Legend Power Systems Inc.

Good afternoon, my name is Donna and I will be your conference operator today. At this time, I would like to welcome everyone to the Legend Power Systems Quarter 2 2021 Financial Results Release and 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, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Mr. Backemer, you may begin your conference.

Thank you. Welcome to Lesley Power fiscal 2021 Q2 investor call. I'm Randy Backemer, the CEO. I will be acting as CFO also today as Steve Vannery is busy working on our prospectus and sure that gets filed this afternoon for our financing. As the CFO, I'll provide a financial review, and as CEO, I'll give you a corporate update. And then I'm very pleased to have Mike Ciosi, our VP Sales and Marketing, and he'll discuss the great sales progress we've been making. We're also really happy to have everyone join us on the call today to discuss our progress and the financial results for the second quarter of 2021, which just reminded of three months that ended March 31st, 2021. Please note that certain statements in this call may be forward-looking in nature and These include statements involving known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially. But those expressed are implied in our forward-looking statements. And for information about Legends' forward-looking statements and risk factors, please see our management discussion analysis, which was filed on CDAR today, under the company profile at cdar.com. Financial review. Revenue was lower than we would have expected as the abundance of sales in the past six months was temporarily slowed in reaching revenue recognition milestones due to customer-driven installation scheduling, internal and external COVID-related personnel constraints and building lockdowns, and inventory supply chain delays. We now have a significant backlog to recognize in revenue, which we anticipate will take place over the next couple fiscal quarters. Our gross margin percentage during the three and six months ended March 31, 2021, was significantly under our historically reported averages. We have strategically moved older generation inventory at more attractive pricing to both secure business with marquee customers and proactively create precast and otherwise sunk capital. While gross margin has been a variable, while revenue has remained low due to installation delays, Management believes that if the company scales and sales bookings convert to revenue, that margins will improve and be closer to longer-term averages. During Q2, we continue to proactively manage our operating costs to attain a balance between the company's then activity level, while maintaining the infrastructure and personnel needed to quickly transition back to a growth cycle. We're definitely now in a growth cycle, as evidenced by our activity and sales booking performance results reported to Q2 2021, and the bought deal financing we agreed to last week could not have come at a better time. With additional working capital, we will be well positioned to expand the offensive part of our business in sales and marketing. We'll talk about that. Ensure the timely production, delivery, and installation of our next-generation technology. Additional capital also allows us to practically focus on the items critical to attain our growth projections, namely, insight engagements and their conversion to full platform sales, and expanding our ESCO, channel partner, and reseller networks. Post-closing of the proposed bot deal financing, we will continue to frugally manage our capital resources, as we always have, and squeeze the most of every dollar provided by our shareholders. In short, we're very happy with where we are and are very optimistic about the future. On behalf of Mr. Steve Zanary, My update. I'm also, as Steve said earlier, pleased to tell you that despite the pandemic, we're experiencing growth in all aspects of our business. We continue to believe our opportunity to leading energy platform solution has never been better and will continue to do so. We are achieving our intended business activity growth. Backlog is growing quickly. Quarter booked business equaled more than our previous two-year sales. For this fiscal, we're on the track to book orders well in excess of the last two years' sales combined. Insight service deployments are meeting our exceeding targets, achieving Insight smart gate conversion targets. Our two largest deals that we just completed were actually flown through at 100% conversion ratio. Reseller and ESCO channels are embracing both Insights and smart gate solutions. And outside the corridors we touched on earlier, a key event, our 10.3 raise to support our growth plans. And since January, we've put over 20 solid press releases highlighting some key corporate progress. I just want to touch on a few of the headings because sometimes we forget how far we've come in such a short period of time. We cut a deal and put with one of the ESCOs two significant smart gate platforms in New York schools. We worked with an ESCO to assess 10 city of Boston buildings. We were chosen as the top and really only choice in the active power management category by third-party white paper. One of our channel partners followed up with their Insight deployments and got five SmartGate systems during the quarter. And one of the largest orders that we had in the corporate history added two additional systems to make a 19-system order. One large multi-res ordered 15 Insight and one SmartGate system. Ten Insight ordered a large New York. City of DCAS, that's the New York Department of Citywide Administrative Services, chose our smart gate solution for demonstration agreement coming up in the schools that will open this up to almost 5,000 buildings. New largest order in legend history as Ontario multi-res ordered 10 new smart gate systems. That became our largest dollar value record and 100% insights to smart gate conversion ratio. Department of Health took 10 insights, a whole new vertical for legend. ESCO, for the first time, we had our partner use legend insight solutions to help a major property management firm assess multiple buildings before they bought the building. First-time insights have become a due diligence tool. Very excited about that. And ESCO teamed up with the Department of Defense, and that's a whole new vertical for us. And we're currently assessing some defense buildings as we speak. And, of course, we announced the overbought 10.3 financing. And these are just the major highlights. There were many more. And reflecting on the releases, one sees major demonstrable progress in our business. And over the last few years, based on customer feedback, as you mentioned in the last quarter, you know, we needed to offer more than just energy savings. And we're clearly doing that with our HAPS platform. The new platform, SmartGate, does save the energy, but addresses the common power problems occurring in buildings. And over the last couple of years, we've invested several million dollars to develop the new and expanded Legend SmartGate platform, and educating our target markets about our solutions. And we're now starting to get payback on those previous investments. During September, we introduced our analytic product insights, which performs detailed power analysis to identify problems and opportunities to improve power quality and efficiencies in commercial buildings. Insight analyzes over 200 power parameters, and we form a power impact report where we present our findings and recommendations to our prospects. In this way, we're pulled in our customer's business instead of us trying to push our products on the prospect. It's a huge improvement. We are still seeing customers save energy, so we can do so much more for our target market. And Mike will talk a bit about that later on. The exciting thing is our platform has growth to integrate with electric charging, all kinds of electrification products and solutions as they come out into the marketplace, and we can become the hub to make those all better. And just to remind you what we talked about last quarter, we see our business model as being very simple to understand. The quarter goal is to get 90 insights, service deployments, a target per quarter. And if we can get and continue the 50% conversion rate we're getting, that means that for every smart gate sale from every two insights, we create $110,000 platform sale and 1,000 to 4,500 recurring revenue. And also just to take off what we talked about last quarter, we continue to see that massive shift of corporate effort The climate and environmental initiative is becoming top corporate objectives. The world started to take serious steps and continues to, to positively impact climate change. And in all of our markets, we saw consistent and systemic change to make buildings less harmful to the environment, combined with improving efficiencies, reducing costs, and making a better tenant experience. The Democrats in the US, they're committed, and they come out talking about how they want to make it easier for corporations to adopt electrical energy saving technologies for commercial buildings. This is exactly where we play and where our solutions excel. In regards to the region, companies anointed senior leadership to address ESG and building energy improvement efforts, and everyone seems to be looking for new and innovative energy technologies, leading technologies like Legend's SmartGate platform. Clearly, the world is looking for products like Legend's SmartGate platform. We're poised for significant growth. Combining our new platform with the exciting sales progress which Mike and his team have made is very exciting for all of us. There's much to look forward to. Quite simply, we expect to see continued confirmation that the time is now and growing for Legend Power and our solutions. And during these uneasy financial market times, it is company and all The legend is complete of capital raise and has a sufficient balance sheet and resources to fuel our growth plans. We've invested to grow by improving our sales team and processes and building a strong engineering team that will continue to release leading-edge energy management solutions. We will continue to improve and expand our sales team to ensure we achieve our targeted growth. We will continue to earn the respect of our target markets and their ecosystems, and make them comfortable that Legend Power is an innovative company to work with. We will continue to build our brand by working with key ecosystem players to ensure they're aware of and ultimately support Legend Power in their clients' buildings. Michael Scherhout said we are about growing our reseller, EscoMarkets. The Legend Power leadership team is extremely positive about Legend's future. We're excited about our current results, and we're committed to making Legend a leading energy management organization. Mike Ciosi, VP Sales and Marketing, will now speak about the excellent product and sales improvements he and his team have made and how our target markets have responded to our leading solutions. Mike?

Thanks, Randy. Appreciate it. The last few quarterly calls, we've been talking about the fact that the demonstrable results are coming, and we're very pleased that now we can look back over the calendar 2021 And it's obvious that our demonstrable results are here and that they are indeed sustained. And again, if you look back since the beginning of 21 with more than a dozen major announcements, as Randy has outlined, there are some definite themes that start to surface. And those surface that our sales model is working. When we look at the fact that we have a multi-pronged sales approach, where we're selling into direct sold businesses, distributors, channel resellers, and ESCOs, we can start to see that we have demonstrable results on all fronts. And also, when you look at the fact that there's multiple verticals that are involved from commercial office to multifamily to government, K through 12 education and higher education, we're starting to see our business model really start to come to life and produce demonstrable results across multiple sectors and multiple distribution channels. Again, if you look back at the list that Randy read off and you look at the ESCO deals, that not only did we get systems installed inside of K-12s in New York, we also have them operating at the municipal level as well as the federal level. So when we see that the ESCO channel is starting to gain momentum, it's very exciting. Obviously, when we look at the fact that there's also multiple ESCOs that are involved, again, further proof that the model is working. Again, when you look at some of the fact that over the last, since January of this year, we've announced two of the largest sales in the company's history, with one surpassing the other. So it's very exciting times. And again, when you go back to the business model of the insights-led sale, the reason why we're doing that is to allow building owners and operators to look across their portfolio holistically, quickly, and find those areas for results, where we can reduce their risk and improve their financial performance and increase their tenant safety and satisfactions. So, again, if you look at those large system sales that have come through the direct side across multifamily side, again, the business model is simply working. There are a couple of deals that I do want to spend a little bit of additional time on because of the significant strategic nature in them. Again, one of them we've already discussed briefly about the ESCO momentum, but it's also noteworthy to really spend a few minutes talking about the city of New York. and our demonstration agreement with the city of New York. Because this gives us the opportunity to earn the right to get into every facility and every entity operated by the city of New York, which includes the New York Police Department, Fire Department, museums, libraries, government buildings, water treatment facilities, so on and so forth. And the other thing that's also very exciting about this is the procurement process that we went through with this is very similar to the new energy technology program. It was actually modeled after the new energy technology program from the GSA at the federal level. So the fact that we've been able to successfully navigate that process to get an agreement in place with the state of New York is incredibly exciting. Not only because, again, the potential that exists there, but also New York is just, they're viewed as a trendsetter for large municipalities. So again, we cannot understate the importance of that agreement with the city of New York and the DCAS group. Again, if we look at the new largest deals, 100% conversion rate, double-digit systems orders from long-term customers. And the other things that are exciting about that is this is just the tip of the iceberg. These building owners and operators were running We've done dozens with them and they own and operate hundreds. So from the excitement level and the potential that we have there, that's one of the things that's, again, if you look at our, if you look back at our new business model, something that's dramatically different. Before we would go, we would do one school at a time. Now what we're doing is we're addressing major portfolios dozens at a time. And that's getting us much larger sales, much faster and a much more meaningful and engaged way with our customers to And again, just further demonstrable results that the new model is working. And the new model being, again, direct sold ESCOs and channels, as well as leveraging the insights sales. And that all comes together with our release on our growth metrics. Again, one of the big differences between the old legend sales model and the new legend sales model is it's much more predictable, as Randy indicated. We can look at it and say that for every 10 SmartGate insights we place, we expect five SmartGate platform sales. And that's, again, game-changing from our ability to be able to predict what our bookings will be. And, again, this is generating – if we look back at the metrics that we announced, we're generating results in direct, channel, and ESCO. So we're not relying on one distribution channel. The markets are engaging with our solution like they never have before. That's predominantly because of the crossroads and the intersection that we represent. Not only are we something that's good for the environment, it's good for ESG strategies, but it's also good for your customers. It's also good for the financial health and performance of organizations. And those are some of the things that are really starting to engage and why the new business model is and the new sales model is working so spectacularly. So we're very excited about what we've got going on. So, again, a lot of great results, which are creating more great results, which is part of the reason why I'm more excited than ever about the future of Legend. And please stay tuned for more announcements shortly. Randy, I'll send it back to you.