January 18, 2019
We are pleased to provide our 2018 Fiscal Q4 board report and 2019 Q1 update to the Board on behalf of the Legend Power team. We will discuss both quarters as trends that began in Q4 and impacted Q1 need to be reviewed in tandem.
In Q4 we continued to achieve quarter over previous year quarter growth but our sales momentum slowed. Due to the mix of higher install revenue recorded in the quarter, our margins were significantly reduced compared to recent trends.
This report will be longer than usual and include attachments that we believe will help you better understand our challenges, and our plans to manage them.
We moved Kathleen Reeves, our Director of Sales based in Ontario, to New York in August 2018 to lead our New York sales efforts and the Ontario sales team struggled without Kathleen’s day-to-day leadership. Fiscal 2019 Q1 results showed a material drop in sales and will be discussed in detail.
As a team, we accept full responsibility for the Q1 miss. We are confident in the plans we have put in place and reported on previously and are focused on managing the challenges as they arise. Team morale is high despite the miss and we are strongly committed to implementing our agreed upon 2019 strategy.
We believed there was a sales weakness trend developing during Q4 and once confirmed late in Q4, we took steps to address this concern by engaging a leading US sales improvement organization (SKALED), and the best eastern USA energy market business development consulting firm (Lido Energy). We have ninety days experience with the two consultants and we are pleased with the positive impact to Legend and the milestones achieved to date.
It is critical to Legend’s long-term success to ensure we create the necessary systems, procedures, culture and scalability to be a $100 million plus company. We are doing so. This will cause short-term pain or “lumpiness” but we must set up to scale while growing our current business.
Why did new customer sales slip in Q4 and more so in Q1?
As presented to you during our November 21, 2018 Board strategy session, we engaged SKALED, a leading US-based sales improvement and development firm to conduct a fundamental review of our sales operations, processes and people. Most of the work was performed during 2018 Fiscal Q1 and an update report is attached.
SKALED provided a dedicated sales expert to Legend (Mike Cioce) who provided sales coaching to the Ontario sales team and leadership support to the NY team. With 90 days of SKALED involvement completed, we are very pleased with the engagement and the results. Based on his assessment of the excellent opportunity for Legend to become a successful energy solution provider, Mike, SKALED’s Legend sales coach, has approached Legend to join the team on a full-time basis and lead our sales efforts. We expect to have Mike Cioce under contract as Legend’s first VP Sales by January 21, 2019.
Sarah Driansky, the Managing Director of NY-based Lido Energy, is acting as our NY area ambassador and providing business development process and guidelines, and making introductions for Legend sales personnel throughout the NY energy market ecosystem. We are also very pleased with Lido and the first 90 days of results and deliverables achieved. A detailed Lido/Legend report highlighting our US growth plans is attached and Sarah will walk through the handout during our meeting.
Based on our earlier NY efforts, we learned we will not be successful flying people into NY and must have executive sales leadership and a NY-based sales team. We had to “earn the right to sell” before we could sell. Kathleen’s move to NY combined with an “A-player” like Sarah, have accelerated our progress in NY and we now believe NY sales could exceed Ontario sales in calendar 2019.
In late Q1, we’ve opened and placed an “A-Player” business development person in both Washington State and Washington, DC.
To establish our US presence, we must provide “comfort” to our prospect markets. We know the elements of comfort involve confidence that:
For our Partners in the ecosystem, (resellers, installers, energy experts, ESCO’s, etc.), comfort involves knowing that not only is all of the above true, but that their customer relationship is not only safe, but enhanced. Like our investors, partners also want a product that helps them grow their business today, and into the future. 74.7% of Legend’s sales are multi-unit sales of 2 or more (69.2% of those are 5 units and above). Partners like engineering firm Haven Consultants International with 18 customer installations to date, have turned market potential into proven, and repeatable, market results.
Our investor communications plan objective is to provide honesty and clarity, yet create comfort that our market potential is intact, and any issues identified by short-term ‘misses’ have been addressed and are well on the way to being permanently fixed.
We expect to be back to sales growth in Q2 Fiscal 2019 as our sales activities are building to required levels and our sales funnel grows. Additionally, we have a $1mil. marketing budget to fuel sales growth by driving top-of-funnel leads, enabling our sales team to move from 20% of their time being spent on selling, to 70%.
Kathleen’s Wins Outside of Actual Sales in Q4.
Business Development ─ Washington State
As a leadership team, we recognized the need to listen to, and learn from, the market (customers & ecosystem) as part of our growth and entry into multiple US markets. We also recognized the need for targeted, specific and measurable action – Seattle was selected as an ideal market “trial market” (close proximity to Vancouver with strong utility commitment to efficiency). The focus throughout Q4 2018 was on Planning & Strategizing for our upcoming market expansion, getting ready to “open” the market in the NW the following Quarter. This included:
Events the following Quarter: Q1 2019
Bonneville Power Administration (BPA) – provides oversight to the region’s public utilities. We have connected with the team which runs and approves incentives to Public utilities in Washington state. The team at the BPA are very excited about our solution and have been very supportive of our market entry initiatives.
Sea-Tac Electric – A well established electrical contractor based in Seattle. The Sea-Tac team is visiting Legend’s Vancouver location in January to discuss opportunities to work together in the Northwest.
Key Associations & Influencers – We are now an active member of two key associations in the Northwest – NEEC and 2030 Seattle. Both groups have provided us with introductions to a myriad of partner opportunities in the NW and have been very supportive at integrating us into the ecosystem.
Met and engaged with the region’s largest utilities – Seattle City Light and Puget Sound Energy.
Regional Energy Service Contractors – Established a connection with three of the largest Energy Services Contractors in the Northwest with Lunch & Learns booked with each group during the month of January. All three are interested in the opportunity Legend is introducing in the NW.
Staff – Hired Jason Schwartz to lead our US expansion efforts on the East coast. Leveraging all our learnings, process and methodology from Seattle and New York to continue to improve and speed up our growth engine.
Marketing: Q4 – 2018
Through the quarter, Marketing continued the foundational work that needs to be in place to make the most effective use of marketing spend to drive quality, top-of-funnel lead generation, and subsequent conversion. We also supported significant in-market trade show and other activities.
Key initiatives included:
Based on the above and other requirements, near-term plans include:
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