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spk01: Morning, everybody. We're waiting for everyone to continue to flow in. So thank you for your patience. It looks like everyone who has been in the waiting room has joined. So good morning, everybody. My name is Mike Ciosi. I'd like to welcome everyone to the Legend Power Systems Q4 2023 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please enter your question into the Q&A tab below the main screen on the Zoom interface. I will now turn it over to Randy Buckemer, President and CEO of Legend Power, to start the conference.
spk00: Randy, you're still on mute.
spk04: Apologize. Thanks, Mike. Too many buttons for some of these meetings. Welcome, everybody. We appreciate you taking the time. We know it's a busy time of year, so we really appreciate that you... have taken the time to listen to an update on Legend Power's fiscal 2023 Q4 call. I'm joined by Florence, who is our CFO, Paul, who is our COO, and Mike Sciosi, who's VP Sales and Marketing. Just quickly want to review the agenda so you have an appreciation of what we're going to do today. Obviously, we'll have some opening remarks. I'll give you an overview and quick highlights of some things that I think you'll find of interest. Florence will go into the reviewing the results and we'll be talking about sales and operations as we go forward. Just take a moment. If you could just read the forward-looking statement, just to make sure that that disclaimer... And you appreciate it. So we're taking a different approach today. Hopefully you'll enjoy the interactivity. We're going to be able to present and share some reports and documents that we use inside the company that I think are illustrative and clearly show the progress the company's making. Florence will talk a little bit about the quarter from a financial point of view. Mike's going to talk about the sales side, and Paul will talk about a lot of the initiatives that we've been having inside the company to improve the organization. But the focus for all of us really has been conservation of cash, speeding up cash flow, getting deposits with orders, improving key processes, and really getting ready for growth. reducing our costs, and Paul will talk about that, and growing margins. And in each of those areas, we've made significant progress. On Mike's side, I think it's really exciting. You don't get to see with some of the financials, the progress on the sales side. And it's really exciting the progress we're making with the GSA Green Proving Ground and how we're actually being written into specs with DCAS, City of New York, et cetera. There are a lot of things going on that are really, really exciting. I think you'll find today informative, but I think also you'll have a better appreciation for how far along we are in the sales cycle with some major organizations. that are each company makers, and as well as the numerous markets and things that we're in. And we've passed the critical stage. People aren't wondering if our product works. We're having terrific success with Gen3 in the marketplace. We've had many different technology evaluations from government to private enterprise, and the solution is really, really delivering. And right now, we're really at the stage with many prospects. They're deciding on multi-year deployment plans, how best to utilize the technology for many years to come. Very exciting time for us, and we'll get into that today. And hopefully, you'll have, again, a better appreciation for where the company really is in the marketplace. I'd like to ask Florence now, if she could, just to take us through some of the financial highlights.
spk02: Thank you, Randy. Good morning, everyone. So during this quarter, revenue recognized was $159,000 compared to $579,000 in Q4 of fiscal 23. Revenue recognized for the year ended September 30, 23 of $1.1 million was based on nine smart gate systems and eight completed smart gate installations compared to $2.1 million for fiscal 22. which was 22 smart gate systems and 15 completed smart gate installations respectively. So this shows an increase in average unit sale price year over year. Deferred revenue as at the end of the year was $210,000 compared to $30,000 in the prior year. So backlog is healthy and we will see the transition of these revenue recognition as the orders are fulfilled. Gross margin in the fourth quarter of fiscal 2023 was negative 4% compared to 11% in Q4 of fiscal 22. Negative margins this quarter were the result of unallocated fixed costs incurred. Gross margins normalized for these unallocated fixed costs would have been 33%. The company ended the year with $2.5 million in cash, no debt, and $3.79 million in working capital. With this working capital, we'll continue to proactively focus on the items critical to attaining our growth projections this year. We'll continue to manage our capital resources as we always have to support our sales growth plans and deliver for our shareholders. I'll now pass it to Paul, our COO, to provide some operational highlights.
spk03: Great. Thanks, Florence, and welcome everyone to the call. You know, I think it's really important that we talk a little bit about our sales and operational definitions as we're using them frequently in both written and communications. And really, pipeline, these six steps from pipeline to revenue recognition is our revenue value stream in lean manufacturing. And a value stream is basically a process or a set of processes that transform material and information into products and services that the customer wants and something that we can cash for. So it's very critical that we're looking at these six steps of our revenue value stream and transforming it to speed the time to sales, to speed the time to cash and to be proactive planners. So our top five strategic initiatives are really focused on doing that. Sorry, Mike, could I take them through the definitions, please? Yeah, wanted to do that very quickly. Pipeline and forecast. These are sales opportunities that are not yet won. Pipeline decisions are not yet underway. Where forecast, the smart gate decisions are actively underway with the customer. Commitments are verbal. Paperwork in process. Bookings are actual sales wins. And these are opportunities where proposals and POs have been signed. Backlog is equal to bookings. However, from an operational point of view, this is where we need to actually transform, deliver, produce the material, get it to the customer, install. And revenue recognition, of course, is where that product or service is provided to the customer. And then hence, invoicing and collection of cash. So our revenue or our cash value stream. Thanks, Mike. So those five key initiatives are really significantly altering the way that we do things. And again, our primary focus is on speed to cash, speed to sales and proactive planning. We're transforming the business management processes to streamline the company. And we're improving company processes to improve quality, time, efficiencies and effectiveness. And this is making our processes shorter. It's increasing win rates and it brings cash sooner. Effectively, what we're doing is perfecting how we transact to support success and company growth. Our backlog is very strong. We have 10 plus units to be shipped over the next four months. This, in addition to deposits we will get from new bookings, is going to support our positive cash flow throughout the year and will bring additional cash to the business. In terms of our product and services roadmaps, It's very important that we understand the timing and release of new products, revisions and changes as we're aligning all of our material planning and our production to those changes. Again, so that we can be predictive, we can be on time and we can ensure process turnaround time shortened and we're bringing cash to the business sooner. Supply chain's improving. I've seen a lot of improvements, still some holdouts, but The way we're addressing longer lead time is by ordering the parts a little sooner. And I'm very excited about the rolling forecast and sales and operational planning process. Because we've transformed a lot of the workflows of both sales operations, operations, productions, and finance, we're able to provide a 36-month rolling forecast. And the value of that rolling forecast is very high. As we can look monthly at changes in that forecast, and take action immediately, not only within the fiscal year, but because it's 30 months, the next fiscal year and beyond. And that's a very powerful decision-making tool as we're able to react very quickly and take action where changes need to be made. And again, supporting time to sales, time to cash and proactive planning. And we're scaling to meet the increase in demand while knowing we're replicating our best practices throughout the company. So our continuous improvement initiatives, they're involving all departments, addressing business, customer, partner, and deploying needs. Our cash position is very strong. We have solid cash throughout the entire year and beyond. Our operating expenses have been reduced dramatically, 30% down from $500,000 a month to less than $350,000. Our COGS has improved by 8 to 10 percent and working further on that. So I'm very excited that operations is in an excellent position to continue shipping and to support the sales and the growth of this company and what we're going to see soon. So with that, Mike, I'll pass it over to you.
spk01: Thanks, Paul. Appreciate that. And thanks, everyone, for your time today. Again, I'm Mike Ciosi, head of sales and marketing for Legend Power. And I'm pleased to give you an update today on our recent progress as well as our efforts to win more deals faster. That's our mantra for the year. So we've been making significant strides on multiple fronts with smaller deals coming in and substantial momentum building on larger projects. Notably, we're pleased to announce our upcoming first shipment to the United States General Services Administration, or GSA, as part of the Green Proving Grounds, or the GPG. Our collaboration with the GSA has opened doors for additional opportunities and showcased the capabilities and the applicability of SmartGate broadly across the U.S. federal government facilities. We have several new sales opportunities with the federal government that have come directly from the site selection process for the GPG. Given the unprecedented need and the level of satisfaction with the GSA currently has with us, we are able to push forward with these new sales opportunities, while we continue through the green proving ground process. In addition, with the city of New York has been promising, they finalized the active power management specifications and are beginning to distribute them to existing RFPs. We expect the active power management specification to be officially published in January. Additionally, with the procurement processes being on a school by school basis that are being rolled up by general contractors, we are confident that our standard payment terms will be applied and included in these deals going forward. As we navigate these larger opportunities, we continue to see smaller deals materialize, and I'd like to highlight a few of them to enhance your view of our position in the market. One unique case is involving a local butcher shop in Ontario. While this would not normally be one of our primary direct customers, they were referred to us by their local utility. The shop faced significant power-related challenges affecting their high-tech processing equipment, which ultimately impacted their revenue and their ability to service the community. Through a power impact report, we identified and showed them how the SmartGate can solve their power issues, resulting in their decision to purchase the SmartGate. This demonstrates the versatility of our business model and emphasizes the success of our standard terms, including our deposits, applied in multiple markets. Another noteworthy customer is a major resort along with our other longstanding partners. The end customer's investment in large resort property required a large amount of upgrades with the existing upgraded equipment and the power quality issues. They were concerned that the power would prematurely damage their brand new equipment, which came at a hefty price tag that led them to acquire a smart gate. They also are leveraging our financing facilities to further emphasize the success of our partner model and aligning with our standard business terms. So we're excited about that as well. And these success stories are not isolated. As buildings of all types continue to decarbonize and increase efficiency, they rely more heavily on sophisticated systems, which are more susceptible to power issues. In fact, we were recently meeting with a major technology company and during a conversation, their director of energy and sustainability, they said it best. I'd like to read you the quote. It says, with the focus on reduction of carbon emissions, buildings will always move to smart systems, making these sites sensitive to power quality issues. On the other end, in deregulated energy-only power markets, there is uptake of intermittent renewable power, which may also create power quality challenges. So power quality becomes a critical component for reliable, efficient buildings and ensuring optimized equipment lifetime as we progress forward on the carbon reduction journey. So we are currently working actively with them on a plan to assess the hundreds of locations that they operate. They are also pulling in multiple decision makers as part of the process. And these are a double-edged sword. As the opportunities get bigger, they can also take more time, which is why our strategic focus has been on winning more deals faster. And that's why it's so pivotal. What I'd like to do is kind of give you a quick overview on how we operate. Prior to today, prior to this year, we were focused on more of a linear process where we would go through, educate, sell the impact assessment, conduct the power impact assessment, present the findings, handle objections. And that led to a lot of questions and data support coming later in the process. So as Paul mentioned, we were focused on reworking our processes So as a result of that, what we're doing is we're moving those data support and those questions earlier in the process. And what that's focused on is being able to shorten our sales cycles, improving data integrity, enhancing transparency, and increasing customer confidence as critical aspects. So as you can see, the current process takes 12 to 18 months. But with our revised approach, we aim to significantly reduce that, ultimately increasing win rates and velocity. Looking ahead, we are confident in meeting our guidance for 2024 with strong commitments from committed system orders from the City of New York, from the U.S. federal government, and other existing CRE customers that are awaiting budgets and or bandwidth availability. So from the sales and marketing standpoint to operational improvements, Ledge Empower is committed to enabling our customers to make faster, more confident, and better informed decisions. In conclusion, all systems are green. Our deals are progressing well. And we are enthusiastic about the future. And we thank you all for your time. And I'll now turn it back to Randy for questions. Oh, I apologize. There was one thing that I forgot to mention. And that is, well, I wanted to give everybody some visibility to some of the actual results that our customers are experiencing. So you can see here, what we traditionally do is we deliver a measurement and verification report. And to that, what we've also recently added is a power quality improvement report. So these are real reports for existing customers that show the impact that we can deliver to them, not only from an energy efficiency basis, but also from a power quality improvement basis. You can see that we take hundreds of fluctuations straight out of the building. So the left side of the chart shows what the power looks like coming in from the utility, and the right side shows what it looks like coming from the Legend Power smart gate system. So what we always ask our customers is, which facility would you rather rely on for your income, for your profits, and for your reputation, one with high volatility on the left or the one with a steady power stream on the right? So there we have it. So thank you very much. I'll turn it back to Randy.
spk04: Thank you, Mike. Thank you, Florence. Thank you, Paul. We've had a slight glitch on the system, but we're going to work around it, so that's all right. Again, I think there's a lot of work and things that go on behind the scenes that people don't see, but the sales activity and the Movement we're having with significant accounts is really starting to pay off. We're seeing a lot of growth, obviously, in the marketplace. We're seeing technology that is coming out that is affecting adversely buildings on the grid side. I mean, the market continues to get bigger and bigger for us. We've now got over 24 smart gate systems out in the field. And the part that's really interesting is that the customers are telling us how effective it is. And in fact, we're in the process now of working on an extremely large order with an existing customer that has come back to us based on the success they've had in about 20 buildings in their network. So we're seeing, again, in all of our markets, people are starting to look at deployment plans. They're looking at many years out about what they're going to be doing with their network of buildings. And we're seeing the government programs very strong for us. They continue to support the adoption of technology that can reduce the impact of poor power. And we're finding from utilities and different marketplace decision makers and recommenders are asking people to talk to Legend about solving their power problems. So we're very pleased with that part of the business. I did want to mention a couple of things also before we went to the questions. When Paul was talking about cash and strong cash, we do depend on deposits. So I just wanted to mention that Successful deposits in the non-government field have been strong. In fact, they've been 100%. We've asked for a 25% deposit. We expect that to continue to happen. And one thing that is interesting on the government side, when you looked at the announcement on October 3rd about the 8 million commitments and the 15 million target we had, a lot of that was government accounts, et cetera. And one of the changes we had was One of the government accounts went to RFP because they couldn't go single source supplier. So they went to RFP for electrical contractors. We're spec'd in as the power management solution in those RFPs. That delayed the process, but that was a significant portion of the revenue we expected by the end of the year. It's not gone away. It's in fact grown. And we are now awaiting the RFPs to come back in and we will work with up to five electrical contractors that have to put in a power management program and solution, which is Legend Power. So I want to make that point that there's some deferrals and some delays, but nothing has gone away in our funnel to date. And we also are excited from the deposit point of view, just to leverage on the last point, by going through the contractors instead of directly to the government, we will ask those individual contractors contractors for deposits, which will help with our cash flow. So there's some extreme positiveness out of it. And it also allows us to take those partners and ask them for a reciprocal business in other markets, et cetera. So we continue to build a brand. We're getting great feedback. I think it's now appropriate time that we ask you to submit any questions you'd have. But on behalf of the team, we're excited about where we're going. We're excited about our future. And the part that we're most frustrated is we cannot publicly share all the great things happening behind the fence that we'd like to, but I think you're going to start seeing a lot more information and press releases coming out that'll help you appreciate how significantly we've moved the company along over the last six to nine months. On that note, questions, please. So I've got a few questions. One of them is RFPs for in particular smart gates for DCAS. What we can say is that there are over two dozen current RFPs out with DCAS. As Mike mentioned, we will be expecting a public sharing of information on RFPs, I guess is the best way to put it. And if you look for that, we expect that to come out during January. But specifically on RFPs, we are seeing over two dozen currently. And the number of systems that we're looking from that particular organization will be somewhere in the 60 range. The second question is bottlenecks to prevent a legend from publicly announcing a major multi-million dollar smart date purchase order broken down by customer, et cetera. We'll stay tuned, I guess is the best way to say that. You should see something very early in January of significance. I can say this, that we... believe that we press releases out with the largest order in the company's history very soon. So we're excited about that. And bottlenecks really are deferral on the sales side from the purchasing connection. In other words, we have to follow the process of not only the person that's buying the system, but then we have to arrange electrical contracting. And in some cases, as I've mentioned earlier with government, we've had to go to electrical contractor RFPs because they can't go single source supplier, even though we're spec'd in two contracts. So I would say the bottleneck that's prevented us from publicly announcing some of these major deals is we'd have to button up some of the paperwork. There's a couple that were waiting for financing to get finished up so we can do that. There's a couple others that we getting electrical contracting, uh, pricing, et cetera. Those will be done. Um, so there's nothing there that is, um, Going away, it's just been deferred or slightly delayed following the customer's purchasing process. Let's go with the next. Next question I'll give to Mike. Do you think the lack of addressing data questions early in the process may have contributed to a delay in sales?
spk01: I believe that has had some impact. Again, what we've been doing is we've been, again, if you could look at it from a cholesterol perspective, I think everybody understands that high cholesterol of 240 and greater is meaningful. But when you find out that your cholesterol is 240, it's a completely different story. And that's really what we've been focusing on is delivering the data for the specific buildings. We've done enough of these now to really understand what kind of questions about the data. Because when we look at how do we tie data to financial results, there's not a set formula for that. So we have to go through and look at it and try to figure that out for each individual customer. So what we're doing earlier in the process now is we're presenting the findings that we have from existing customers that show what kind of, just as we showed earlier, what kind of impact to the power quality we can have, but then also give real customer results. Like for example, one of our customers, they deployed about 10 systems, they saved about $110,000 worth of energy, and they weren't quite sure how they were going to quantify the maintenance repair savings. So what they did is they did a five-year look back on one common category, and that was control boards. And control boards for HVAC elevators, lighting, those types of things. And what they actually found is their average was about $180,000 per year for those facilities that they deployed in. And what they found is in the subsequent year after deploying, that $180,000 spend went to $15,000. So that was a way to we can actually go through and show how improving the power actually had hard dollar savings. So when we look at the data side of it, now that we have a better understanding of the data and how it actually relates to real life customer events, we're pulling that forward in the process and we're making sure that that's happening while we're doing the impact assessment. rather than presenting the information and handling it at that point in time. So we feel that this will be an accelerator for our sales efforts for sure.
spk04: Thanks, Mike. You have a question that comes up is, can you please talk about cash position, cash burn and expectations for capital needs? So Florence went through the basic balance sheet numbers earlier. We're roughly now in just short of $2 million in cash plus receivables. We've got somewhere about $1.7 or so in inventory, $1.7 million. So we've got some good working capital. What we need to do is collect on the receivables, which we're focused on. We need to ensure we get deposits with the orders we have. And if we take the forecast, internal forecast we produce, and only get 50% of the deposits that are expected will have more than enough working capital for the fiscal. So right now we are looking at that constantly. And as I've said earlier, we have not had one person say that they won't give a deposit. We were concerned about the government accounts. If you go back into August, because they told us they would only give progress payments and not cash. But by going through the RFPs and now dealing with the five independent electrical contractors, we will ask them for a minimum of 50% of the order because we brought all the marketing and sales effort on those accounts. In some cases, DCAS, we've got somewhere close to $2 million of equipment sales efforts invested in the account. So we will be asking those independent contracts for deposits. So as we sit today, yes, deposits are a significant portion of our plan for cash, but we're historically showing a hundred percent achievement of that cash deposits. And our expectation is continued to do that. So we don't see at this point in time, capital requirements, unless we see something different in the marketplace when it comes to deposits, et cetera. Florence, if you can just explain the reason for the negative gross margins, that adjustment that you had.
spk02: Sure. So as I spoke about earlier, the negative gross margin this quarter is due to the reallocation of fixed costs. So that includes rent expense, amortization of fixed assets, et cetera. So those costs would have been reflected below the line regardless. So it would have had a zero impact on the overall revenue profit and loss statement of the company. And in terms of whether or not we have the visibility of this into 2024, given that these are fixed costs, they're certainly already taken into account for. So we have 100% visibility as to what those costs are. And if you look in both the financial statements and MD&A, we do strip those costs out so that you're able to see exactly how much is being allocated over into cost of sales, which are costs that are going to be incurred regardless.
spk04: And the other question that's following that is written, I believe the statement is talking about margins going forward for the year. And as we said, if you took the true margins for the court, about 33%, and we're on target for 50% by late 2024, early 2025. Paul's been earlier talking about a lot of the initiatives we've taken to do that. But we're confident margins are coming up. product availability components, et cetera, is improving. We're taking numerous methods to reduce our cost of goods. The most significant that I talk to with people on a daily basis is transformers. And transformers are the most significant component of our system and the most costly. And if you look historically, if you go back five years, the average transformer was probably in the 1500 amp range and costing about $4,500. If you look at today in the large ramps, that went closer to almost $15,000 during COVID. We believe, and we have been looking at alternate products from the current supplier. We've gone through an evaluation with some alternate suppliers that will reduce those costs by about 50%. And we're on target to put those things in place. And that's just part of some of the things that Paul and his team have been doing to reduce the cost. And Another question is given all of your work on manufacturing, what's the lag between order placement and final delivery? On most of the products now we're finding that we can either stock within the timeframes that work for us, because when you've got the, when you're managing your cashflow closely, you want to make sure you don't have more and more inventory. And as we've said, we've been carrying about 1.8 million in inventory, about 350 of that would be old inventory and the rest would be new. Our goal is to get it out the door. So what we're doing is using the existing inventory up and bringing the components to complete orders. As Paul mentioned, there's 10 systems going out. We're trying to use that up. We do bring components in to address the lead time. But on another call, we can go in more detail about how that is being more systemic. And rather than just ordering and keeping, we're looking at some products that may be going obsolete, ensuring that we have those. We're looking at lead times of vendors and different cost structures and optimizing it for the best costs we could have and time list to deliver. Also, we had a couple of questions that came in email and I thought I would just share a couple of those with you. One of the questions came up was in the October 3rd release, we talked about large orders commitments in the neighborhood of 8 million US plus. What those were is very large buildings in the U.S. needed systems that were bigger than what we had. And just to put it in perspective, historically, we had 1,000 amp, 1,200 amp systems, and we had 1,500 amp. Then when we got the IKEA order, we had to go up to a 2,000 amp, then larger. We're being pulled. We're being pulled by larger opportunities. So the larger opportunities are looking for a 4,000 amp system, which you currently don't have. When engineering first looked at the 4,000 amp, they were looking at significant spend, significant timeframe, a year and a half, and perhaps up to $2 million. We're lucky to have a guru engineering head, Mark Peterson, who looked at it and looked at some alternative methods. We expect to be able to, released to the marketplace at 4,000 amp by the end of this fiscal. And it will be at a cost basis that's nominal compared to what was first looked at. So it's very exciting. So back to the question that was asked, there are some people that are looking for 4,000 amp. What we'll do is we'll fill orders on some of their portfolio with smaller systems. And then what we'll do is defer and install the 4,000s as they become available. So it's another example of how the platform that Mark and his team at Engineering Developed keeps growing. And I hate to give Tesla a plug, but I'm going to use it a little bit because it's so software driven. Once we get the larger systems, the capabilities to add functionality and additional power management capabilities is software driven. So we're becoming less and less. We're putting things together in the back and more and more we're technology driven. So that was that particular question. Another one was just asking about the DCAS, GSA, larger quarters, et cetera. I think we've covered that in detail. I've been asked a bit about our cost structure. Everyone's chipped in. Paul's led the initiative. We've taken about a million dollars out of our operating costs on an annual basis compared to last year. We're in the neighborhood of between three $325 to $350 per month to run the organization. That's very lean, but that allows us to deliver as planned. And that's one side of the equation. The denominator side is reduce your costs, which we've done proactively. And additionally, on the revenue side, taking the deposits and with a forecast that Mike has, even significantly downsizing his forecast, we're very confident with the year. although we do expect to fulfill all the promises the sales team has had. And also, the last question I have is you've spoken about non-energy savings being a larger proponent of savings than reducing energy costs. Can you provide some examples from customers that illustrates how SmartGate lowers operating costs and saves money beyond energy savings? And I'm going to turn it over to Mike. I'll just set it up by saying we're really excited about the GSA Oak Ridge Labs. relationship, because that will give us a third party document that we could share with our prospects and customers stating what they have found the non-energy savings to be. We're also finding that more and more systems go out, as we said, over two dozen in the field. It's exciting because the customers are telling us, and Michael shared a couple of stories about the non-energy savings. But I think this is very parallel to what we experienced when we had energy savings and first came to the marketplace years ago, energy savings were doubted. What's your methodology? You know, how did you get there? That's not the case anymore. And as we become more standardized with our methodology and having a third party endorsement, I think you'll find like we had with the early energy questions, the aspects of non-energy savings will become absolute and not be questioned as much as it is now. This Gen 3 is only out one year, and people want to know how it works. Mike, you want to expand on that, please?
spk01: Yeah, sure. So a few things to keep in mind. First of all, when we look at maintenance repairs on a commercial office building, it's very analogous to maintenance repairs on your vehicle. Obviously, if you take it to the dealer and get every piece of preventative maintenance done, done that they recommend, you're going to have one cost basis versus if you take it to a local mechanic, you're going to have a different cost basis. And if you decide to not do it, you're going to have a different cost basis. So when it comes to predicting maintenance and repair savings, there's not a formula for that. So what we try to do is we try to create some visibility of what our customer's real experience is. And the feedback that we've gotten from our customers is is we try to look at it from a basis of the energy savings. So typically what we see is the low end of maintenance repair savings is about 50 cents for every dollar worth of energy savings. And the high end is about $2 worth of maintenance repair savings for every dollar of energy savings. So we try to give them that range and that's what the data is all about. That's what the power impact report We're really looking at understanding their data because what that enables us to do is be able to look at a broad swath of buildings and we'll find some that are good. We'll find some that are bad. And then where the power falls into the critical range. That enables us to go through and compare where they have the good buildings to where they have the critical power. And then you can actually see the difference in the cost structures there. So it is a model that we help our customers be able to build out. And as Brandy indicated, the work that we're doing with the U.S. federal government and Green Proving Grounds, and particularly the work that Oak Ridge National Labs is doing, Oak Ridge National Labs has been tasked as part of this to help give them a model to quantify maintenance and repair and life expectancy savings. So we'll definitely have more information as we move through that process with Oak Ridge National Labs. So we're very excited about that. Again, if you, as Randy said, if you go back a couple of years and you look at how do we handle our energy savings, we were able to build a model and a formula in order to be able to do that. And we did that in conjunction with a lot of the utilities to really prove out the, as well as the IPMVP to prove out an energy savings model. And now what we're doing with our customers, as well as with Oak Ridge National Labs, we'll be able to do a very similar model for the maintenance and repair savings. So again, we have all kinds of anecdotal information. For example, we've talked with multiple lightning manufacturers, They know when they have good power, their LED driver failure rates are in the low single digits. Conversely, when they know they have bad power, that can go as high as 25%. So there's proof points there. There's proof points on the EV charging side. There's been some recent studies that have come out that said that up to 40% of charging station downtime is due to power quality issues coming in from the grid. So what we're able to do with the Gen 3, as well as our sales process, We're able to help build out those models and be able to start to articulate that in the work that we're doing with the GSA is only going to add power to that.
spk04: Thanks, Mike. I think the other thing I would add is I guess about three years ago, Mike said, look, what we are offering on energy savings is great. It's nice, but we need something more compelling. And he began the process of talking about power management and the adverse effects of power on buildings. If we could add additional functionality to our system to incorporate that, we would have a real compelling solution. We're there. I mean, the engineering is delivered. It's taken us three years. We probably have about two, two and a half million dollars in that investment. And what I like to parallel is the current market value of the company does not reflect what's going on in the organization, nor does it not reflect our unique positioning as the only solution to address not only energy but the power management challenges they have so we believe and we're excited we thank mike for bringing it up it becomes more compelling and a must-have is what mike uses a lot of times around the around the organization so it's great to have energy savings but it's great also to have uh a solution that can make your elevators and your escalators of things work for your tenants and everything else. So it's a really exciting time and we will add additional functionality. In fact, there will be a release sometime soon about a new capability the system has that we'll be releasing to the marketplace for one of the government accounts that they asked us to add that capability. We're adding that and enhancing the system that will be available to the general marketplace. So, What are we focused on? I mean, when I talk to people every day, we're focused on cash. We're focused on deposits. We're focused on profitable sales. We're focusing on making sure we can take the inventory and the assets that we have that are all prepaid. I mean, that 1.8 million at cost when it goes out the door is a direct contribution to cash. And we forget sometimes that's all prepaid. So making sure that we kept our operating costs down and develop the margins to get that back in that 50% range. And we're building, led by Paul, the processes and systems to handle the rapid growth that we know is coming. So as an organization, we're excited about where we're going. We're excited about the opportunity in front of us. But most important, we're going to get this done. We will get this done. We believe the future looks very exciting for Legend and our people. And we're going to take advantage of it and become a very leading energy solution organization. So on behalf of the team, I'd like to wish everyone happy holidays. We wish you a fantastic 2024. And we know that 2024, I'm both a shareholder and Legend team member, is going to be a great year. It's our time. Thank you and have a great legendary day.
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