Vancouver, Canada, March 1, 2018 – Legend Power Systems Inc. (TSXV: LPS), a global leader in voltage reduction and management technology, today reported its fiscal Q1 2018 financial results for the three-months ended December 30, 2017. The Company’s strategic investments have shown significant quarterly growth and increased product adoption in both Ontario and the United States. All dollar figures are quoted in Canadian dollars.
- $1.28 million revenue
- Continued quarter over quarter revenue growth (99%)
- 12 units sold during the quarter
- Blended gross profit margin of 34%
Revenue for the first quarter of 2018 was $1,282,707, up significantly from $644,847 in the same period of fiscal 2017. The significant increase in comparative quarterly revenue is attributed to increasing demand for the Company’s product and an expanded Legend sales team in Ontario.
Gross blended margin in the first quarter 2018 was 33.8%, down from 42.7% in the same period of 2017. The decrease in blended gross margin for the three-month comparative periods is due primarily to an increase in installation revenue as a percentage of total revenue. Q1 2018 saw installation revenue as 49.9% of total revenue, compared to 18.9% in Q1 2017. Though installation revenue historically offers lower margins than hardware, the Company has implemented measures to strengthen the capacity and cost effectiveness of its internal installation services team. This is expected to have a positive impact on profit margins beginning in the first half of 2018 and thereafter.
Operating expense in the first quarter 2018 was $1,178,176 compared with $748,947 in the same quarter of 2017. The increase in comparative periods is due primarily to additional sales and field operations personnel and general overhead costs associated with the Company’s recent growth.
Financial summary for the three-month periods ended December 31, 2017 and 2016
|Three months ended December 31,|
|(Cdn$, unless noted otherwise)||2017||2016||Change|
|Cost of sales||849,200||369,688||129.7%|
|Gross margin %1||33.8%||42.7%||(8.9)%|
1 Gross margin is based on a blend of both equipment and installation revenue.
2 Adjusted EBITDA; for the three months ended December 31, 2017 and 2016, we are disclosing Adjusted EBITDA, which is a non-IFRS financial measure, as a supplementary indicator of operating performance. We define Adjusted EBITDA as net income or loss before; interest, income taxes, amortization, non-cash stock-based compensation and foreign exchange gains and losses, as well as unusual non-operating items such as insurance settlement. Warranty expense is no longer included in the Adjusted EBITDA calculation, as such historical amounts have been updated.
- Overvoltage condition in New York has been assessed as pervasively negative
- Legend’s business model was proven effective in Ontario and can be replicated in other geographies
- The energy conservation ecosystem in Northeastern USA needs Legend’s solution
- Legend’s investment in growth has yielded results
Legend made significant investments to grow the business in Q1 2018. Areas targeted include sales capacity, international expansion, marketing support, and product offering.
The Company instilled full-time presence in the New York area by hiring 2 local sales professionals. Both bring over 20 years of experience selling energy conservation solutions. Legend courted and hired a senior executive from the New York power utility who brings to the company strong relationships with New York’s top power consumers. The team of 3 were fully trained and equipped for success by the end of Q1.
In Q1 the Company also launched a customer-facing website. The site is designed primarily as a sales tool to build brand awareness, educate prospects, tell the investment story, and convert browsers to sales leads.
Early-stage data from buildings evaluated by Legend indicates a significant and pervasively negative overvoltage condition in New York City. Buildings throughout Manhattan and the greater New York area are plagued with voltage issues that can be corrected by Legend’s proprietary technology.
As of February 2018, Legend has 5 Distribution Partners who work in concert with its local sales team to promote and sell Harmonizer systems to their trusted network of customers. These distributors bring customer relationships spanning multiple market verticals including multi-unit residential, government, and property management. Areas of operation include the tri-state area of New York, New Jersey, and Connecticut. Legend will work independently and in concert with its distribution network to rapidly address buildings suffering from overvoltage.
In January of 2018 the power Utility in New York City increased its financial incentives in the category applicable to Legend’s solution. Customers who apply for incentives in the applicable category will be eligible for additional cash contributions. The performance-based incentive for eligible energy efficiency upgrades added $600 per kW saved to the standard rate of $0.16 per kWh. This will typically increase the funding ranges from what was previously $10,000-$25,000, to $20,000-$50,000 for approved Legend projects.
As at December 31, 2017, the Company had working capital totaling $5.2 million; an increase of $1.1 million from the $4.1 million at September 30, 2017. The increase was due in large part to the exercise of 4,464,382 warrants at a price of $0.40 each for total proceeds of $1.8 million during Q1. 100% of all warrants expiring in calendar 2017 were exercised and the Company now has no warrants outstanding.
During February of 2018, the Company began a pilot project to install and test an in-house developed technology that enables real-time system performance, energy savings, and power management data to be customer-accessible via a web portal. This product was developed in response to overwhelming interest expressed by existing customers and sales prospects asking to have business-office access to the actionable savings data Legend achieves from a solution located in a building’s electrical room.
Complete financial statements and management’s discussion and analysis for the three months ended December 31, 2017 are available at the Company’s website and with the Company’s filings on SEDAR (www.sedar.com).
The Company will host a conference call to provide a business update and discuss its fiscal Q1 2018 financial results as detailed below. The call will be hosted by Randy Buchamer, President & Chief Executive Officer and Steve Vanry, Chief Financial Officer.
CONFERENCE CALL DETAILS:
|DATE:||Friday, March 2, 2018|
|TIME:||8:00 am PT (11:00 am ET)|
|DIAL-IN NUMBER:||Toronto (647) 788-4901
Toll Free – North America (+1)(877) 201-0168
|REPLAY:||Available at: www.legend20.wpengine.com|
About Legend Power Systems Inc.
Legend Power Systems Inc. (www.legend20.wpengine.com) is changing the way buildings around the world use power. The company’s patented and proprietary technology reduces overvoltage, a natural condition present in power grids around the world. Overvoltage inflates energy costs, damages electrical equipment, and increases the negative impact a building has on the environment. Legend’s utility-proven Harmonizer improves the power efficiency of an entire building to reduce total energy consumption and power costs, while maximizing equipment life. The solution provides customers risk free energy savings, improves the value of their physical assets, and enhances their sustainability efforts. As an application with demand side benefits, Legend is also a key contributor toward utility conservation goals. In 2015 Legend was recognized as the top performing cleantech company on the TSX Venture Exchange.
For further information, please contact:
Randy Buchamer, CEO and President
+ 1 778 945 1501
Sean Peasgood, Investor Relations
+ 1 416 565 2805
Neither the TSX Venture Exchange nor the Investment Industry Regulatory Organization of Canada accepts responsibility for the adequacy or accuracy of this release.
This Press Release may contain statements which constitute “forward-looking information”, including statements regarding the plans, intentions, beliefs and current expectations of the Company, its directors, or its officers with respect to the future business activities and operating performance of the Company. The words “may”, “would”, “could”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” and similar expressions, as they relate to the Company, or its management, are intended to identify such forward-looking statements. Investors are cautioned that any such forward-looking statements are not guarantees of future business activities or performance and involve risks and uncertainties, and that the Company’s future business activities may differ materially from those in the forward-looking statements as a result of various factors. Such risks, uncertainties and factors are described in the periodic filings with the Canadian securities regulatory authorities, including the Company’s quarterly and annual Management’s Discussion & Analysis, which may be viewed on SEDAR at www.sedar.com. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not be as anticipated, estimated or intended. The Company does not intend, and does not assume any obligation, to update these forward-looking statements other than as may be required by applicable law.