Vancouver, B.C., Canada – February 25, 2022 – Legend Power® Systems Inc. (TSX.V: LPS) (OTCQB: LPSIF) (“Legend Power” or the “Company”), a global leader in commercial electrical system solutions, reports its Q1 F2022 financial results for the three months ended December 31, 2021. The Company has also scheduled a conference call to provide a business update and discuss its Q1 F2022 financial results for Friday, February 25, 2022 at 11:00 AM ET (8:00 AM PT) (details below). The call will be hosted by Randy Buchamer, President & Chief Executive Officer. 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.
Financial Highlights for Q1 F2022 (quarter ending December 31, 2021)
- Revenue of $169k versus $766k in Q1 F2021
- Adjusted EBITDA loss of $1.00 million versus a $678k loss in Q1 F2021
- Net loss of $1.23 million versus a $874k loss in Q1 F2021
- Cash of $7.56 million, no debt, and $9.02 million in working capital at December 31, 2021
- On track to ship first 20 Next Generation SmartGATE Platforms in Q2 F2022
- First NextGen SmartGATE platform installed and performing above initial expectations
- Paul Moffat appointed COO
“The supply chain issues and NextGen SmartGATE shipping delays that we experienced in Q1 have significantly improved, and we expect to deliver the initial 20 units in Q2 F2022,” said Randy Buchamer, CEO of Legend Power. “The foundation for solid growth is now firmly in place as our ESCO partners, channel sellers and direct sales continue to execute. Sales activity remains robust; customer feedback from our initial NextGen SmartGATE deployment is overwhelmingly positive, setting up our business to return to growth in the coming quarters.”
Overview of Q1 F2022 Financials
During Q1 F2022 the Company continued to invest in its sales team, inventory, and expand production and field operations capacity in readiness for ramping Gen3 SmartGATE demand. These investments were highlighted in the Company’s June 10, 2021 prospectus as primary use of proceeds in connection with the successful $10 million bought deal financing.
The Company’s channel sales team now consists of 3 individuals experienced in growing reseller and ESCO relationships and who understand the value propositions that Insights and SmartGATE solutions bring to commercial real estate. Target markets and reseller channels continue to respond positively to Legend’s solutions and combined opportunities. As of today the Company is engaged with over 50 organizations interested in becoming Legend selling partners. During Q1 F2022 the channel sales team commenced development of partner support tools for the partner portal including marketing support, sales support, technical support, and deal registration. The partner portal will be launched in March 2022.
During Q1 F2022 the Company completed testing of the Gen3 SmartGATE system and began an aggressive build initiative to fill backlog sales orders. The Company continued to work through component inventory supply chain challenges but began to secure additional stock to commence the assembly of 20 plus units. Unfortunately, due to the delivery timing of components revenue recognized during the quarter was lower than what was anticipated.
With the Gen3 SmartGATE system reaching commercial production, during Q1 F2022 the engineering team focused on remote commands functionality. This functionality allows the Company to communicate remotely with Gen3 SmartGATE field units and is the foundation of a “remote upgrade” feature. In addition, the engineering department worked on cost reduction strategies including identifying alternative suppliers and design refinements.
Financial summary for the three months ended December 31, 2021 and 2020
1 Gross margin is based on a blend of both equipment and installation revenue.
2 Adjusted EBITDA is a non-IFRS financial measure.
Revenue for Q1 F2022 was $169,220 compared with $766,226 in the same quarter of fiscal 2021. The lower revenue during Q1 F2022 was primarily due to delayed product deliveries to customers due to inventory shortages caused by supply chain challenges and, to a lesser extent, the production ramp required for the Gen3 version of SmartGATE.
Gross margin in Q1 F2022 was 22%, compared with 26% in Q1 F2021. The decrease in gross margin experienced during Q1 F2022 was due primarily to higher cost of goods sold driven by supply chain challenges, COVID-19 supplier surcharges, and component cost increases.
The Company’s operating expenses for Q1 F2022 were $1,319,476, up from $1,077,392 in Q1 F2021. The primary cause for the increase was higher salaries and consulting costs as the Company recently expanded its channel sales team and the fact that internal cost cutting measures and COVID-19 government subsidies were still in place during Q1 of the prior fiscal year. Increased salary and consulting costs were offset slightly by a large warranty expense recovery and decreased product development costs in the current quarter.
Adjusted EBITDA for Q1 F2022 was negative $1,005,774, compared with negative $677,607 in Q1 F2021.
Net loss for Q1 F2022 was $1,229,961, compared with a net loss of $873,792 in Q1 F2021. Lower gross margins and increased operating costs in Q1 F2022 compared with Q1 F2021 resulted in a higher net loss.
CONFERENCE CALL DETAILS:
About Legend Power® Systems Inc.
Legend Power® Systems Inc. (www.legendpower.com) provides an intelligent energy management platform that analyzes and improves building energy challenges, significantly impacting asset management and corporate performance. Legend Power’s proven solutions support proactive executive decision-making in a complex and volatile business and energy environment. The proprietary and patented system reduces total energy consumption and power costs, while also maximizing the life of electrical equipment. Legend Power’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:
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 to 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.