Vancouver, B.C., Canada – August 27, 2020 – Legend Power® Systems Inc. (TSX.V: LPS) (“Legend Power” or the “Company”), a global leader in commercial electrical system solutions, today reported its Q3 fiscal 2020 financial results for the nine months ended June 30, 2020. A conference call to discuss the results is set for 4:15PM ET (1:15PM PT) today (dial in details 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.
Financial Highlights for the three months ending June 30, 2020
“Q3 was a challenging quarter financially given the backdrop of the global pandemic,” said Legend Power Systems CEO Randy Buchamer. “We went into the quarter with a strong pipeline and expectations for a number of new deployments to close, but unfortunately access to buildings and the lockdown prevented us from recognizing revenue in the quarter. I am proud of how quickly we transitioned our team and took action to preserve our balance sheet. Post quarter end, we’ve announced deals in New York, Toronto and Boston and are seeing strong demand for our SmartGATE Insights service. We are also in the process of closing an ESCO partnership (Energy Service Company) and are being scoped into projects being managed by other national ESCOs. Although the quarter was challenging financially, not only have we not lost any deals, we have increased our sales funnel and look very well positioned in the coming quarters.”
At the beginning of the quarter, the Company took immediate action in the face of the global pandemic to reduce unnecessary costs, ensure the safety of employees and quickly developed a strategic plan to be able to operate and thrive despite the uncertainty in market conditions. The near shutdown in the North American economy led to delays in our ability to get into buildings for both assessments and installs, and our customers were focused on the immediate task of dealing with the safety of their tenants. We invested a lot of time speaking with clients and advancing existing opportunities. Toward the end of the quarter, our major markets began to reopen, and we have since seen significant progress in advancing
During the first 75 days of the pandemic, we found that our customers and prospects were deferring capital purchase decisions and restricting access to their buildings, both of which had a material impact on sales cycles and revenue recognition. Even though customers delayed new projects, interest in our SmartGATE solutions continued to grow as did our access to senior decision-makers.
Beginning in late May and through June, our customers and prospects re-engaged for existing sales cycles, initiated new sales cycles and rescheduled previously delayed installations for completion.
July and August activity has included a significant up-tick in commitments from building owners; some for multi-building assessments with our SmartGATE Insights service and others for full SmartGATE platforms. This resurgence in activity has been broad-based and includes engagements in the multi-family, schools, commercial office and ESCO verticals. Based on the activity in our sales funnel and with a stabilized North American economy, we anticipate a return to growth for the Company.
Financial summary for the three and nine months ended June 30, 2020 and 2019
1 Gross margin is based on a blend of both equipment and installation revenue.
Revenue for the third quarter of 2020 was $1,548 compared with $676,139 in the same quarter of 2019. Revenue for the nine months ended June 30, 2020 was $1,681,236 a 9% decrease from $1,848,982 in the same period 2019. During Q3 2020, COVID-19 caused a significant curtailment of sales and prevented the Company from accessing customer buildings to complete SmartGATE installations.
Gross margin in the third quarter of fiscal 2020 was nil%, compared with 48% in same quarter of 2019. Gross margin during the first nine months of fiscal 2020 was 26%, a decrease from 58% over the same period of 2019. The lower gross margin experienced during the first nine months of fiscal 2020 was due primarily to: i) two projects completed for an early adopter, marquee, New York City customer during Q1 of 2020. Early projects in new regions typically involve higher overall install costs, in particular electrical contractor costs due to a significant learning curve in understanding the nuances of installing a new and unfamiliar technology; and ii) a disproportionate amount of total revenue derived from installation services during the nine-month period, which has historically yielded lower gross margins.
Adjusted EBITDA for the third quarter of fiscal 2020 was negative $856,386, compared with negative $1,132,652 in the third quarter of 2019. Adjusted EBITDA for the first nine months of fiscal 2020 decreased to negative $3,658,701, from negative $3,466,987 in the same period of fiscal 2019.
Net loss for the third quarter of fiscal 2020 was $1,015,242, compared with a net loss of $1,176,154 in the third quarter of 2019. Net loss for the first nine months of 2020 was $4,014,067, an increase of 9% from a loss of $3,669,937 in the same period of 2019. Lower gross margins were the prime contributor to the increase in net loss compared with the same nine-month period in fiscal 2019.
The Company’s operating expenses for the third quarter of 2020 were $983,658, down from $1,544,329 in the same quarter of 2019 and for the first nine months of fiscal 2020 were $4,340,180 compared with $4,874,730 in the same nine months of 2019. The decreases in both comparative periods are due to cost cutting measures implemented in response to the economic slowdown caused by COVID-19.
CONFERENCE CALL DETAILS:
DATE: Thursday, August 27, 2020
Please pre-register in advance of the call. Once you register, you will receive a confirmation which will have the dial in number and both the Direct Event Passcode and your unique Registrant ID to join the call.
CONFERENCE ID: 8989912
About Legend Power® Systems Inc.
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:
Steve Vanry, CFO
Sean Peasgood, Investor Relations
Neither the TSX Venture Exchange nor the Investment Industry Regulatory Organization of Canada accepts responsibility for the adequacy or accuracy of this release.
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