Canadian Sales Growth Accelerating and U.S. Expansion on Track
VANCOUVER, British Columbia, May 24, 2018 (GLOBE NEWSWIRE) — Legend Power Systems Inc. (TSXV:LPS), a global leader in voltage reduction and management technology, today reported its fiscal Q2 2018 financial results for the three and six-month periods ended March 31, 2018. Legend’s healthy sales funnel, multiple follow-on orders, and penetration of a broader spectrum of market verticals in Ontario and Atlantic Canada have resulted in significant quarterly growth. 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 F2018 Highlights
- Record quarterly revenue of $1.92 million, up 91% over Q2 2017;
- 28 units recognized in revenue; versus 19 units in Q2 2017;
- Blended gross profit margin of 42% was lower year-over-year due to higher installation costs;
- Added key personnel to fuel growth into the U.S. market;
- Added 4 channel partners in the U.S. market.
Subsequent Events to the Quarter
- Closed bought deal financing for gross proceeds of $10.5 million;
- Two Ontario colleges purchased eight harmonizers for sales totaling $967,583;
- A Legend channel partner purchased nine additional units for its clients;
- Strengthened Board of Directors by adding U.S. Retail Industry Veteran, Mr. Cosimo La Porta.
“I am very pleased with both our second quarter financial and operating results,” said Randy Buchamer, CEO of Legend Power. “Our existing Ontario market continues to fire on all cylinders, and the talent we have attracted to fuel our U.S. growth has put the Company on a strong footing for success in this new region. Since the end of the quarter, we have seen several follow-on multi-unit orders, validating our technology with energy savings generated for our end customers. We’ve proven our business model in Ontario, and along with our recent $10.5 million financing, we are confident that we can duplicate our Ontario success throughout the United States.”
Key initiatives for 2018
- Build five additional vertical markets in Ontario (replicating our Education market success);
- Create awareness of Legend’s solution in the East Coast USA and obtain:
- Six testimonial accounts
- $1 million in revenue
- Six committed, trained and contributing resellers.
Initiatives started in 2018 which are expected to have significant impact on 2019 performance:
- Establish a presence in five additional U.S. regions including:
- Regional utility support and cooperation
- Approved product incentive status
- Three key recommenders supporting Legend Power
- Continued implementation of product enhancements plan;
- Develop “franchise program” for individual resellers to represent Legend in the targeted regions.
Revenue for the second quarter of 2018 was $1,916,582, a 91.4% increase from $1,001,382 in the same period of fiscal 2017. Revenue for the first half of fiscal 2018 was $3,199,289, an increase of 94.3% from $1,646,229 in the first half of fiscal 2017. The significant increase in revenue in 2018 is due primarily to building awareness of, and interest in, the Company’s technology across several market verticals as well as consistently demonstrating reliability and strong energy savings in a growing number of commercial buildings.
Gross margin for the second quarter of 2018 and first half for 2018 was 41.7% and 38.5% respectively, a decrease from 51.1% and 47.8% in the same periods of fiscal 2017. The decreases were due primarily to the higher relative amount of lower margin installation revenue realized in the second quarter and six months of fiscal 2018 (32.6% and 41.5% of total revenue respectively compared to 11% and 14% respectively in the same periods of 2017). The lower margins experienced so far in fiscal 2018 are also due to a bias towards sales of the Company’s smaller, lower margin units and a large sale to a reseller, under the Company’s reseller program, which resulted in lower margins. The Company has implemented measures to strengthen the capacity and cost-effectiveness of its internal installation services team, the benefits of which are expected to have a materially positive impact on margins starting in the second half of fiscal 2018.
Total operating expenses for the quarter ended March 31, 2018 increased to $1,242,127 from $760,122 in same period of 2017. Total operating expenses for the first half of fiscal 2018 increased to $2,420,303 from $1,509,069 in the first half of 2017. The increase in Q2 was primarily due to a significant increase in salaries and consulting fees associated with the Company’s growth in both existing and new geographical markets. The Company has added eleven additional staff members since the prior year period. Adding to the increase in overall operating expense in 2018 was general and overhead costs, which were due to higher office-related costs, and growth associated with sales and business development-focused travel costs to support the Company’s expansion in Toronto and New York.
Financial summary for the three and six-month periods ended March 31, 2018 and 2017
|Three months ended March 31,||Six months ended March 31,|
|(Cdn$, unless noted
|Cost of sales||1,117,590||489,458||128.3||1,966,790||859,146||128.9|
|Gross margin %1||41.7%||51.1%||(9.4)||38.5%||47.8%||(9.3)|
1 Gross margin is based on a blend of both equipment and installation revenue.
2 Adjusted EBITDA; for the periods reported, 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.
U.S. Expansion on Track
The Company continued to increase awareness of its technology in the New York region by presenting at several industry-specific trade shows and with hosted education and awareness events. So far, interest has been strong as demonstrated by the significant number of new Distribution Partners added to the Distribution Partner Program. During the quarter, we added 4 new partners to the Program. This Program enables Legend to work with our partners’ local sales team to promote and sell Harmonizer systems to their trusted network of customers. Legend is working both independently and in concert with its distribution network to address buildings suffering from overvoltage.
The Company recently renewed its NY Utility – Partner status and also became an approved Multi-Family Market Partner, allowing Legend to better leverage the multi-family incentives available to our clients.
Canadian Sales and Operations Seeing Strong Growth
Legend is experiencing increased sales activity and orders in Canada, illustrating strong acceptance of Legend’s solution as a commercial energy saving option. We are now emulating our successful education vertical sales strategy in the multi-residential, retail, property management and municipal market verticals and have dedicated sales representatives for each.
Channel sales during the quarter were strong with nine units purchased by a reseller for clients in eastern Canada. The Company provides turn-key training and distributor support processes for its expanding distribution network, which is targeted for specific regions and companies looking to offer unique energy efficiency solutions that complement their established business model.
As part of the Company’s strategy to increase blended margins, and with a focus on installation costs, we have built a five-person Ontario installation team, which provides greater flexibility to complete certain jobs internally and at a materially lower cost than third-party contractors.
Strong Working Capital Post Recent Financing
As at March 31, 2018 the Company had working capital totaling $5.0 million, an increase 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 in late 2017. 100% of all warrants expiring in calendar 2017 were exercised, and the Company now has no warrants outstanding. Subsequently, during April 2018, the Company closed a bought deal offering for total gross proceeds of $10.5 million.
New Product Enhancement Beta Testing Now Complete
The Company successfully launched an energy metering solution, which provides real-time energy saving performance data and other power management metrics to customers. This product was developed in response to overwhelming interest expressed by existing customers and sales prospects in having a direct link to the Company’s power management solution that resides in the power room of a customer’s commercial building. A customer-facing beta program is now complete, with 15+ systems now enhanced with integrated metering. This new product provides customers access to energy, power and system status readings 24 hours per day, 7 days per week via a web portal. Metering data will assist Legend and its customers to assess additional savings mechanisms and solutions for power quality issues of which the customers may have been previously unaware. Feedback from internal and external stakeholders has been positive so far.
Investor Conference Call
The Company will host a conference call to provide a business update and discuss its fiscal Q2 2018 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:
|CONFERENCE CALL DETAILS:|
|DATE:||Thursday, May 24th, 2018|
|TIME:||1:15 pm PT (4:15 pm ET)|
|DIAL-IN NUMBER:||Toronto (647) 788-4901
Toll Free – North America (+1) (877) 201-0168
|REPLAY:||Available at: www.legendpower.com|
About Legend Power Systems Inc.
Legend Power Systems Inc. (www.legendpower.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
+ 1 647 503 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.