Audi AG

On June 11, 2018, we announced the signing of a 3.5-year extension to our technology solutions contract with Audi AG (“Audi”), part of the Volkswagen Group. The program with Audi is substantially complete as of March 31, 2023. The program, through a series of technical milestone awards, encompassed automotive fuel cell stack development as well as system design support activities for the benefit of Audi.

Revenue earned from this and other agreements with Audi ($0.2 million in the first quarter of 2023; $1.7 million in the first quarter of 2022; $5.6 million in fiscal 2022) is recorded primarily as technology solutions revenues in our Emerging and Other market.

Order from First Mode for 30 additional hydrogen fuel cells for diesel-free mining trucks

On March 1, 2023, we announced a purchase order to supply First Mode with 30 hydrogen fuel cell modules – totaling 3 megawatts – to power several hybrid hydrogen and battery ultra-class mining haul trucks. This is the equivalent of approximately 4,000 horsepower.

The 30 Ballard hydrogen fuel cell modules are to be integrated into clean energy powerplants built in Seattle, Washington and installed into ultra-class haul trucks to be operated at First Mode’s Proving Grounds in Centralia, Washington. These trucks are estimated to save 2,600 tons of diesel fuel each year.

Project with Adani to develop a hydrogen fuel cell truck for mining & transportation

On January 17, 2023, we announced the signing of an agreement to launch a pilot project to develop a hydrogen fuel cell electric truck (“FCET”) for mining logistics and transportation with Adani Enterprises Limited (“AEL”), part of the diversified Adani portfolio of companies, and Ashok Leyland.

The demonstration project will be led by AEL, a company focused on both mining operations and developing green hydrogen projects for sourcing, transporting, and building out hydrogen refueling infrastructure. Ballard will supply the FCmove™ fuel cell engine for the hydrogen truck and Ashok Leyland, one of the largest manufacturers of buses in the world, will provide the vehicle platform and technical support.

The FCET is scheduled to be launched in India in 2023. The hydrogen powered mining truck utilizing Ballard’s 120 kW PEM fuel cell technology is expected to weigh 55 tons, have three hydrogen tanks, and a 200-km working range.

Weichai Power Co., Ltd. and Weichai Ballard Hy-Energy Technologies Co., Ltd.

On November 13, 2018, we announced the closing of a strategic collaboration transaction with Weichai. Ballard’s strategic collaboration with Weichai included:

•Equity Investment – an equity investment in Ballard made by Weichai representing a 19.9% interest in the Company at that time. Weichai currently holds an approximate 15.4% interest in Ballard.

Ballard entered into an investor rights agreement with Weichai under which: (a) so long as Weichai directly or indirectly holds at least 10% of Ballard’s outstanding shares, it has an anti-dilution right entitling it to maintain its percentage ownership in Ballard by subscribing for Common Shares from treasury at the same price as Ballard distributes Common Shares to other investors (to date, Weichai’s anti-dilution rights with respect to all previous offerings of the Company have expired unexercised); (b) for so long as Weichai directly or indirectly holds at least 15% of Ballard’s outstanding Common Shares, it has the right to nominate two directors to Ballard’s board of directors; and (c) if there is a third-party offer to buy Ballard, Weichai has the right to make a superior proposal or otherwise it must vote its Common Shares in accordance with the recommendation of Ballard’s board of directors.

•China Joint Venture and Technology Transfer Agreement – Weichai and Ballard have established a joint venture company in Shandong Province to support China’s Fuel Cell Electric Vehicle market, with Weichai holding a controlling ownership interest of 51% and Ballard holding a 49% ownership position. Weichai Ballard JV was established in the fourth quarter of 2018. During fiscal 2018 through fiscal 2022, Weichai made its committed capital contributions totaling RMB 561.0 million and Ballard

made its committed capital contributions totaling RMB 539.0 million (equivalent to $79.4 million). Weichai holds three of five Weichai Ballard JV board seats and Ballard holds two, with Ballard having certain shareholder protection provisions.

The Weichai Ballard JV develops and manufactures fuel cell modules and components including Ballard’s LCS bi-polar plates, fuel cell stacks and FCgen®-LCS-based power modules for bus, commercial truck, and forklift applications with exclusive rights (subject to certain conditions) in China and is to pay Ballard a total of $90 million under a program to develop and transfer technology to Weichai Ballard JV in order to enable these manufacturing activities. Revenue earned from the $90 million Weichai Ballard JV technology transfer agreement ($0.6 million in the first quarter of 2023; $2.3 million in the first quarter of 2022; $6.0 million in fiscal 2022; $18.2 million in fiscal 2021; $21.2 million in fiscal 2020; $22.5 million in fiscal 2019; $1.2 million in fiscal 2018) is recorded primarily as technology solutions revenues in our HD-Mobility Truck market. During the fourth quarter of 2018, we received an initial 10% or $9.0 million prepayment from Weichai Ballard JV for this program with additional amounts paid to us as program milestones are successfully completed. We retain an exclusive right to the developed technologies outside China, subject to certain restrictions on sublicensing outside China. The Weichai Ballard JV will also purchase MEAs for FCgen®-LCS fuel cell stacks exclusively from Ballard under a long-term supply agreement.

•Fuel Cell Sales – On December 16, 2019, we announced the receipt of a purchase order from Weichai Ballard JV for the delivery of MEAs valued at approximately $19 million under a long-term MEA supply agreement. Revenue earned from this agreement ($0.3 million in the first quarter of 2023; $0.5 million in the first quarter of 2022; $1.0 million in fiscal 2022; $2.1 million in fiscal 2021; $8.8 million in fiscal 2020) is recorded primarily as product revenue in our HD-Mobility Truck market. As of March 31, 2023, an additional $6.9 million of revenue associated with shipments on this order to Weichai Ballard JV remain unrecognized until these products are ultimately sold by Weichai Ballard JV.

The Weichai Ballard JV operation, located in Weifang, Shandong Province, China, has commenced production activities of LCS bi-polar plates, LCS fuel cell stacks and LCS-based modules to power bus and truck FCEVs for the China market. After recent production automation projects, the Weichai Ballard JV is expected to have annual production capacity of 40,000 fuel cell stacks which equates to approximately 20,000 engines.

Guangdong Synergy Ballard Hydrogen Power Co., Ltd.

During 2017, Synergy Ballard JVCo commenced operations utilizing Ballard’s FCveloCity®-9SSL fuel cell stack technology in the city of Yunfu in China’s Guangdong Province. Ballard has a non-controlling 10% interest in the joint venture, Synergy Ballard JVCo, together with Guangdong Nation Synergy Hydrogen Power Technology Co., Ltd. (a member of the “Synergy Group”) who has a 90% interest. The fuel cell stacks manufactured by Synergy Ballard JVCo are expected to be used primarily in fuel cell engines assembled in China to provide propulsion power for zero-emission fuel cell electric buses and commercial vehicles in China.

Synergy Ballard JVCo has an exclusive license to manufacture and sell FCveloCity®-9SSL stacks in China until September 30, 2026. Exclusivity is subject to Synergy Ballard JVCo maintaining certain performance criteria and compliance with: a code of ethics; Ballard’s quality policies and branding practices; payment terms; certain intellectual property covenants; achievement of certain minimum annual MEA volume commitments through 2026; and certain financing conditions.

Ballard contributed $1.0 million for its 10% interest in Synergy Ballard JVCo in 2017, currently recognized at nil value. We have no obligation to provide future funding to Synergy Ballard JVCo. We have recently entered into an agreement to sell our 10% interest in Synergy Ballard JVCo to the Synergy Group for nominal consideration. The transaction is expected to close in the second quarter of 2023.

Revenue earned from MEA sales and other agreements with Synergy Ballard JVCo (nil million in the first quarter of 2023 and 2022; $0.1 million in fiscal 2022; $3.4 million in fiscal 2021; $8.2 million in fiscal 2020) is primarily recorded as product revenues in our HD-Mobility Bus market.

We report our results in the single operating segment of Fuel Cell Products and Services. For 2023, we have made certain changes in the presentation of revenues by application comprising our Fuel Cell Products and Services operating segment. Our Fuel Cell Products and Services segment consists of the sale of PEM fuel cell products and services for a variety of applications including Heavy-Duty Mobility (consisting of bus, truck, rail, and marine applications), Stationary Power, and Emerging and Other Markets (consisting of material handling, off-road, and other applications). Revenues from the delivery of Services, including technology solutions, after sales services and training, are included in each of the respective markets.

For 2023, we have updated the classification and presentation of revenue by market application. See Section 5.2 for 2022 Revenues by quarter under the above classification methodology.

Fuel Cell Products and Services Revenues of $13.3 million for the first quarter of 2023 decreased (37%), or ($7.7) million, compared to the first quarter of 2022. The (37%) decrease was driven by lower Stationary, Emerging and Other, and Heavy-Duty Mobility market revenues. Lower revenues were recognized across all regions.

Heavy-Duty Mobility revenues of $8.7 million decreased ($1.1) million, or (11%), as lower shipments of fuel cell bus and truck fuel products were only partially offset by higher sales of marine and rail products. Excluding product and technology solutions service sales to Weichai Ballard JV in each of the respective periods, Heavy-Duty Mobility revenues earned from other customers increased by $1.2 million, or 18%, in the first quarter of 2023 compared to the first quarter of 2022. Heavy-Duty Mobility revenues on a quarter-to-quarter basis are impacted by product mix due to varying customer requirements and various fuel cell products, including numerous power configurations required by our customers (and the resulting impact on selling price) of our fuel cell modules, fuel cell stacks, MEAs, and related component and parts kits. Heavy-Duty Mobility revenues of $8.7 million in the first quarter of 2023 includes service revenues of $0.6 million earned on the Weichai Ballard JV technology transfer program; $0.4 million from Weichai Ballard JV for the supply of a mix of certain fuel cell products and components that will be used in the assembly of modules to power zero-emission FCEVs in China; and $7.7 million from a variety of customers in Europe, North America and China including CP Rail, Solaris, Quantron, Wrightbus, Van Hool, and others, primarily for shipments of FCmove™-HD, FCmove™-HD+, FCmove™-XD, FCmove™-MD, FCwave™, and FCveloCity®-HD7 fuel cell modules and related components for their respective bus, truck, rail and marine programs.

Heavy-Duty Mobility revenues of $9.8 million in the first quarter of 2022 includes service revenues of $2.3 million earned on the Weichai Ballard JV technology transfer program; $1.0 million to Weichai Ballard JV for the supply of a mix of certain fuel cell products and components that will be used in the assembly of modules to power zero-emission FCEVs in China; and $6.5 million to a variety of customers in Europe, North America and China including Wrightbus, New Flyer, Van Hool, Solaris, and others, primarily for shipments of FCveloCity®-HD7, FCmove™-HD, and FCwave™ fuel cell modules and related components for their respective bus and train programs.

Stationary revenues of $2.5 million decreased ($3.4) million, or (58%), due primarily to a decrease in sales of stationary power generation fuel cell modules, stacks, products and services in Australia. Stationary revenues also include technology solutions program revenues from a variety of customer programs for stationary applications including HDF Energy, Siemens AG (“Siemens”) and others.

Emerging and Other market revenues of $2.1 million decreased ($3.3) million, or (61%), primarily due primarily to lower fuel cell stack shipments to Plug Power and lower service revenues to Audi. Emerging and Other market revenues include technology solutions program revenues on the substantially complete Audi program of $0.2 million in the first quarter of 2023, compared to $1.7 million earned in the first quarter of 2022.

Fuel Cell Products and Services gross margins were ($5.6) million, or (42%) of revenues, for the first quarter of 2023, compared to ($0.2) million, or (1%) of revenues, for the first quarter of 2022. The decrease in gross margin of ($5.3) million was driven primarily by a shift to lower overall product margin and service revenue mix including the impacts of pricing strategy, higher fixed overhead costs due primarily to the expansion of manufacturing capacity and lower overall revenues, increases in supply costs, higher negative warranty adjustments, and increased inventory impairment and onerous contract provisions, resulting in an (41) percentage point decrease in gross margin as a percent of revenues.

Gross margin in the first quarter of 2023 was negatively impacted by net increases in inventory impairment and onerous contract provisions of ($0.6) million due primarily to excess and impaired Heavy-Duty Mobility product inventory and pricing strategy; and negatively impacted by net warranty adjustments of ($0.3) million related primarily to increased service costs. Gross margin in the first quarter of 2022 was negatively impacted by net increases in inventory impairment and onerous contract provisions of ($0.5) million; and by net warranty adjustments of ($0.1) million.

Revenue by quarter for fiscal 2022 presented under our updated 2023 classification methodology is as follows:

Cash Operating Costs and its components of Research and Product Development (cash operating cost), General and Administrative (cash operating cost), and Sales and Marketing (cash operating cost) are non-GAAP measures. We use certain Non-GAAP measures to assist in assessing our financial performance. Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. See the reconciliation of Cash Operating Costs to GAAP in the Supplemental Non-GAAP Measures and Reconciliations section and the reconciliation of Research and Product Development (cash operating cost), General and Administrative (cash operating cost), and Sales and Marketing (cash operating cost) to GAAP in the Operating Expense section. Cash Operating Costs adjusts operating expenses for stock-based compensation expense, depreciation and amortization, impairment losses on trade receivables, restructuring charges, the impact of unrealized gains or losses on foreign exchange contracts, acquisition related costs, and financing charges.

Total Operating Expenses (excluding Other operating expenses) for the first quarter of 2023 were $36.0 million, an increase of $5.9 million, or 19%, compared to the first quarter of 2022. The increase was driven by higher research and product development expenses of $4.6 million, higher sales and marketing expenses of $1.0 million, and higher general and administrative expenses of $0.2 million.

Cash Operating Costs (see Supplemental Non-GAAP Measures and Reconciliations) for the first quarter of 2023 were $32.0 million, an increase of $5.9 million, or 23%, compared to the first quarter of 2022. The increase was driven by higher research and product development cash operating costs of $4.5 million, higher sales and marketing cash operating costs of $1.1 million, and higher general and administrative cash operating costs of $0.4 million.

The increase in operating expenses and cash operating costs in the first quarter of 2023 was driven primarily by increased expenditure on technology and product development activities including the design and development of next generation fuel cell stacks and engines for bus, truck, rail, marine and stationary applications, investment in hydrogen powertrain systems (A-Drive) with battery-FC hybrid architecture, and increased continuation engineering investment in our existing fuel cell products, including activities related to product cost reduction. Increased program investment includes expenditures related to our FCmove™-HD+, a fuel cell module designed for buses and medium and heavy-duty trucks, our FCgen®-HPS High-Power Density Fuel Cell Stack for light-medium-and heavy-duty vehicles, our FCwave™ Fuel Cell Module for marine applications, and on the ongoing improvement of all of our fuel cell products including our high performance fuel cell module, the FCmove™-HD, and our high performance liquid-cooled fuel cell stack, the FCgen®-LCS. In addition, sales and marketing costs increased significantly due to increased commercial expenditures and staffing in Europe, China, and North America.

Operating expenses also include the impact of increases in functional staffing levels and the impact of inflationary wage pressures throughout our operations.

These operating expense increases were partially offset by relatively lower labour costs in Canada in the first quarter of 2023 on our Canadian operating cost base as the Canadian dollar, relative to the U.S. dollar, was approximately (6%) lower in the first quarter of 2023 compared to the fourth quarter of 2022.

    EBITDA and Adjusted EBITDA are non-GAAP measures. We use certain Non-GAAP measures to assist in assessing our financial performance. Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. See reconciliation of Adjusted EBITDA to GAAP in the Supplemental Non-GAAP Measures and Reconciliations section. Adjusted EBITDA adjusts EBITDA for stock-based compensation expense, transactional gains and losses, acquisition related costs, finance and other income, recovery on settlement of contingent consideration, asset impairment charges, and the impact of unrealized gains and losses on foreign exchange contracts.

Adjusted EBITDA (see Supplemental Non-GAAP Measures and Reconciliations) for the first quarter of 2023 was ($38.3) million, compared to ($27.5) million for the first quarter of 2022. The ($10.7) million increase in Adjusted EBITDA loss was driven primarily by the decrease in gross margin of ($5.3), the increase in Cash Operating Costs of ($5.9) million, the increase in restructuring related costs of ($0.8) million due to certain cost cutting measures, partially offset by lower equity in loss of investment in joint venture and associates of $1.4 million primarily attributed to the operations of Weichai Ballard JV.

Net loss for the first quarter of 2023 was ($33.9) million, or ($0.11) per share, compared to a net loss of ($40.4) million, or ($0.14) per share, in the first quarter of 2022. The $6.5 million decrease in net loss in the first quarter of 2023 was driven by higher finance and other income of $17.8 million due to increased investment income of $9.5 million and improved mark to market and foreign exchange impacts of $8.1 million on our long-term investments including Forsee Power and certain hydrogen infrastructure and growth equity funds. These net loss improvements were partially offset by the increase in Adjusted EBITDA loss of ($10.7) million, and by higher acquisition related costs of ($0.5) million.

In addition, operating margins, and costs in the first quarter of 2023 were also impacted by the positive impact of a weaker Canadian dollar, relative to the U.S. dollar, as compared to the first quarter of 2022. As a significant amount of our net operating costs (primarily labour) are denominated in Canadian dollars, gross margin, operating expenses, Adjusted EBITDA, and net loss are impacted by changes in the Canadian dollar relative to the U.S. dollar. As the Canadian dollar relative to the U.S. dollar was approximately (6%), or (500) basis points, lower in the first quarter of 2023 as compared to the first quarter of 2022, positive foreign exchange impacts on our Canadian operating margins and cost base were approximately $1.5 million. A $0.01 decrease in the Canadian dollar, relative to the U.S. dollar, positively impacts annual operating margins and costs by approximately $1.2 million.

Research and Product Development (cash operating cost) is a non-GAAP measure. We use certain Non-GAAP measures to assist in assessing our financial performance. Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. Research and Product Development (cash operating cost) adjusts Research and product development expense for depreciation and amortization expense and stock-based compensation expense. See the reconciliation of the adjustments to Research and product development expense in the table above.

Research and product development expenses for the three months ended March 31, 2023, were $25.7 million, an increase of $4.6 million, or 22%, compared to the corresponding period of 2022. Excluding depreciation and amortization expense and stock-based compensation expense, research, and product development cash operating costs (see Supplemental Non-GAAP Measures and Reconciliations) were $22.7 million in the first quarter of 2023, an increase of $4.5 million, or 25%, compared to the first quarter of 2022.

The $4.5 million, or 25%, increase in research and development cash operating costs (see Supplemental Non-GAAP Measures and Reconciliations) in the first quarter of 2023, as compared to the first quarter of 2022, was driven primarily by increased expenditure on technology and product development activities including the design and development of next generation fuel cell stacks and engines for bus, truck, rail, marine and stationary applications, investment in hydrogen powertrain systems (A-Drive) with battery-FC hybrid architecture, and increased continuation engineering investment in our existing fuel cell products, including activities related to product cost reduction. Increased program investment includes expenditures related to our FCmove™-HD+, a fuel cell module designed for buses and medium and heavy-duty trucks, our FCgen®-HPS High-Power Density Fuel Cell Stack for light-medium-and heavy-duty vehicles, our FCwave™ Fuel Cell Module for marine applications, and on the ongoing improvement of all of our fuel cell products including our high performance fuel cell module, the FCmove™-HD, and our high performance liquid-cooled fuel cell stack, the FCgen®-LCS.

Research and product development expenses also include the impact of increases in functional staffing levels and the impact of inflationary wage pressures. These operating expense increases were partially offset by relatively lower labour costs in Canada in 2023 on our Canadian operating cost base as the Canadian dollar, relative to the U.S. dollar, was approximately (6%) lower in the first quarter of 2023, compared to the first quarter of 2022.

Depreciation and amortization expense included in research and product development expense for the three months ended March 31, 2023, was $1.7 million, compared to $1.6 million for the corresponding period of 2022. Depreciation and amortization expense relate primarily to amortization expense on our intangible assets and depreciation expense on our research and product development facilities and equipment.

Stock-based compensation expense included in research and product development expense for the three months ended March 31, 2023, was $1.3 million, relatively consistent with the corresponding period of 2022.

General and Administrative (cash operating cost) is a non-GAAP measure. We use certain Non-GAAP measures to assist in assessing our financial performance. Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. General and Administrative (cash operating cost) adjusts General and administrative expense for depreciation and amortization expense, stock-based compensation expense and the impact of unrealized gains or losses on foreign exchange contracts. See the reconciliation of the adjustments to General and administrative expense in the table above.

General and administrative expenses for the three months ended March 31, 2023, were $6.5 million, an increase of $0.2 million, or 4%, compared to the corresponding period of 2022. Excluding depreciation and amortization expense, stock-based compensation expense, and the impact of unrealized gains (losses) on foreign exchange contracts, general and administrative cash operating costs (see Supplemental Non-GAAP Measures and Reconciliations) were $5.8 million in the first quarter of 2023, an increase of $0.4 million, or 7%, compared to the first quarter of 2022.

The $0.4 million, or 7%, increase in general and administrative cash operating costs (see Supplemental Non-GAAP Measures and Reconciliations) in the first quarter of 2023, as compared to the first quarter of 2022, was due primarily to increases in functional staffing levels primarily in Europe and the impact of inflationary wage pressures throughout our operations.

Depreciation and amortization expense included in general and administrative expense for the three months ended March 31, 2023, was $0.5 million, consistent with the corresponding period of 2022. Depreciation and amortization expense relate primarily to our office and information technology intangible assets including our ongoing investment in our ERP system.

Stock-based compensation expense included in general and administrative expense for the three months ended March 31, 2023, was $0.8 million, relatively consistent with the corresponding period of 2022.

The impact of unrealized gains (losses) on foreign exchange contracts included in general and administrative expense for the three months ended March 31, 2023, was $0.5 million, compared to $0.3 million for the corresponding period of 2022. We use forward foreign exchange contracts to help manage our exposure to currency rate fluctuations. We record these contracts at their fair value as of the balance sheet date as either assets or liabilities with any changes in fair value in the period recorded in profit or loss (general and administrative expense) as these contracts are not designated or qualified under hedge accounting criteria.

Sales and Marketing (cash operating cost) is a non-GAAP measure. We use certain Non-GAAP measures to assist in assessing our financial performance. Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. Sales and Marketing (cash operating cost) adjusts Sales and marketing expense for depreciation and amortization expense and stock-based compensation expense. See the reconciliation of the adjustments to Sales and marketing expense in the table above.

Sales and marketing expenses for the three months ended March 31, 2023, were $3.9 million, an increase of $1.0 million, or 37%, compared to the corresponding period of 2022. Excluding stock-based compensation expense, sales and marketing cash operating costs (see Supplemental Non-GAAP Measures and Reconciliations) was $3.6 million in the first quarter of 2023, an increase of $1.1 million, or 42%, compared to the first quarter of 2022.

The $1.1 million, or 42%, increase in sales and marketing cash operating costs (see Supplemental Non-GAAP Measures and Reconciliations) in the first quarter of 2023, as compared to the first quarter of 2022, due primarily to increased commercial expenditures and staffing in Europe, China, and North America.

Stock-based compensation expense included in sales and marketing expense for the three months ended March 31, 2023, was $0.3 million, relatively consistent with the corresponding period of 2022.

Other operating expenses for the three months ended March 31, 2023, was $1.5 million, compared to $0.1 million for the corresponding period of 2022. The following table provides a breakdown of other operating expense for the reported periods:

Restructuring and related costs for the three months ended March 31, 2023 were $0.8 million, compared to nominal amounts for the corresponding period of 2022, and consist primarily of certain cost cutting measures and related personnel change costs.

Acquisition related charges for the three months March 31, 2023 was $0.7 million, compared to $0.1 million for the corresponding period of 2022, and consist primarily of legal, advisory, and transaction related costs incurred due to certain corporate development activities.

Net impairment loss (recovery) on trade receivables for the three months ended March 31, 2023, and 2022 were nominal. If we recover on an impaired trade receivable through legal or other means, the recovered amount is recognized in the period of recovery as a reversal of the impairment loss.

Finance income (loss) and other for the three months ended March 31, 2023 was $10.3 million, compared to ($7.5) million for the corresponding period of 2022. The following table provides a breakdown of finance and other income (loss) for the reported periods:

Employee future benefit plan expense for the three months ended March 31, 2023 was nominal, relatively consistent with the corresponding period, and consists primarily of interest cost on plan obligations over the expected return on plan assets on a curtailed defined benefit pension plan for certain former United States employees.

Investment and other income for the three months ended March 31, 2023 was $10.6 million, compared to $1.1 million for the corresponding period of 2022. Amounts were earned on our cash, cash equivalents and short-term investments and have changed proportionately with the overall increase in market interest rates during 2023 and 2022 and the relative change in our overall average monthly cash balances.

Mark to market gain (loss) on financial assets for the three months ended March 31, 2023 was ($0.5) million, compared to ($8.6) million for the corresponding period of 2022. Mark to market gain (loss) in 2023 and 2022 consist primarily of changes in the fair value of our long-term financial investments including Forsee Power and certain hydrogen infrastructure and growth equity funds. Mark to market gains and losses are also impacted by the conversion of these long-term financial assets from their respective European Euro or Great British pound denominated investment to the U.S. dollar.

Foreign exchange gains (losses) for the three months ended March 31, 2023, were $0.2 million, consistent with the corresponding periods of 2022. Foreign exchange gains and losses are attributable primarily to the effect of the changes in the value of the Canadian dollar, relative to the U.S. dollar, on our Canadian dollar-denominated net monetary position. Foreign exchange gains and losses are also impacted by the conversion of Ballard Power Systems Europe A/S’ assets and liabilities from the Danish Kroner to the U.S. dollar at exchange rates in effect at each reporting date are recorded in other comprehensive income (loss).

Government levies for the three months ended March 31, 2023 was nil, compared to ($0.1) million for the corresponding period of 2022. Government levies relate primarily to withholding taxes deducted from proceeds earned on certain commercial contracts.

Finance expense for the three months ended March 31, 2023 was ($0.3) million, consistent with the corresponding periods of 2022. Finance expense represents the interest expense incurred on our right-of-use assets with a lease term of greater than 12-months, including our head office building, manufacturing facility, and related storage facilities in Burnaby, British Columbia, as well as similar right-of-use assets in all of our subsidiaries.

Equity in income (loss) of investment in joint venture and associates for the three months ended March 31, 2023, was ($0.9) million, compared to ($2.2) million for the corresponding period of 2022. Equity in loss of investment in joint venture and associates relates to the pickup of 49% of the net income (loss) of Weichai Ballard JV due to our 49% ownership position, and 10% of the net income (loss) of Synergy Ballard JVCo due to our 10% ownership position. Both investments in China are accounted for using the equity method of accounting.

The loss of investment in joint venture and associates in 2023 and 2022 is primarily attributed to the operations of Weichai Ballard JV and includes research and product development expenses in the periods consisting primarily of amounts expended on the ongoing $90 million technology transfer agreement with Ballard as Weichai Ballard JV continues to establish operations. Weichai Ballard JV manufactures Ballard’s next-generation LCS bi-polar plates, fuel cell stacks and LCS-based power modules for bus, commercial truck, and forklift applications with certain exclusive rights in China.

The following table provides summary financial data for our last eight quarters:

Summary of Quarterly Results: There were no significant seasonal variations in our quarterly results. Variations in our net loss for the above periods were affected primarily by the following factors:

•Revenues: Variations in fuel cell product and service revenues reflect the demand and timing of our customers’ fuel cell vehicle, bus, and fuel cell product deployments as well as the demand and timing of their engineering services projects. Variations in fuel cell product and service revenues also reflect the timing of work performed and the achievements of milestones under long-term fixed price contracts.

•Operating expenses: Operating expenses were negatively impacted in the fourth quarter of 2022 by restructuring related costs of ($5.0) million due to the post-acquisition restructuring of operations at Ballard Motive Solutions in the U.K, and negatively impacted as of the fourth quarter of 2021 by the acquisition and integration of Ballard Motive Solutions (formerly Arcola). Operating expenses also include the impact of changes in the value of the Canadian dollar, versus the U.S. dollar, on our Canadian dollar denominated expenditures.

•Net loss: Net loss is impacted by the above noted impacts on Revenues and Operating expenditures. Net loss in the fourth quarter of 2022 was negatively impacted by intangible asset impairment charges of ($13.0) million and positively impacted by the recovery on settlement of contingent consideration of $9.9 million, both items arising from the post-acquisition restructuring of operations at Ballard Motive Solutions in the U.K. Net loss in the first quarter of 2023, the fourth quarter of 2022, the third quarter of 2022, the second quarter of 2022, the first quarter of 2022, and the fourth quarter of 2021 was also impacted by mark to market gains (losses) on financial assets of ($0.5) million, $2.9 million, $1.7 million, ($12.9) million, ($8.6) million, and ($10.3) million, respectively, related primarily to our investment in Forsee Power and certain hydrogen infrastructure and growth equity funds.

6.CASH FLOWS, LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were $863.8 million as of March 31, 2023, compared to $913.7 million as of December 31, 2022. The ($50.0) million decrease in cash and cash equivalents in 2023 was driven by net cash operating losses (excluding non-cash items) of ($27.6) million, net working capital outflows of ($9.0) million, purchases of property, plant and equipment and intangible assets of ($11.6) million, long-term financial investments of ($0.9) million consisting of an investment in certain hydrogen infrastructure and growth equity funds, and by finance lease repayments of ($0.9) million.

For the three months ended March 31, 2023, cash used by operating activities was ($36.6) million compared to ($41.7) million for the three months ended March 31, 2022. The $5.1 million decrease in cash used by operating activities in the first quarter of 2023, as compared to the first quarter of 2022, was driven by the decrease in working capital requirements of $8.1 million, partially offset by the increase in cash operating losses of ($3.0) million.

The ($3.0) million increase in cash operating losses in the first quarter of 2023 was driven by the increase in Adjusted EBITDA loss of ($10.7) million offset by the impact of several items included in cash operating losses but excluded from Adjusted EBITDA loss or vice-versa including: higher finance and other income (excluding mark to market fair value changes on investments) of $9.7 million, higher restructuring related costs of ($0.8) million, higher acquisition related costs of ($0.5) million, and lower equity investment losses in joint venture and associates of ($1.4) million.

The total change in working capital of ($9.0) million in the first quarter of 2023 was driven by higher inventory of ($6.4) million primarily to support expected product shipments in 2023 and to help mitigate ongoing supply chain disruptions, lower accounts payable and accrued liabilities of ($4.7) million primarily as a result of the timing of supplier payments and annual compensation awards, and by higher prepaid expenses of ($3.2) million primarily due to the timing of certain program requirements. These first quarter of 2023 outflows were partially offset by lower accounts and contract receivables of $5.2 million primarily due to the timing of revenues and the related customer collections.

The total change in working capital of ($17.1) million in the first quarter of 2022 was driven by lower accounts payable and accrued liabilities of ($6.9) million primarily as a result of the timing of supplier payments and annual compensation awards, higher inventory of ($6.0) million primarily to support expected product shipments in 2022 and to help mitigate ongoing COVID-19 supply chain disruptions, higher prepaid expenses of ($3.1) million primarily due to the timing of annual insurance renewals, and by higher accounts and contract receivables of ($1.2) million primarily as a result of the timing of revenues and the related customer collections.

Investing activities resulted in net cash outflows of ($12.5) million for the three months ended March 31, 2023, compared to net cash outflows of ($13.7) million for the corresponding period of 2022.

Investing activities in the first quarter of 2023 of ($12.5) million consist of additional long-term investments in certain hydrogen infrastructure and growth equity funds of ($0.9) million, and by capital expenditures of ($11.6) million incurred primarily for production and test equipment and certain intangible assets.

Investing activities in the first quarter of 2022 of ($13.7) million consist primarily of additional long-term investments in certain hydrogen infrastructure and growth equity funds of ($2.5) million, subsequent Milestone attainment cash acquisition investment in Ballard Motive Solutions of ($4.8) million, investments in associated companies of ($3.3) million for the twelfth equity contribution in our 49% investment in Weichai Ballard JV, and by capital expenditures of ($4.2) million incurred primarily for production and test equipment and certain intangible assets, partially offset by proceeds received on the sale of short-term investments of $1.0 million.

Financing activities resulted in net cash inflows (outflows) of ($0.8) million for the three months ended March 31, 2023, compared to net cash inflows (outflows) of ($0.3) million for the three months ended March 31, 2022.

Financing activities in the first quarter of 2023 of ($0.8) million consist of finance lease payments of ($0.9) million, partially offset by proceeds from the exercise of share purchase options of $0.2 million.

Financing activities in the first quarter of 2022 of ($0.3) million consist of finance lease payments of ($0.8) million, partially offset by proceeds from the exercise of share purchase options of $0.5 million.

As of March 31, 2023, we had total liquidity of $865.8 million. We measure liquidity as our net cash and short-term investment position, consisting of the sum of our cash, cash equivalents and short-term investments of $865.8 million, as we have no bank debt.

We have a Letter of Guarantee Facility (the “LG Facility”) enabling our bank to issue letters of guarantees, standby letters of credit, performance bonds, counter guarantees, counter standby letter of credit or similar credits on our behalf to from time to time up to a maximum of $2.0 million. As of March 31, 2023, there was nil outstanding on the LG Facility. We also have a $25 million Foreign Exchange Facility (the “FX Facility”) enabling us to enter into foreign exchange currency contracts (at face value amounts in excess of the FX Facility) secured by a guarantee from Export Development Canada. As of March 31, 2023, we had outstanding foreign exchange currency contracts to purchase a total of Canadian $38.5 million under the FX Facility.

Our liquidity objective is to maintain cash balances sufficient to fund at least six quarters of forecasted cash used by operating activities and contractual commitments. Our strategy to attain this objective is to continue our drive to attain profitable operations that are sustainable by executing a business plan that continues to focus on Fuel Cell Products and Services revenue growth, improving overall gross margins, maintaining discipline over Cash Operating Costs, managing working capital and capital expenditure requirements, and securing additional financing to fund our operations as needed until we do achieve profitable operations that are sustainable. We believe that we have adequate liquidity in cash and working capital to achieve our liquidity objective.

Failure to achieve or maintain this liquidity objective could have a material adverse effect on our financial condition and results of operations including our ability to continue as a going concern. There are also various risks and uncertainties affecting our ability to achieve this liquidity objective including, but not limited to, the market acceptance and rate of commercialization of our products, the ability to successfully execute our business plan, and general global economic conditions, certain of which are beyond our control. While we continue to make significant investments in product development and market development activities necessary to commercialize our products, make increased investments in working capital and capital expenditures as we grow our business, and make ongoing capital contributions in support of our investment in certain hydrogen infrastructure and growth equity funds, our actual liquidity requirements will also vary and will be impacted by future acquisitions and strategic partnerships and investments, our relationships with our lead customers and strategic partners including their ability to successfully finance and fund their operations and programs and agreements with us, our success in developing new channels to market and relationships with customers, our success in generating revenue growth from near-term product, service and licensing opportunities, our success in managing our operating expense and working capital requirements, foreign exchange fluctuations, and the progress and results of our research, development and demonstration programs.

We may also choose to pursue additional liquidity through the issuance of debt or equity in private or public market financings. To enable the timely issuance of equity securities in the public market, we renewed our Base Shelf Prospectus on file with the securities regulators in Canada on May 9, 2023.

The Base Shelf Prospectus, which is effective for 25-months ending in June 2025, was filed in each of the provinces and territories of Canada, and a corresponding shelf registration statement on Form F-10 was also filed with the United States Securities and Exchange Commission. These filings will enable offerings of securities at any time during the 25-month period that the Base Shelf Prospectus remains effective. No offerings of securities under this Base Shelf Prospectus have been issued to date.

No assurance can be given that any such additional liquidity will be available or that, if available, it can be obtained on terms favorable to the Company. If any securities are offered under the Base Shelf Prospectus, the terms of any such securities and the intended use of the net proceeds resulting from such offering would be established at the time of any offering and would be described in a supplement to the Base Shelf Prospectus filed with applicable Canadian securities regulators and/or the SEC, respectively, at the time of such an offering.

7.OTHER FINANCIAL MATTERS

Periodically, we use forward foreign exchange contracts to manage our exposure to currency rate fluctuations. We record these contracts at their fair value as either assets or liabilities on our statement of financial position. Any changes in fair value are either (i) recorded in other comprehensive income if formally designated and qualified under hedge accounting criteria; or (ii) recorded in profit or loss (general and administrative expense) if either not designated, or not qualified, under hedge accounting criteria. As of March 31, 2023, we had outstanding foreign exchange currency contracts to purchase a total of Canadian $38.5 million at an average rate of 1.3320 Canadian per U.S. dollar, resulting in an unrealized loss of Canadian ($0.5) million as of March 31, 2023. The outstanding foreign exchange currency contracts have not been designated under hedge accounting.

As of March 31, 2023, we did not have any other material obligations under guarantee contracts, retained or contingent interests in transferred assets, outstanding derivative instruments, or non-consolidated variable interests.

As of March 31, 2023, we had the following contractual obligations and commercial commitments calculated on a non-discounted basis (with the exception of Finance leases):

Long-term investments include an investment committing us to be a limited partner in HyCap, a newly created hydrogen infrastructure and growth equity fund. HyCap is to invest in a combination of hydrogen infrastructure projects and investments in companies along the hydrogen value chain. We have committed to investing £25.0 million (including £7.9 million invested as of March 31, 2023) into HyCap.

Long-term investments also include an investment committing us to be a limited partner in Clean H2, another newly created hydrogen infrastructure and growth equity fund. Clean H2 is to invest in a combination of hydrogen infrastructure projects and investments in companies along the hydrogen value chain. We have committed to investing €30.0 million (including €1.0 million invested as of March 31, 2023) into Clean H2.

In addition, we have outstanding commitments of $67.8 million as of March 31, 2023, related primarily to purchases of property, plant, and equipment. Capital expenditures and expenditures on other intangible assets pertain to our regular operations and are expected to be funded through cash on hand.

In connection with the acquisition of intellectual property from UTC in 2014, we have a royalty obligation in certain circumstances to pay UTC a portion of any future intellectual property sale and licensing income generated from certain of our intellectual property portfolio for a period of 15-years expiring in April 2029. No royalties were paid to UTC for the three months ended March 31, 2023 and for the years ended December 31, 2022 and 2021.

As of March 31, 2023, we retain a previous funding obligation to pay royalties of 2% of revenues (to a maximum of Canadian $5.4 million) on sales of certain fuel cell products for commercial distributed utility applications. No royalties have been incurred to date due to this agreement.

We also retain a previous funding obligation to pay royalties of 2% of revenues (to a maximum of Canadian $2.2 million) on sales of certain fuel cell products for commercial transit applications. No royalties have been incurred to date due to this agreement.

In the ordinary course of business or as required by certain acquisition or disposition agreements, we are periodically required to provide certain indemnities to other parties. As of March 31, 2023, we have not accrued any significant amount owing, or receivable, due to any indemnity agreements undertaken in the ordinary course of business.

Related parties include our 49% owned equity accounted investee, Weichai Ballard JV, and our 10% owned equity accounted investee, Synergy Ballard JVCo. Transactions between us and our subsidiaries are eliminated on consolidation. For the three months ended March 31, 2023, and 2022, related party transactions and balances with Weichai Ballard JV and Synergy Ballard JVCo total as follows:

We also provide key management personnel, being board directors and executive officers, certain benefits, in addition to their salaries. Key management personnel also participate in the Company’s share-based compensation plans. Key management personnel compensation is summarized in note 28 to our annual consolidated financial statements for the year ended December 31, 2022.

8.USE OF PROCEEDS

During 2021 and 2020, we completed the following offerings of our common shares (“Common Shares”):

•On February 23, 2021, we closed a bought deal offering of 14.87 million Common Shares at a price of $37.00 per Common Share for gross proceeds of $550.2 million and net proceeds of $527.3 million (the “2021 Offering”).

•On November 27, 2020, we closed a bought deal offering of 20.9 million Common Shares at a price of $19.25 per Common Share for gross proceeds of $402.5 million and net proceeds of $385.8 million (the “2020 Offering”).

•On September 1, 2020, we announced an at-the-market equity program to issue a total of 16.45 million Common Shares from treasury (the “$250 million ATM Program”). The 16.45 million Common Shares issued under the $250 million ATM Program were sold in the third and fourth quarters of 2020 at prevailing market prices at the time of sale for total gross proceeds of $250 million and total net proceeds of $244.1 million.

•On March 10, 2020, we announced an at-the-market equity program to allow the issuance of up to $75 million of Common Shares from treasury (the “$75 million ATM Program” and together with the $250 million ATM Program, the “2020 ATM Programs”). The 8.2 million Common Shares issued under the $75 million ATM Program were sold in the first half of 2020 at prevailing market prices at the time of sale for total gross proceeds of $66.7 million and total net proceeds of $64.7 million.

The net proceeds from the 2021 Offering and the 2020 Offering of $527.3 million and $385.8 million, respectively, were intended to be used to further strengthen the Company’s financial position, thereby providing additional flexibility to fund growth strategies, including through activities such as product innovation, investments in production capacity expansion and localization, future acquisitions and strategic partnerships and investments. The net proceeds from the 2020 ATM Programs of $308.8 million were intended to be used for general corporate purposes.

Pending their use, we disclosed our intention to invest the net proceeds from the 2021 Offering and the 2020 Offering in short-term, investment grade, interest bearing instruments or to hold them as cash and cash equivalents.

The following tables sets out a comparison of the Company’s disclosed expected use of net proceeds from the 2020 Offering and the 2020 ATM Programs to the actual use of such net proceeds to December 31, 2022. As of March 31, 2023, the net proceeds of $527.3 million from the 2021 Offering and residual unused amounts from the 2020 Offering and the 2020 ATM Programs were held in interest bearing cash accounts.

9.ACCOUNTING MATTERS

Our consolidated financial statements are prepared in accordance with IFRS, which require us to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Critical judgments that we have made in the process of applying our accounting policies and that have the most significant effect on the amounts recognized in the consolidated financial statements is limited to our assessment of our ability to continue as a going concern (See Note 2 (e) to our annual consolidated financial statements).

Our significant accounting policies are detailed in note 4 to our annual consolidated financial statements for the year ended December 31, 2022 and our condensed consolidated interim financial statements for the three months ended March 31, 2023. Effective January 1, 2023, we adopted a number of new standards and interpretations, but they did not have a material impact on our financial statements.

9.3     Key Sources of Estimation Uncertainty

The following are key assumptions concerning the future and other key sources of estimation uncertainty that have a significant risk of resulting in a material adjustment to the reported amount of assets, liabilities, income, and expenses within the next financial year.

Revenues are generated primarily from product sales, the license and sale of intellectual property and fundamental knowledge, and the provision of engineering services and technology transfer services. Product revenues are derived primarily from standard product sales contracts and from long-term fixed price contracts. Intellectual property and fundamental knowledge license revenues are derived primarily from standard licensing and technology transfer agreements. Engineering service and technology transfer service revenues are derived primarily from cost-plus reimbursable contracts and from long-term fixed price contracts.

Revenue is recognized when a customer obtains control of the goods or services. Determining the timing of the transfer of control, at a point in time or over time, requires judgment.

On standard product sales contracts, revenues are recognized when customers obtain control of the product, that is when transfer of title and risks and rewards of ownership of goods have passed, and when obligation to pay is considered certain. Invoices are generated and revenue is recognized at that point in time. Provisions for warranties are made at the time of sale. Revenue recognition for standard product sales contracts does not usually involve significant estimates.

On standard licensing and technology transfer agreements, revenues are recognized on the transfer of rights to a licensee, when it is determined to be distinct from other performance obligations, and if the customer can direct the use of, and obtain substantially all of the remaining benefits from the license as it exists at the time of transfer. In other cases, the proceeds are considered to relate to the right to use the asset over the license period and the revenue is recognized over that period. If it is determined that the license is not distinct from other performance obligations, revenue is recognized over time as the customer simultaneously receives and consumes the benefit. Revenue recognition for standard license and sale agreements does not usually involve significant estimates.

On cost-plus reimbursable contracts, revenues are recognized as costs are incurred, and include applicable fees earned as services are provided. Revenue recognition for cost-plus reimbursable contracts does not usually involve significant estimates.

On long-term fixed price contracts, the customer controls all of the work in progress as the services are being provided. This is because under these contracts, the deliverables are made to a customer’s specification, and if a contract is terminated by the customer, then the Company is entitled to reimbursement of the costs incurred to date plus the applicable gross margin. Therefore, revenue from these contracts and the associated costs are recognized as the costs are incurred over time. On long-term fixed price contracts, revenues are recognized over time using cumulative costs incurred to date relative to total estimated costs at completion to measure progress towards satisfying performance obligations. Generally, revenue is recognized by multiplying the expected consideration by the ratio of cumulative costs incurred to date to the sum of incurred and estimated costs for completing the performance obligation. The cumulative effect of changes to estimated revenues and estimated costs for completing a contract are recognized in the period in which the revisions are identified. If the estimated costs for completing the contract exceed the expected revenues on a contract, such loss is recognized in its entirety in the period it becomes known. Deferred revenue (i.e., contract liabilities) represents cash received from customers in excess of revenue recognized on uncompleted contracts.

•The determination of expected costs for completing a contract is based on estimates that can be affected by a variety of factors such as variances in the timeline to completion, the cost of materials, the availability and cost of labour, as well as productivity.

•The determination of potential revenues includes the contractually agreed amount and may be adjusted based on the estimate of our attainment on achieving certain defined contractual milestones. Management’s estimation is required in determining the amount of consideration for which the Company expects to be entitled and in determining when a performance obligation has been met.

Estimates used to determine revenues and costs of long-term fixed price contracts involve uncertainties that ultimately depend on the outcome of future events and are periodically revised as projects progress. There is a risk that a customer may ultimately disagree with management’s assessment of the progress achieved against milestones, or that our estimates of the work required to complete a contract may change.

During the three months ended March 31, 2023, and 2022, there were no significant adjustments to revenues relating to revenue recognized in a prior period.

The carrying amounts of our non-financial assets other than inventories are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite useful lives, the recoverable amount is estimated at least annually.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

In assessing fair value less costs to sell, the price that would be received on the sale of an asset in an orderly transaction between market participants at the measurement date is estimated. For the purposes of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other groups of assets. The allocation of goodwill to cash-generating units reflects the lowest level at which goodwill is monitored for internal reporting purposes. Many of the factors used in assessing fair value are outside the control of management and it is reasonably likely that assumptions and estimates will change from period to period. These changes may result in future impairments. For example, our revenue growth rate could be lower than projected due to economic, industry or competitive factors, or the discount rate used in our value in use model could increase due to a change in market interest rates. In addition, future goodwill impairment charges may be necessary if our market capitalization declines due to a decrease in the trading price of our common stock, which could negatively impact the fair value of our business.

An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in net loss. Impairment losses recognized in respect of the cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit on a pro-rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the cumulative loss has decreased or no longer exists. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

We perform the annual review of goodwill as at December 31 of each year, more often if events or changes in circumstances indicate that it might be impaired. Based on the impairment test performed as at December 31, 2022 and our assessment of current events and circumstances, we have concluded that no goodwill impairment test was required for the three months ending March 31, 2023.

In addition to the above goodwill impairment test, we perform a quarterly assessment of the carrying amounts of our non-financial assets (other than inventories) to determine whether there is any indication of impairment. During the three months ended March 31, 2023 and 2022, there were no significant impairment charges of our non-financial assets (other than inventories).

A provision for warranty costs is recorded on product sales at the time of shipment. In establishing the accrued warranty liabilities, we estimate the likelihood that products sold will experience warranty claims and the cost to resolve claims received.

In making such determinations, we use estimates based on the nature of the contract and past and projected experience with the products. Should these estimates prove to be incorrect, we may incur costs different from those provided for in our warranty provisions. During the three months ended March 31, 2023, we recorded provisions to accrued warranty liabilities of $1.2 million for new product sales, compared to $0.6 million for the three months ended March 31, 2022.

We review our warranty assumptions and make adjustments to accrued warranty liabilities quarterly based on the latest information available and to reflect the expiry of contractual obligations. Adjustments to accrued warranty liabilities are recorded in cost of product and service revenues. As a result of these reviews and the resulting adjustments, our warranty provision and cost of revenues for the three months ended March 31, 2023, were adjusted downwards (upwards) by ($0.3) million, compared to adjustments downwards (upwards) by ($0.1) million for the three months ended March 31, 2022.

In determining the lower of cost and net realizable value of our inventory and establishing the appropriate provision for inventory obsolescence, we estimate the likelihood that inventory carrying values will be affected by changes in market pricing or demand for our products and by changes in technology or design which could make inventory on hand obsolete or recoverable at less than cost. We perform regular reviews to assess the impact of changes in technology and design, sales trends, and other changes on the carrying value of inventory. Where we determine that such changes have occurred and will have a negative impact on the value of inventory on hand, appropriate provisions are made. If there is a subsequent increase in the value of inventory on hand, reversals of previous write-downs to net realizable value are made. Unforeseen changes in these factors could result in additional inventory provisions, or reversals of previous provisions, being required. During the three months ended March 31, 2023, negative inventory impairment and onerous contract adjustments of ($0.6) million were recorded as a recovery (charge) to cost of product and service revenues, compared to negative inventory impairment and onerous contract adjustments of ($0.5) million in the three months ended March 31, 2022.

The present value of our defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that have terms to maturity approximating the terms of the related pension liability. Determination of benefit expense requires assumptions such as the discount rate to measure obligations, expected plan investment performance, expected healthcare cost trend rate, and retirement ages of employees. Actual results will differ from the recorded amounts based on these estimates and assumptions.

FAIR VALUE MEASUREMENT (INCLUDING INVESTMENTS)

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Corporation has access at that date. The fair value of a liability reflects its non-performance risk. A number of the Corporation’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

When one is available, the Corporation measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as “active” if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If there is no quoted price in an active market, then the Corporation uses valuation techniques that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. This involves developing estimates and assumptions consistent with how market participants would price the instrument.

Management bases its assumptions on observable data as far as possible, but this is not always available. In that case, management uses the best information available. Where they are available, the fair value of investments is based on observable market transactions. Estimated fair values may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date.

The best evidence of the fair value of a financial instrument (including investments) on initial recognition is usually the transaction price – i.e., the fair value of the consideration given or received. If the Corporation determines that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique for which any unobservable inputs are judged to be insignificant in relation to the measurement, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value on initial recognition and the transaction price. Subsequently, that difference is recognized in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable data or the transaction is closed out. During the three months ended March 31, 2023, we recognized mark to market gain (loss) on financial assets of ($0.5) million, compared to ($8.6) million for the three months ended March 31, 2022. Mark to market gain (loss) in 2023 and 2022 consist primarily of changes in the fair value of our long-term financial investments including Forsee Power and certain hydrogen infrastructure and growth equity funds.

Effective January 1, 2022, we adopted a number of new standards and interpretations, but they did not have a material impact on our financial statements.

The following is an overview of accounting standard changes that we will be required to adopt in future years. We do not expect to adopt any of these standards before their effective dates and we continue to evaluate the impact of these standards on our consolidated financial statements.

Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)

On January 23, 2020, the IASB issued amendments to IAS 1 Presentation of Financial Statements (the “2020 Amendments”), to clarify the classification of liabilities as current or non-current. On October 31, 2022, the IASB issued Non-current Liabilities with Covenants (Amendments to IAS 1) (the “2022 Amendments”), to improve the information a company provides about long-term debt with covenants.

For the purposes of non-current classification, the 2020 Amendments and the 2022 Amendments (collectively “the Amendments”) removed the requirement for a right to defer settlement or roll over of a liability for at least twelve months to be unconditional. Instead, such a right must exist at the end of the reporting period and have substance.

The Amendments reconfirmed that only covenants with which a company must comply on or before the reporting date affect the classification of a liability as current or non-current. Covenants with which a company must comply after the reporting date do not affect a liability’s classification at that date. The Amendments also clarify how a company classifies a liability that includes a counterparty conversion option.

The Amendments state that:

•settlement of a liability includes transferring a company’s own equity instruments to the counterparty, and

•when classifying liabilities as current or non-current a company can ignore only those conversion options that are recognized as equity.

The Amendments are effective for annual periods beginning on or after January 1, 2024. Early adoption is permitted. A company that applies the 2020 amendments early is required to also apply the 2022 amendments. The extent of the impact of adoption of the amendments to IAS 1 has not yet been determined.

10.SUPPLEMENTAL NON-GAAP MEASURES AND RECONCILIATIONS

In addition to providing measures prepared in accordance with GAAP, we present certain supplemental non-GAAP measures. These measures are Cash Operating Costs (including its components of research and product development (operating cost), general and administrative (operating cost) and sales and marketing (operating cost)), EBITDA and Adjusted EBITDA. These non-GAAP measures do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. We believe these measures are useful in evaluating the operating performance of the Company’s ongoing business. These measures should be considered in addition to, and not as a substitute for, operating expenses, net income, cash flows and other measures of financial performance and liquidity reported in accordance with GAAP. The calculation of these non-GAAP measures has been made on a consistent basis for all periods presented.

This supplemental non-GAAP measure is provided to assist readers in determining our operating costs on an ongoing cash basis. We believe this measure is useful in assessing performance and highlighting trends on an overall basis.

We also believe Cash Operating Costs is frequently used by securities analysts and investors when comparing our results with those of other companies. Cash Operating Costs differs from the most comparable GAAP measure, total operating expenses, primarily because it does not include stock-based compensation expense, depreciation and amortization, impairment losses or recoveries on trade receivables, restructuring and related costs, acquisition related costs, the impact of unrealized gains and losses on foreign exchange contracts, and financing charges. The following tables show a reconciliation of total operating expenses to Cash Operating Costs for the three months ended March 31, 2023, and 2022:

The components of Cash Operating Costs of research and product development (cash operating cost), general and administrative (cash operating cost), and sales and marketing (cash operating cost) differ from their respective most comparable GAAP measure of research and product development expense, general and administrative expense, and sales and marketing expense, primarily because they do not include stock-based compensation expense, depreciation and amortization expense, and acquisition related costs. A reconciliation of these respective operating expenses to the respective components of Cash Operating Costs for the three months ended March 31, 2023, and 2022 is included in Section 5.4 Operating Expenses and Other Items.

A breakdown of total stock-based compensation expense for the three months ended March 31, 2023, and 2022 are as follows:

A breakdown of total depreciation and amortization expense for the three months ended March 31, 2023, and 2022 are as follows:

These supplemental non-GAAP measures are provided to assist readers in determining our operating performance. We believe this measure is useful in assessing performance and highlighting trends on an overall basis. We also believe EBITDA and Adjusted EBITDA are frequently used by securities analysts and investors when comparing our results with those of other companies. EBITDA differs from the most comparable GAAP measure, net loss, primarily because it does not include finance expense, income taxes, depreciation of property, plant and equipment, and amortization of intangible assets. Adjusted EBITDA adjusts EBITDA for stock-based compensation expense, transactional gains and losses, acquisition related costs, finance and other income, recovery on settlement of contingent consideration, asset impairment charges, and the impact of unrealized gains and losses on foreign exchange contracts.

The following tables show a reconciliation of net loss to EBITDA and Adjusted EBITDA for the three months ended March 31, 2023, and 2022: