Vancouver, Canada, May 23, 2019 – Legend Power® Systems Inc. (TSXV: LPS), a global leader in onsite energy management technology, today reported its second quarter of fiscal 2019 financial results for the quarter ended March 31, 2019. A conference call to discuss the results is set for 4:30pm EST today (dial in details are below). A complete set of Financial Statements and Management’s Discussion & Analysis has been filed at www.sedar.com. All dollar figures are quoted in Canadian dollars.
Q2 F2019 Highlights
- Revenue for the quarter was $769,443, down 60% versus $1.9 million in the year-ago quarter but up 90% from $403,400 in the prior quarter;
- 7 system sales and 6 installations recognized in revenue;
- Gross margin was 54% versus 52% in Q2 F2018;
- Cash position of $8.7 million, no debt, and $11.2 million working capital.
Financial summary for the quarter ended March 31, 2019
|Three months ended March 31,||Six months ended March 31,|
|(Cdn$, unless noted otherwise)||2019||2018 (reclassified)1||Change||2019||2018 (reclassified)1||Change|
|Cost of sales2||355,329||919,997||(61)%||432,161||1,723,920||(75)%|
|Gross margin %3||54%||52%||2%||63%||46%||17%|
1. Previous year columns have been reclassified to conform with the presentation of fiscal 2019 periods.
2. Components of Cost of Sales has been adjusted to better conform with typical practice; namely, sales commissions and selling fees are now accounted for separately under “Selling Costs”.
3. Gross margin is based on a blend of both equipment and installation revenue.
4. Adjusted EBITDA is a non‐IFRS financial measure. See the Company’s MD&A for EBDITA reconciliation details.
“As we detailed in our Q1 fiscal 2019 results, the Company was focused on addressing the sales challenges in the New York and Ontario markets,” said Randy Buchamer, CEO of Legend Power. “Post quarter end, we saw the results of our efforts in the first quarter with follow-on orders from a New York City property manager, an Ontario college, and an order for 3 SmartGATE units from an Ontario multi-family building owner. We’re pleased with our progress, and although we have discovered that the sales cycles in new markets vary, we believe that we are now on track to return to continued growth.”
Revenue for the quarter ended March 31, 2019 was $769,443, a 60% decrease from $1,916,582 in the same quarter of 2018. Revenue for the six months ended March 31, 2019 was $1,172,843 a 63% decrease from $3,199,289 in the six months ended March 31, 2018. The year-over-year decrease in both comparative periods was due to a lack of sales activity identified in Q4 F2018. It’s also probable that due to the length of the sales cycle, the full impact of the recently implemented sales team changes may not be realized in the Company’s quarterly results until H2 F2019. All of the revenues in both periods are attributable to Legend Canada.
Gross margin in the second quarter of fiscal 2019 was 54%, an increase from 52% in second quarter of 2018. Gross margin in the first half of fiscal 2019 was 63%, an increase from 46% in first half of 2018. The significantly higher gross margin experienced in the first half of 2019 was primarily due to the results of an inventory re-valuation in the amount of $138,891, materially reducing cost of goods sold reported during the six months ended March 31, 2019. All gross margin was attributable to Legend Canada in both comparative periods.
Cash and Working Capital
As at March 31, 2019, the Company had cash and cash equivalents of $8,655,297 (September 30, 2018 – $10,046,366), total current assets of $11,662,359 (September 30, 2018 – $14,239,985) and current liabilities of $484,928 (September 30, 2018 – $621,666). As at March 31, 2019, the Company had working capital of $11,177,431 (September 30, 2018 – $13,618,319).
Sales and Marketing
During April 2019 we fully onboarded an outsourced lead development service to drive the outbound prospecting for our sales team to ensure that nothing gets in the way of starting to talk to net new customers on a regular basis – thereby growing our pipeline consistently. The service works to a weekly quota of 300 phone calls per rep. and is dedicating 3 reps. for a total of 900 calls per week. Our objective is to source 10 to 20 new prospects per day and to email anywhere between 10 to 40 prospects per day. During fiscal Q2 sales activity related metrics including; prospective customer meetings, building assessed, business cases presented and deal planning all materially improved.
We have completed the onboarding and training of new highly experienced sales professionals, each with multiple years of selling experience and specifically many years selling energy control systems/savings initiatives in their respective markets. Each of the sale executives immediately understood SmartGATE’s value proposition and long-term energy and maintenance savings capabilities and has quickly established seven-figure pipelines.
In New York, a leading New York property manager facilitated the follow-on purchase of two SmartGATE™ systems for the New York City building complex of a global Fortune 100 technology company. These new orders followed the successful initial deployment and evaluation of a SmartGATE unit installed earlier in the same building.
This recognized New York City property manager saw a strong financial case and a way to achieve high sustainability standards, indicating our value proposition is resonating and our strategy is working.
Legend’s sales team entered the New York market in mid-2018 and announced the first installed unit in July of that year. Since then, Legend has grown its presence in the region and is in discussions with several customers to deploy the SmartGATE system across several verticals in the region.
The traction is indicative of the growing trend of New York building owners and managers who are taking advantage of significant incentives to invest in advanced building solutions to reduce energy consumption, greenhouse gas emissions and protect the buildings from present and future grid volatility.
Our business development teams in Seattle and DC / Baltimore continue to establish relationships with key players in the energy ecosystem within each region including utilities, electrical contractors, energy service companies and energy efficiency associations. During calendar 2019 we expect to enter agreements in both regions for the placement of initial showcase installations for proof of concept and anecdotal endorsements, which we have learned are critical foundational elements to successful start-up in new regions.
We have observed significant increases in all pre-sale activity related metrics, including an 145% increase in the size of the Company’s sales funnel between January 1st and March 31st of 2019. The growth in sales prospects is significant both in New York and Ontario and is well diversified across multiple verticals. We have increasing confidence that the recent changes made in sales operations, processes and people along with the recently initiated lead generation program are having a material positive impact on sales and will be a catalyst for continued momentum in both of our existing primary sales regions and others yet to be fully established.
Investor Conference Call
The Company will host a conference call to provide a business update and discuss its second quarter of fiscal year 2019 financial results. The call will be hosted by Randy Buchamer, President & Chief Executive Officer and Steve Vanry, Chief Financial Officer. Investors may access the conference call via the following numbers:
DATE: Thursday, May 23, 2019
TIME: 1:30PM PST (4:30pm EST)
North America Toll Free Dial-in Number: (877) 201-0168
Local and International Dial-in Number: (647) 788-4901
CONFERENCE ID: 7484917
REPLAY: Available at: www.legendpower.com
About Legend Power® Systems Inc.
Legend Power® Systems Inc. (www.legendpower.com) is a global leader in voltage management technology. We help buildings use less energy by eliminating ‘overvoltage’; an inherent challenge associated with power grids around the world. Legend’s industry-proven SmartGATETM enables dynamic power-management of an entire building. The proprietary and patented system reduces total energy consumption and power costs, while also maximizing the life of electrical equipment. Legend’s unique solution is also a key contributor to both corporate sustainability efforts, and the meeting of utility energy efficiency targets.
For further information, please contact:
Steve Vanry, CFO
+ 1 604 671 9522
Sean Peasgood, Investor Relations
+ 1 647 503 1054
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.