Ballard Power Systems Inc

TSX:BLDP

Earnings Call Transcript 2018-Q1

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems First Quarter 2018 Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Guy McAree, Director of Investor Relations. Please go ahead.

[Guy McAree, Director of Marketing & Investor Relations]

Thanks very much, and good morning, everyone. The purpose of today's call is to discuss Ballard's first quarter 2018 financial and operating results. And with us is Randy MacEwen, our President and CEO; and Tony Guglielmin, our Chief Financial Officer. We're going to be making forward-looking statements that are based on management's current expectations, beliefs and assumptions concerning future events. Actual results could be materially different. Please refer to our most recent annual information form and other public filings for our complete disclaimer and related information. So this morning, Randy is going to review our strategic progress in the first quarter. And then Tony will review Q1 financial results. And we'll open the call up for Q&A after that.Just before we start, a few brief notes. Randy is going to be participating at the Reach China Investment Conference in Shanghai on May 22 as well as the Cowen 46th Annual Technology, Media & Telecom Conference in New York City on May 31. And I'll be participating at the Third Annual Oppenheimer Emerging Growth Conference in New York City on May 15 and at the B. Riley FBR Investor Conference in Los Angeles on the 23rd of May. And with that, I'll turn the call over to Randy.

[R. Randall MacEwen, CEO, President & Director]

Thanks, Guy, and welcome, everyone, to our first quarter 2018 earnings conference call. Our Q1 results were consistent with the type of start to the year we had anticipated. As has been typical with past years, our revenue cadence through 2018 features a relatively slower first half followed by an expected increase in business levels in the second half. As previously indicated, we're expecting a relatively flat 2018 overall. However, I want to point out that the relatively high level of onetime technology transfer revenue in China last year is masking underlying growth this year. We continue to be very excited by the growing opportunity set we see in Heavy Duty Motive applications, where customer requirements include long range, rapid refueling, medium to heavy payloads and route flexibility. I want to direct you to Slide 5. In a 2017 report prepared for the Hydrogen Council, McKinsey concluded that fuel cell electric vehicles offer the most effective solution for vehicles weighing more than about 7 tons or traveling more than about a 100 kilometers on a daily basis. There are 3 additional notable points. First, in each of these markets, including city bus, heavy trucks, trains and trams, fleet and taxis and light commercial trucks, they're each large addressable markets. Second, many of these applications feature centralized return-to-base or depot refueling, which represents the lowest failure for hydrogen refueling infrastructure. And third, in many of these markets, Ballard has industry leadership positioning, including talent, technology, products, field experience, service support and brand. In my view, what's been most exciting so far this year is the growing interest and meaningful progress we made across a number of transportation applications detected in this McKinsey graphic. Now I want to be very clear, all market signals are positive. Today, the interest in hydrogen fuel cells is real and growing and Ballard is well positioned. I'd like to summarize recent important developments, which underpin our perspective on future growth. Looking first at the transit bus market. We announced this week a firm purchase order with a key partner, Van Hool, a Belgian bus OEM, to supply all 40 of the fuel cell engines that will support the German cluster under the JIVE program. These 40 engines, which we expect to begin shipping in 2018, willpower zero-emission fuel cell electric buses to be deployed in Cologne and Wuppertal, Germany beginning in 2019. This is the largest fuel cell bus program announced to date in Europe. In the U.S. bus market, progress continues, particularly with our key partner, New Flyer. Last week, Orange County Transit Authority awarded New Flyer 10 fuel cell buses. We also expect another 10 fuel cell buses to be awarded by AC Transit later this year. In the commercial truck market, progress also continues, particularly on the planned deployment of 500 licensed fuel cell electric commercial trucks in Shanghai this year, all using Ballard fuel cell stack technology. Approximately 80 of these trucks are now in normal operation with another 220 in trial operation. In the U.S. commercial truck market, during Q1, we announced that Kenworth's hybrid Class 8 drayage truck, using a Ballard FCveloCity module, had successfully completed initial road testing in the Pacific Northwest. The truck was also displayed at 2018 Consumer Electronics Show at Las Vegas. This moves the program to the next stage, which involves extensive on-road trialing at the ports of Long Beach and Los Angeles. We also announced another U.S. medium-duty commercial truck activity during the quarter, specifically the signing of a contract with CALSTART for an FCveloCity module to be used in a trial of a hybrid UPS Class 6 delivery van operating in the L.A. area. This is another example of fuel cell electric vehicles addressing limitations of batteries in a target use case since battery-only UPS delivery vans are often limited to specific routes with modest range and flat terrain. CALSTART has stated that at least 1,500 UPS vans operating in California are prime targets for this hybrid fuel cell solution. It's important to note that medium- and heavy-duty trucks account for a disproportionally large percentage of CO2 emissions in the transport sector, including 26% in the U.S. And with significant use of these trucks at ports, including 21,000 Class 8 drayage trucks in use today at the ports of L.A. and Long Beach alone, the focus is increasing on this environmental challenge. Turning to the train market. In Europe, during the quarter, Siemens announced receipt of approximately EUR 12 million in funding to support the development program for the Siemens Mireo, which is a zero-emission fuel cell light rail commuter train. This is important progress in relation to our November 2017 announcement of a multiyear agreement with Siemens for the development of a customized 200-kilowatt fuel cell module to power the Mireo. The Mireo's lightweight design, energy-efficient component and intelligent onboard network management capability will result in the use of up to 25% less energy than traditional electrified trains with similar passenger capacity. With initial deployments planned for 2021, the Mireo will also reduce infrastructure costs and minimize environmental impact. In the marine market, in addition to our initial collaboration activities with ABB and Royal Caribbean Cruises that we previously discussed, this year, we also announced a successful integration and testing of Ballard 30-kilowatt modules in a hybrid boat in Japan. The modules were sold through our distribution agreement with Toyota Tsusho to Yanmar, a major industrial equipment manufacturer in Japan. The testing was focused on the establishment of safety guidelines for hydrogen fuel cell-powered boats operating in Japan's restricted coastal waters. It's an important step in the wider adoption and use of fuel cells in Japan's marine sector. And just to underscore the momentum that's beginning to build in the marine sector, the United Nation's International Maritime Organization, IMO, announced a signing of a historic agreement last month by 170 member governments, establishing aggressive reduction targets for greenhouse gas emissions in the shipping industry. The targets are to reduce GHG emissions to 40% of 2008 levels by the year 2030, 50% by 2050 and completely eliminate GHG emissions by the end of the century. On the light-duty end of the spectrum of transportation applications, several important developments have occurred since our last conference call. In terms of Material Handling, we've made a number of important announcements. First, we're very pleased with our announcement 2 days ago relating to the signing of a master supply agreement with Hyster-Yale to supply a minimum annual volumes of air-cooled fuel cell stacks through 2022 that will power Class 3 lift trucks, such as pallet jacks, as part of Hyster-Yale's ongoing fuel cell forklift program. In addition, we'll be supporting the design of electrical propulsion system for these Class 3 Hyster-Yale trucks. This initiative complements the Nuvera liquid-cooled fuel cell stack offering. So it's exciting for us to be working with the forklift manufacturer that's leading the OEM community in terms of fuel cell-powered trucks. Second, as referenced on our previous call, we signed a $4.2 million initial contract with an unnamed strategic customer for a multiyear technology solutions program to develop an ultra-high durability and high-performance air-cooled fuel cell stack that can be used to power Class 3 forklift trucks. This program is targeting the development of a stack with 20,000 hours of operating life, which would, of course, be another important factor in driving down product cost and strengthening the value proposition and expanding the addressable market. And finally, we received a follow-on purchase order from the Nisshinbo to progress our previously announced technology solutions program focused on the development of non-precious metal catalyst-based fuel cell stacks. This multiyear effort is expected to result in significant cost reduction in both air-cooled and liquid-cooled stacks for use in Material Handling applications. These programs are very positive indicators of Ballard's future opportunities in the evolving Material Handling space as we believe the market will move to purpose-built fuel cell forklifts in the longer term. Also in the light-duty area, we continue to make progress in the unmanned vehicle market through our subsidiary, Protonex. While this is a nascent market and most of our work at this point has been with military customers, we believe that both military and especially commercial unmanned vehicle demand are poised to grow dramatically over the 3- to 5-year time horizon. Our collaboration with Cellula Robotics was recently announced as we work together on the development of a fuel cell-powered long-range autonomous underwater vehicle, work that's being funded under a contract with the Department of National Defence in Canada. This is the first of a possible 3-phase program with the potential to dramatically reduce the cost of ocean exploration, observation and mapping by enabling month-long underwater autonomous missions. Finally, with respect to Protonex Power Manager product, we announced 2 SPM-622 military purchase orders in Q1 with a total value of $3.5 million. The first PO, valued at $1.6 million, was shipped in the quarter with the remaining $1.9 million PO planned for shipment later this year. With that, let me now turn the call over to Tony for his review of Q1 2018 results. Tony?

[Anthony Robert Guglielmin, CFO & VP]

Thanks, Randy, and good morning, everyone. Top line revenue in Q1 was $20.1 million, a decrease of 11% or $2.6 million year-over-year. And this largely reflects the absence of $6.2 million of Technology Solutions revenue associated with our stack joint venture in China recorded in Q1 last year, partly offset by growth in our Power Products business. Overall, Power Products revenue increased 11% to $12.4 million in the quarter. This was driven by a 29% increase in Heavy Duty Motive revenue to $9.3 million, primarily the result of increased MEA shipments to our stack joint venture in China. We also saw a 100% increase in Portable Power revenue to $2.4 million as Protonex shipped Power Manager units to fulfill the $1.6 million order received in January from the U.S. Army. Technology Solutions revenue was down 33% year-over-year or $3.8 million to $7.7 million. This decrease reflected the absence of the same $6.2 million of onetime revenue booked in Q1 2017. This again was partly offset with growth in Technology Solutions contracts with other customers. In terms of gross margin, in Q1, we saw a year-over-year reduction of 9 points to 33%, again a consequence of the absence of the same high-margin technology transfer revenue we saw in the first quarter last year. That said, gross margin in Q1 this year is in the range we expect for the full year as we've discussed previously. Cash operating costs increased 8% in Q1 to $10.7 million. This was due primarily to higher investment in technology and product development, including our next-generation liquid-cooled stack and module technology, partially offset by the previously announced cost reductions at Protonex. Cash operating costs were also negatively impacted by a stronger Canadian dollar relative to the U.S. dollar as a significant amount of our cost base is denominated in Canadian dollars. Adjusted EBITDA was negative $3.8 million for the quarter compared to negative $0.7 million in Q1 2017, reflecting the lower revenue and lower gross margin in the quarter. Net loss in Q1 was negative $5.5 million compared to negative $2.9 million in Q1 last year. And earnings per share was negative $0.03 in Q1 compared to negative $0.02 in Q1 2017. Cash used in operating activities was negative $7.2 million in Q1, consisting of cash operating loss of $2.8 million and working capital outflows of $4.4 million. The working capital increased primarily to support 2018 deliveries. In terms of liquidity, we ended Q1 with strong cash reserves of $52.5 million and no debt. Finally, an update on order backlog. Our order backlog, which reflects committed orders on hand, remained strong at $222 million at the end of Q1, roughly unchanged from year-end. At the end of Q1, our 12-month order book stood at $89 million, up from $73 million at year-end, reflecting the strong order intake in Q1. This excludes the purchase order from Van Hool for 40 modules to power buses in Germany as well as the supply contract with Hyster-Yale both announced this week. And with that, let me turn the call back to the operator for questions.

[Operator]

[Operator Instructions] Our first question comes from Sameer Joshi of Wainwright & Co.

[Sameer S. Joshi, Associate]

Start with China, how is the production ramp or production facility ramp going there? And how many vehicles are actually on the road? I think you mentioned 80. How do you see that developing towards the 500?

[R. Randall MacEwen, CEO, President & Director]

So there are, I think, 4 or 5 key things we kind of look at right now in terms of how the China market is pacing. One is you have to track subsidy support very carefully in China. And there seems to be a very solid base -- continues to be a solid base in China on the subsidy report. The second is the vehicle list, the promotion list, where the MIIT, the Ministry of Information and Industry there, certifies or classifies vehicles as eligible for -- as fuel cell vehicles to be roadworthy as well as subsidy-worthy. And so we continue to see progress on the MIIT vehicle list. The third, the one you're referring to, is kind of deployment activity. And right now, today, there are over 300, I'll call it, Ballard-powered vehicles on the road, either in normal operation or in trial operation. And we see probably in excess of 1,000 vehicles by the end of this year with similar type of operation, either in normal operation or trial operation by the end of the year. So those are important. And we mentioned the 80. There's also another 220 additional in the 500 in Shanghai that are currently in trial operation. So there's good progress in Shanghai on that deployment, to answer specifically your question. Another key thing that we track in the China market is the hydrogen fueling infrastructure. And right now, we're currently tracking 76 hydrogen refueling stations. There are 16 currently in service or in trial service. There's 2 different designations there. There's 16 currently under construction and 44 in the planning stage. So we're tracking those. And I think one thing that's very encouraging is we're starting to see a number of larger players, like Sinopec, accelerating their engagement on the hydrogen refueling side. And then the last thing is just tracking different companies in the industry. And what's been, I think, really important in the last 6 to 12 months, and it's accelerated literally in the last few months, is the number of large industrial and transportation companies carefully looking at the fuel cell industry and trying to determine the best technology solutions and the best partnering arrangements for them in the marketplace. So we see lots of opportunity in that market. And then in terms of the JV production, I think you're asking a question about how the JV is ramping. It's consistent with what we had communicated previously. We came out of 2017 with good production in December. We've had fairly similar production run rates, kind of looking at 2,000 on an annualized basis.

[Sameer S. Joshi, Associate]

Okay, great. No, that was really good color on the overall China initiative. But I think during the last call, what we understood was that Chinese -- the revenue from China, the contribution would be dropping to around 40% of your total overall revenues from 60% that you saw it contribute in 2017. That leaves you a gap of -- or a hole of around $25 million. And you outlined all these other initiatives and marine initiatives as well as a progress on the unmanned vehicle. Where do you see this $25 million gap being filled?

[R. Randall MacEwen, CEO, President & Director]

Yes, so a couple of things, and Tony can supplement. First of all, we're seeing growth in the Heavy Duty Motive segment, and particularly bus and commercial trucks. Those are the key markets right now today. And as you probably know, ACT Expo is underway right now in Long Beach. And we're seeing a lot of interesting developments on the truck market, electrification of freight transportation particularly is growing very fast. We're seeing the truck market is a large market, very fragmented. But e-commerce is growing, so freight volumes are, I think, projected to grow in the range of 40% by 2050. And the emissions from heavy-duty vehicles, including trucks, continue to grow and disproportionally are a very significant part of air pollution and GHG. So there's a lot of activity going on in the truck space right now. We're looking at the value proposition for each of the different 8 classes in North America as well as the 3 classes in Europe and the 4 classes in China. So there's a lot of activity on that front. Your comment seems to be more about how do we fill a delta from last year's kind of onetime revenue. And I think with a relatively flat year-over-year based on the order book we have and the sales activity in the pipeline, it implies fairly good growth in the underlying business. But your question also alluded to some of these other markets, like marine and UAV. These are longer-term markets. I think what's important to understand, and this is fairly unique, I think, to Ballard as well as timing-wise the last 6 months in particular, where we're really starting to see progress in each of these different applications. And what's important to understand is our business model has core competencies, core technology and in some cases, products that can be used across multiple market applications and multiple geographies. So very excited about the leverage and the scaling effect we start to see as these markets continue to pick up. But they're still very early in these markets.

[Anthony Robert Guglielmin, CFO & VP]

Yes. No, I would just -- just to supplement, too, just in terms of maybe a couple more specifics in terms of gap. And we've alluded -- we talked about some of these. Obviously, the progress we're making in the Power Manager space, we expect that to -- as you're talking about filling the gap, Sameer, certainly we're looking for some improvement, and particularly in the second half of the year. And I think Randy talked about -- I would say that we're quite excited about Europe this year. If you're looking for a particular geography, the announcement we made on the Van Hool Germany cluster, I think, is the first of what we expect to be some additional deployments this year. So those are kind of a couple of very specific areas that are not related to the China market that we think will help fill that gap, if you will.

[R. Randall MacEwen, CEO, President & Director]

And Sameer, Guy just noted that I misspoke earlier on the JV capacity. I think I said 2,000, I meant to say 20,000.

[Sameer S. Joshi, Associate]

Wow, okay, good to know. And just one last one before I step back into the queue. There's a recent news about UQM being one of your contract assembly manufacturer. What is your manufacturing capacity in the U.S.? And why was this move necessitated?

[R. Randall MacEwen, CEO, President & Director]

Yes. So we do see a lot of activity, particularly in the California market that's suggesting growth in the U.S. marketplace. We've just recently hired a key addition to our team to increase our California coverage. So there's investment we're making in the U.S. market, like we are in China, like we are in Europe. I think the reality is we're seeing growth opportunities in our 3 core markets and we're making investment we need to, to make sure we have product that satisfy the market requirements. One of the things we're looking at to make sure that we're satisfying local content requirements in China as well as local assembly requirements in the U.S.

[Operator]

Our next question comes from Rob Brown of Lake Street Capital Markets.

[Robert Duncan Brown, Senior Research Analyst]

Just wanted to follow up again with the Kenworth development program in truck and the U.S. development program in general. What's sort of your sense on the test timeline there and the development timeline and how that might play out?

[R. Randall MacEwen, CEO, President & Director]

Yes. I think we'll let Kenworth kind of lead the communications on this. There's a lot of sensitivities right now in the commercial truck market. There's a lot of companies coming to market with electrification. And we'll let our partner kind of lead the discussion on how this timeline rolls out.

[Robert Duncan Brown, Senior Research Analyst]

Okay, fair enough. And then switching to the JIVE opportunity in Europe, you've got some orders now. But what sort of remains in terms of that opportunity at this point [indiscernible]?

[R. Randall MacEwen, CEO, President & Director]

Yes, sure. So Rob, what we announced was what's called the German cluster. We expect the next cluster to be awarded will likely be the U.K. cluster. And we feel we're well positioned for that cluster. But there's more still to do on that front. But we'd expect to see something transpire potentially over the next 3 months, so next quarter.

[Robert Duncan Brown, Senior Research Analyst]

Okay, good. And then maybe just touching on the Material Handling market, you had a nice announcement there. What does that give you for the market? Is that an OEM product? Or is that an aftermarket product? And then how do you sort of see the next steps in Material Handling market developing?

[R. Randall MacEwen, CEO, President & Director]

I think what's important is that we've secured a very important relationship with a company that sees the value proposition for fuel cell forklifts. And that is positioned long term to transition ultimately, I think, to purpose-built fuel cell forklifts. I think where the market is today, we're really talking about what we call BBRs, battery-box replacement. And that's the current strategy that Hyster-Yale has. But we see longer-term opportunities with Hyster-Yale and other forklift OEMs as this market evolves.

[Operator]

Our next question comes from Carter Driscoll of B. Riley FBR.

[Carter William Driscoll, VP & Equity Analyst]

So just following up on Rob's question, so this is -- it's kind of a two-part relationship at least as it exists today with Hyster-Yale, which obviously it is a very important development for your Material Handling business. But could you characterize the work you're doing for the electrification side versus what you're doing specifically for the Class 3 pallet jacks? That's not for a purpose-built product that they haven't built, it's to help them go to market faster? I guess, I'm trying to understand the 2 different moving parts a little bit better.

[R. Randall MacEwen, CEO, President & Director]

Yes. So Hyster-Yale is having their earnings conference call right now, so obviously an important customer with a lot of sensitivity on how things are communicated. So we'll let them lead the discussion. What I would supplement it with though is that Nuvera, the company they acquired in late 2014, has a liquid-cooled stack. And what they want to make sure is that they have a product portfolio that satisfies all 3 classes. And so this is really an opportunity for them to secure, I believe, a leading air-cooled stack to supplement and make sure they can fill out the portfolio. So that's their strategy. So there's work that will be conducted both at Hyster-Yale parent company level as well as the Nuvera subsidiary level in terms of collaborating to make sure they have the right stack technology and the right systems to meet their market requirements.

[Carter William Driscoll, VP & Equity Analyst]

But this is for -- I mean, largely going to be for drop-in replacement. The other work you designed is for a purpose-built forklift down the road. Is that a fair characterization?

[R. Randall MacEwen, CEO, President & Director]

Yes, I would characterize the work today is focused, and the stack supply agreement is focused, on the battery-box replacement market. We see longer opportunity with Hyster-Yale and with others for purpose-built forklift. But we can't comment on what Hyster-Yale's plans are.

[Carter William Driscoll, VP & Equity Analyst]

Got it, okay. Maybe shifting over to the UPS. Obviously, there's been a lot of announcements and development work for -- especially for last-mile delivery as range extension technology. Could you characterize the engagement with UPS? That obviously has been an early adopter of electrified delivery vehicles. Are they looking to hold off the rising competition in their segment by becoming more productive by adding, very similar to your strategy in commercial electric vehicles in the EU and China? Amazon, looks like it's trying to get into the space, maybe even Walmart and certainly FedEx. Maybe just characterize if that is incorrect in my assessment, the nature of the relationship, I realize it's early on.

[R. Randall MacEwen, CEO, President & Director]

You're right. It is early. And this is an initial demonstration. But with a key customer and a key geographic market from a macro level, this theme of electrification of freight transportation has moved much faster in the last 12 months frankly than I would have anticipated. And I just spoke late last night with Rob Campbell, our Chief Commercial Officer, who's at the ACT Expo. And his comment was that this expo is really dominated by electrification. There's a lot of interest in zero-emission solutions. And of course, the challenge with battery-only solutions is the range issues and the refueling or recharging time. And so you kind of look at a side-by-side comparison with fuel cells and batteries working together in a range extension application, you get 2 times the range, about 15 times faster refueling and 10 times lighter solution. And payload is very important. So we see a very strong value proposition in this market. But it will take time to validate these with key customers that are very thoughtful about how they pace new technology and new products into their portfolio.

[Carter William Driscoll, VP & Equity Analyst]

And maybe could you comment, Randy, on obviously both the cost of the molecule and the lack of infrastructure naturally leads, much like you saw maybe years ago in the early adoption when natural gas looked like it might be a competitor to diesel, return-to-base operations. Can you talk about either -- both your opportunity maybe to supply the infrastructure side and/or what you're seeing there in the context of the discussions in adoption? Is that -- are those the 2 key concerns really, the cost of the fuel and the infrastructure and how that might be built out in a cost-effective manner?

[R. Randall MacEwen, CEO, President & Director]

Yes. I think the question really goes to the kind of challenges with adoption of fuel cell electric vehicles, particularly in this truck market that we're talking about in delivery. I would say there's 4 challenges really. And we're working very hard against each one of these. The first is the total cost of ownership. The second is power density to make sure that the fuel cell module can fit into the internal combustion engine space. So that's critically important, so packaging really, so it's mounted under the cabin. Hydrogen storage continues to be a key consideration, making sure you can have storage that allows you to capture longer-range applications. And then as you point out, hydrogen infrastructure and price. And here, we're looking at hydrogen infrastructures being an easier solution, given the return-to-base depot-type refueling. But you do need to have sufficient volume. So you're getting utilization against those assets, so you can drive the cost down. So we're targeting kind of USD 5 per kilogram. We see a pathway to get there. But it's going to take volumes and utilization. So those are the 4 key challenges. And we're working by ourselves and our own technology obviously but with partners and ecosystem collaborators to address these issues.

[Carter William Driscoll, VP & Equity Analyst]

Okay. And then maybe just the last one for me. In terms of the JIVE program, obviously there's JIVE I. Any update on when you think the second program might begin to solicit bids?

[R. Randall MacEwen, CEO, President & Director]

We're seeing activity already on that front. So I could see activity that would crystallize in some bids in 2018. In terms of contracting, I think we should probably assume that's 2019. But we'll see how that plays out. These programs always take longer, so I'm very cautious to be more specific on the timing. But I will say the JIVE I, we're seeing lots of good activity there literally on a daily basis right now.

[Carter William Driscoll, VP & Equity Analyst]

And I'm sorry, I wanted to squeeze one last one in. Can you talk about the competitive front for the train and tram market, in particular with Siemens and Alstom?

[R. Randall MacEwen, CEO, President & Director]

Yes. So obviously, it's important that we kind of look at this globally, too. So I would say you've got CRRC in China, very active in the train space. As you know, we've got 2 partnerships with the CRRC group in China. I just visited those companies recently. And there's good progress being made in China. And I think they're looking at international markets as well. And then in Europe, you obviously have both Siemens and Alstom very active in this space. I think obviously the interesting development is the expected merger -- the announcement of an expected merger of Siemens and Alstom and what happens to that business post merger. And so we feel like we're well positioned with Siemens proper today. And the collaboration has gone very well. We had a number of milestones we needed to deliver in the first quarter. We successfully delivered all of those milestones and are pacing through our program with them very effectively. We've got key meetings with them next week in Germany. So there's a lot of good activity going on with Siemens. And we'll put our focus there for the European market.

[Operator]

Our next question comes from Jeff Osborne of Cowen and Company.

[Jeffrey David Osborne, MD & Senior Research Analyst]

Most of them have been asked. But maybe, Randy, on the transfer impact for Q1, I think you called out $6.6 million. Do you have that number in aggregate? Or can you remind us what it was for '17 as a whole, and just as we look at year-over-year comps, what it was in 2Q?

[R. Randall MacEwen, CEO, President & Director]

Just the aggregate Technology Solutions revenue for the JV last year?

[Jeffrey David Osborne, MD & Senior Research Analyst]

Exactly.

[R. Randall MacEwen, CEO, President & Director]

It's in $16 million range, Tony?

[Anthony Robert Guglielmin, CFO & VP]

Yes. For the full year? Yes, for the full year, about $16 million, $15 million to $16 million for the full year.

[Jeffrey David Osborne, MD & Senior Research Analyst]

And do you have that handy, what it was in 2Q, just as we look at year-over-year growth rates if we were to back that out?

[R. Randall MacEwen, CEO, President & Director]

It's about $4 million, Jeff.

[Jeffrey David Osborne, MD & Senior Research Analyst]

$4 million. Okay, perfect. And then I might have missed it. But can you discuss when the Hyster deliveries would start? I know you can't quantify the scope and all that good stuff. But when do you expect a battery replacement product to be shipping and their service network installing it? Or are you folks dealing with that?

[R. Randall MacEwen, CEO, President & Director]

Yes. So we'll let Hyster-Yale lead the communications on this. It's very important we don't get ahead of their communications.

[Jeffrey David Osborne, MD & Senior Research Analyst]

Got it, makes sense. And then maybe just following up on Sameer's question. Is there a way to kind of rank order the growth opportunities in the second half? I would assume buses is number one, MEA shipments are two and Power Manager is three in terms of the non-China growth. But maybe I'm wrong. Can you just insert any other items that are in backlog that would have delivery schedules in the second half of the year to give you a line of sight to that growth?

[R. Randall MacEwen, CEO, President & Director]

No, I think you've got them right, Jeff.

[Anthony Robert Guglielmin, CFO & VP]

Yes, the only thing I'd add to that, Jeff, is -- yes, the only other thing that we've added, which is really less Power Products. But on the TS, on the Technology Solutions side, although I mentioned as obviously we're down year-over-year in Technology Solutions, but we are looking for some pickup in our overall TS business in the second half of the year, existing customers and some new ones. So I'd see a little growth if one adjusts for the $16 million, $17 million of the China JV. There is some underlying growth going on in TS more generally as well.

[Jeffrey David Osborne, MD & Senior Research Analyst]

That actually dovetails well into my last question. I assume that the answer is no comment. But can you just touch on -- you haven't mentioned Audi, VW in a couple earnings call. Any qualitative comments about how the partnership is going, the development -- when we might see any vehicles for initial testing on the road? I know they've shown some at auto shows and whatnot. But just how is that partnership progressing would be helpful.

[R. Randall MacEwen, CEO, President & Director]

Yes, the technology milestones continue to perform very well. I'll actually be visiting Audi for 2 days next week in Germany. And I think the next stage of the relationship is certainly something we're interested in advancing. But the reality is that, that program is going very well. They're happy with the deliverables. And they announced recently that they're looking at the 2020-2021 time frame for their initial demonstration deployment fleet. And there's a lot of activity that we're aligning with Audi to make sure we can support them for that.

[Operator]

Our next question comes from Annapoorni C.S. of Roth Capital Partners.

[Annapoorni Chandrasekarapuram Seshasayee, Associate]

Most of my questions have been answered. But just wanted to check the European order. It might have been answered earlier, but I missed it. So just wanted to check on the U.K. JIVE cluster that you were talking about earlier on the last call. How is that materializing? And on the current cluster as well, like is there any more clarity that you can give us in terms of timelines? I know it's starting by the end of May -- second half of 2018. But is there anything more that you can give us in terms of timelines?

[R. Randall MacEwen, CEO, President & Director]

Yes, I think the question was really focused on the European JIVE program. And obviously, we're pretty happy that we were able to secure effectively 100% of the orders for the German cluster. We're now working against the U.K. cluster. And we feel like we're well positioned for that. We can't assume that though. So we'll see how that rolls out over the next 90 days or so and hopefully have an update for you at the end of next quarter.

[Annapoorni Chandrasekarapuram Seshasayee, Associate]

All right. And in terms of this current cluster or the German one, is there anything more in terms of timelines that you can give us, like -- or I understand that's in the second half of 2018. But is there any more information that you can give us?

[R. Randall MacEwen, CEO, President & Director]

Yes, nothing too granular. There's a lot of moving pieces, so it's difficult to be precise. What I can tell you is we expect to start our module deliveries in 2018. And those will move into 2019. And that we expect our customer, Van Hool, to start delivery of the fuel cell buses in 2019.

[Operator]

This concludes the time allocated for questions on today's conference call. I would like to turn the conference back over to Mr. Randy MacEwen for any closing remarks.

[R. Randall MacEwen, CEO, President & Director]

Thanks, Ariel, and thanks, everyone, for joining us today. We look forward to speaking with you again in early August, when we'll discuss results for the second quarter of 2018. Thank you.

[Operator]

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