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spk00: My name is Lisa and I will be your conference operator today. At this time, I would like to welcome everyone to the Legend Power Systems Q1 2022 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. Legend Power, you may begin your conference.
spk06: Welcome to the Legend Power Systems Fiscal 2022 Q1 Investor Call. I'm Randy Buckemer, Legend Power's Chief Executive Officer. We're pleased to have you join us in the call today to discuss our corporate progress and financial results for the first quarter of Fiscal 2022, which were the three months ended December 31st, 2021. Please note that certain statements in this call may be forward-looking in nature. These include statements involving known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements. For mention about Legends forward-looking statements and risk factors, please see our year-end management discussion analysis, which was filed on CDAR today, under the company's profile at cdar.com. I'm joined today on the call. We have Florence Tan, our CFO, speaking. We have Mike Ciosi, our VP Sales and Marketing, and also speaking, Mark Peterson, VP Technology and Engineering. We're all really excited and pleased to have Paul Moffitt as our new Chief Operating Officer listening in on the call, too. Mike Ciosi will discuss the sales team's progress. Mark will provide a Generation 3 and supply chain update. Despite the macro challenges that most companies have experienced, we are experiencing growth in all aspects of our business. We are very confident that our opportunity to be a leading active power management solution provider has never been better. We see the acceleration of a 20- to 30-year transformational journey where companies are going to spend trillions of dollars each year needing to protect their buildings from electrification and decarbonization challenges. And a legend, as we've said in previous calls, is perfectly positioned to be a leading solution in this enormous business transformation. During Q1, we completed the testing of our Gen 3 system and we began an aggressive build initiative to fill our backlog. Mark will discuss Gen 3 further, but we are extremely proud of all the team members that made the creation and actual realization of Generation 3 possible. We continue to work through component supply chain challenges, but began to secure additional components to commence the assembly of 20 plus units. Unfortunately, due to the delivery timing of components, our rev rec recognized during the quarter was low. Rev recognition will pick up during the quarter we're in and going forward. We are experiencing deal flow growth and pipeline growth. Mike will give you some good color on that. We're very pleased with the new and expanded sales team's ability to quickly engage both direct and channel partners. We continue to grow backlogs. we are meeting or exceeding our insight service commitment targets, and we received our first insight order, multiple insight order, for our first order outside of the continental USA. The target markets and the seller channels continue to respond very positively to legend solutions and combined opportunities. We welcome new team members, and we focus on operations to support our growth and continued RCO growth. search which ultimately led to Paul coming onto the team and in the next call we'll have Paul give you some insight in his role but we're excited to have him on the team and his expertise in operation and process management etc is all planned to support our significant growth and generally regardless of the region companies appointed senior leadership to address ESG building energy improvement efforts and everyone is looking for new and innovative technologies leading unique technologies like the Legend Smartgate platform. And we don't have to tell you, you can read it every day in all the things you look at, that clearly the world is looking for products like Legend Smartgate platform and we're poised for significant growth. Combining our new platform with the exciting sales progress, which Mike will talk about, all of us have much to look forward to. Quite simply, we expect to see continued confirmation that the time is now for Legend Power and our solutions. During this uneasy financial market, it is comforting to know that Legend has completed a 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, building a strong engineering team that will continue to release leading-edge energy management solutions. We'll continue to improve and expand our sales team and team members as appropriate to ensure we achieve our growth targets. Now I'm going to turn the call over to Mike Ciosi, our VP Sales and Marketing, and he'll share our significant sales progress that does not show in the quarterly numbers. And Mark Peterson will talk about the fantastic Gen 3 achievements and what that means for the organization. Mike?
spk04: Thanks, Randy. I appreciate that. And you're 100% correct that our momentum that we're experiencing is tremendous and From the standpoint of our story hitting the mainstream, there are a lot of mainstream providers that are starting to identify and notice the same trends that we've been talking about, and that's the increasing instability of the grid. And that, quite frankly, is helping to generate results for Legend Power. When we look at our insights, we put out our first quarterly objective for insights back in fourth quarter of calendar 2020. And since then, we've hit all of our targets, hit or exceeded all of our targets for insights. In addition to that, when we look at our expected conversion rate of 50%, We're actually slightly ahead of that right now from a conversion perspective. So when we look at the performance and the results that we've been able to generate, we're very pleased the fact that we are on target or ahead of target for the major metrics that we've put out. Additionally, when we look at the pipeline that we're dealing with, it's never been greater. When we look at the fact that right now we're looking and assessing hundreds of buildings for insights, The pipeline for Insights as well as SmartGates has never been larger. And again, when we look at our business, we look at it from the standpoint of the direct side as well as the channel side. And on the direct side, we are engaged with large commercial real estate companies that own and operate more than $100 billion worth of commercial real estate assets. So the momentum and the interest from the market is incredibly robust. And that's really feeding some great momentum for us, great market feedback, and great interest from the industry. Let's see. From the direct side, we're also working with several large portfolio owners to come up with a strategy to assess their entire portfolio. This is a marked difference from a year and a half ago when we were trying to do one or two buildings at a time. Now we're looking at... our customers challenging us saying, hey, we want to look at the 100 buildings. How do we move through that in a timely fashion? So we're very excited about the momentum that we're gaining there. And, again, we're also seeing this with our large existing customers. We've got customers that have large building portfolios, and we are actively working with them to explore larger and larger portions of their portfolios. And that's going to continue to drive follow-on sales for us as well. In addition to that, we're also focused on bringing our maintenance and our data plans, our data subscriptions, or our recurring revenue model to our existing customer base. We have 300 customers that we can do a lot more for and that we're actively engaged with making sure that we help them to see the benefits of the recurring revenue models that we've recently released. And at the end of the day, as Randy indicated, we're in the process of installing and working on clearing out the backlog. And with the next 20 systems or so that are going to be going out against the backlog, the results from those systems are going to drive even more results. Once people see the powerful solutions and the powerful results that our platform drives, it's going to continue to fuel more results. So that's a little bit about the direct side. As most of you know that last May we did a capital raise for offensive channel sales growth. We really wanted to make sure that we push towards much larger sales and being able to do that through our channel sales partnership strategy is very key and critical to our success. To that end, we are currently at a 50-50 channel sales versus direct sales model, which is dramatically different than we were this time last year. Last year, all of our folks were dedicated to the direct side, and we had one or two people that were part-time on the channel side. So now what we're able to do is we have multiple people that are dedicated specifically to the channel side, multiple people that are directed that are on the strategic side. If we look at the momentum that we're getting in the channel side, we break everything down by Tier 1, Tier 2, and Tier 3. And we look at our Tier 1. Those are the partners that we expect have the capability, both from a size, from a customer base, and a sales organization, to commence more than $5 million worth of SmartGate sales with us per year. And right now we're working with 15 of those tier one channel partners. On the tier two side, we look at those that have the size, the sales force, and the customer base to support more than a million dollars worth of revenue a year. And we're currently working with more than 20 of those. So again, our highly experienced sales reps are continuing to drive a lot of experience. and a lot of results for Legend. And as their experience and the market's awareness of our offering continues to grow, those results will continue to grow as well. So at the end of the day, we are driving a lot of results both on the direct side and the channel side. One of the things that we're also helping doing to help grow both sides of the house, both on the direct side and the channel side, is we've got some major marketing initiatives that are coming up and that will be released in the March timeframe. One of those is a true cost of power calculator. This is going to be a web-based solution where customers can go in and build a digital version of their portfolio online, giving us the geographic location, the sizing, information as well as what the major attributes of the building are, and we can give them an order of magnitude estimate on the value of addressing their power challenges through active power management. And that's going to be very unique because it has a couple of use cases. One of those use cases is a self-service model where the customers can come onto the website and do that themselves. Another is where our sales reps can proactively go out and build a digital twin of those buildings to be able to show those customers and engage them in a compelling and meaningful way. And the third use case is also for our partners, the channel partners that we're working with, to be able to take their existing customer bases and to be able to build the value of the solution and engage with their customers in a very deep and meaningful way. So we're very excited about the True Cost of Power Calculator. That's going to be launching in March. We also are rolling out our first ever partner portal in March as well. And that's going to be a very robust platform for our partners to be able to come in and get the sales support, the marketing support, the technical support, the training support that they need to really build their smart gate practices within their business. So we're very excited about that as well. And another major component of that is deal registration. So this way the customers can be sure that they're going to be getting credit for the smart gates that they're bringing forth, smart gate sales that they're bringing forth. So we're very excited about that. In addition to that, to support all of that, we also have some additional website changes, some new content that's going to be rolling out. So we do have a big launch plan for mid-March, so please look for that. And again, that's going to focus on cost power calculator, the partner portal, and the new websites. We also do have a plan to allow a limited window for interested investors who want to take a look at those solutions and understand the depth of those. So we have plans to be able to make that investor window open as well. So in summary, the problem we solve is hitting our mainstream. It's hitting the mainstream when we look at the fact that the number one producer of smart meters in North America recently published an article talking about the fact that all of the renewable impacts is changing the grid and it's becoming more and more unstable. There's an article earlier this week in the Wall Street Journal covering off the same topic. At the end of the day, the time is right. Not only is the time right, but our experience, the results that we're driving, the investments that we've made, the team that we have, the direct momentum, the channel momentum, things have never been brighter for Legend Power. So I'm very excited to see what the future holds for us. With that said, I'm going to turn it over to Mark.
spk02: Awesome. Thanks, Mike. I appreciate the update and the intro. Recently, we announced the rollout of our initial Gen 3 systems to customer facilities. It's the culmination of three years of hard work by the entire Legend team, and we're really excited about this progress. You know, this system is truly a platform for active power management and we're uniquely positioned in the electrical room with visibility on all aspects of a building's electrical use. The eventually feature set we've brought to the market, you know, really builds on our historic success. It was based in energy savings and brings additional value to the customers to address business challenges of reliability, lifetime and efficiency. These first systems are now completing commission and performing exactly as expected, producing the best possible electrical environments for the entire facility. And, you know, having our cloud database connection as part of that system, we are able to remotely monitor the system and verify the performance and other aspects as to how it's continuing to go. This really is a huge step forward for Legend, and this system is truly a platform for the coming years for us to build on. The ability to add hardware and software features in response to changing electrical environment and conditions on the grid really opens up the opportunity for us for further building upon recurring revenue models and other opportunities that are truly unique in the market. We're really positioned for success here with this platform we've put together. One of the key values for Legend Power is live through the customer's eyes, and this active power management solution we've brought to the market is really the embodiment of that philosophy. All of the features of this system were directly driven by the market and by customers' feedback. We're confident it's the platform for the future of Legend Power. On a personal note, I'm incredibly proud of what the team has been able to achieve with this system, and I'm thrilled by the reception we're seeing from customers, partners, and the market to this unique opportunity we're bringing forward. Thanks. So I think back to Randy.
spk06: Thanks, Mark. Thank you, Mike. I also want to take a moment just to acknowledge Mark. Mark has been with the company for almost day one and has been the grandfather of all the technology that we've had. And Mark, you spend a lot of time on the technology and sometimes supporting the customers. And we asked him about a year ago to get more involved in supporting on a technical side the large ESCOs and large customers that need some more technical support. And Mark is now filling his days with Mr. Sciosi on sales calls, which is really, really exciting. But Mark, your team, et cetera, have done an excellent job with Gen 3. And I think investors will see as we go forward how powerful the platform and what that means to the organization. So thank you for that. Let's just take a moment before we go to questions and discuss Legends Outlook and As I mentioned earlier, the systemic changes that are occurring to address climate change and electrification, decarbonization, and energy efficiency are mainstream, they're long-term, and they're absolutely tremendously positive for Legend. Everyone has or is developing a plan and strategy to address climate change, ESG, et cetera. Our target markets are looking for innovative and entrepreneurial technology companies like Legend, and we believe our message is strongly resonating. We're securing business with many of the most successful organizations in our target markets. And we're seeing huge demand and interest in our US major markets. We're well capitalized to support our aggressive growth plans. We're starting to deliver our fantastic Gen3 platform. And it's a huge accomplishment and it's transformational for Legend. We have successfully installed our first Gen3 and we're shipping the backlog as Mike and Mark both said. And as Mark said, the system is exceeding expectations. The sales team that we built out of experienced sales professionals looks very, very promising, and the numbers they're building of new opportunities are growing significantly. We continue to meet or exceed our in-site service deployment, and we suspect this year that we will go up in numbers on a quarterly basis on a significant number. We're also really excited about our opportunities in regions with partners that we don't even play in yet. And we'll talk about that in subsequent quarters. And we continue to see the ESCO channels support Legend Smartgate as a solution that they're very interested in. And we believe the investments that we made in people and building relationships in New York, and that's about a $6 million sunk cost. We've invested in New York to get where we're at. is starting to pay large dividends. We're also excited about our first insight, 10 insights actually, looking at 70 buildings outside of the continental USA with a government agency, which could lead to not only a huge opportunity in that region, but open up opportunities in other regions. That's why we continue to think that this year is a huge year for our US expansion. And the next generation of SmartGate platforms with the cloud access is being delivered to market. The new platform opens up new and profitable recurring revenue streams and high margin value added capabilities. And we'll continue to enhance the SmartGate platform to address additional power related challenges, cement our position as a leading solution for managing power in commercial buildings. Government, free enterprise, resellers, ESCOs, senior SDEs, That's ESG leaders in business throughout North American Legend Solutions. They're looking for us to help achieve their goals. So we believe the timing is absolutely perfect for Legend and what we're doing. On that note, we would like to take this time to give you a chance to ask some questions.
spk00: At this time, I would like to remind everyone, if you would like to ask a question, please press star, then the number one on your telephone keypad. Your first question comes from the mind of Ian Gillies with Stifel.
spk03: Good morning, everyone. Good morning. There's been a lot of mention of the 20 units that are going to get delivered over the next few months here. Could you maybe provide a bit of an update on where you're at for ordering additional inventory and parts to beyond those 20 units and where you think you might be in, I guess, maybe from an ability to deliver as you push through the year?
spk04: Yeah, Ian, just to make sure that we got that correctly. So you understand where we are with the 20 units, and you really want to see where we are headed with our inventory and our ability to be able to scale to meet the deliveries for the balance of the year?
spk03: Yeah.
spk04: Okay, great.
spk02: Mark? Yeah, I can start with that. So... You know, the beginning part of it, you know, a lot of it has come down to, as everyone knows, pandemic, supply chain, et cetera. We've made tremendous progress in managing that and making sure we have the parts we need to fulfill orders, and that 20 is the beginning of that. You know, I think we've made tremendous progress and we're managing it going forward. Like everyone else, though, it's not a completely done issue, but we feel like we have it under control and are, you know, doing all the right things to ensure we have critical parts that we need to fulfill orders. As we go forward, we'll continue to balance that and make sure we have the right parts to get units to our customers as they need them. And we're confident in that rolling forward. So that 20 is the beginning. And we see significant backlog, but we're confident in our ability to deliver towards that as we move forward.
spk06: I'd just add a couple comments, I think, to put it into relative what we're doing as far as parts, et cetera. I think you have to look at it beyond just the components. I think that bringing Ben in, who became our production manager, et cetera, really gave us a professional to run our operations in the back. Secondly, Paul Moffitt coming in to be our chief operating officer, looking at our processes, et cetera. It's important to understand that you've got to be better and do things better if you're going to take a problem and solve it. So, yes, the components, yes, the parts, getting those in, but there's a lot of work and thought that goes around it for timing of when we need them, when's the build, et cetera, that we're working significantly on. And I think the other thing is that we grew a bit out of this. I think always you get better when you're challenged. We have found better partnerships. We have made better commitments with some partners with some volume commitments, and that's based on the comfort that we have on the sales forecast that the numbers are increasing. So we've become a more valuable customer to a lot of these people. And we've also gone outside of our traditional areas of partnership, continental U.S., for example, and explored some worldwide partners who bring some significant value add, including price reduction. So there's a lot going on in It's all about the parts and components, of course, but there's a lot of things we're doing to scale up and go to the next level. We're also looking at where that next facility will be and how we scale to meet the market demand that we expect is coming. It's all part of the plan. So we're trying to be as proactive as we can and take a situation that created difficulty, but it turned into a strength for the company.
spk03: Got it. Maybe thinking about it a bit of a different way, Mike in his prepared commentary had indicated that the 90 insights a quarter had been executed throughout the year and that the conversion rate was greater than 50%. So would it be fair to assume that the backlog of units to be sold or be delivered right now is in and around 180? Or is there something built in there that I'm not quite catching?
spk06: Not quite sure. I want to just put it a different way.
spk03: So 360 insights were done last year, it sounds like, based on Mike's commentary. And he indicated the conversion rate was greater than 50%. So does that mean 180 smart gates have been ordered to date? And so there's a pretty big backlog for you guys to fill here over the remainder of the year?
spk06: Yeah, I'll let Mike talk from that sales perspective. I can come back and talk the backlog side.
spk04: Yeah, absolutely. So a couple of things to keep in mind, Ian, is that the metric is that within 12 months of the report being delivered, that 50% of those will result in SmartGate sales. So from the time that we get the order for the SmartGate insights, do we actually conduct the report and deliver that report? We have not delivered all of those reports. A lot of those reports are stolen processed And a lot of those reports are still within the first year of that. So for the ones that have exceeded the 12-month mark, we are ahead of cycle on those, that we're ahead of the 50% on those.
spk06: Okay, understood. Take the math that you're using and its sound. The other thing we found was that we had some deferral with some of the large organizations as far as their timing to make decisions. We had numerous situations where we would look at four or five buildings, and they would ask us to go look at 10 or 12. We had a recent order where they asked to look at three, gave us an order for three, and said, go look at another 10. And then the outside of continental U.S., send us 10 insights, we'll look at 70 buildings. So what we found is the first assessment in a lot of cases really opened the door up to a much larger business, although it may make a longer sales cycle overall, but the deals are huge. And I said to the board the other day, you know, when you look at a couple of years ago, we had some history of $1 million deals. We did three or four last year. This year, I think we will hit the five. And then the next step is the 10. Those opportunities are in front of us and visible now. And part of that is working through the teams to assess their building profiles and understand where their best bang for the buck is with lead. So there's a lot going on. I hope that gives you a little bit more color.
spk03: Yeah, no, that's helpful. I appreciate it. On the pricing side, I know you put one through late last year to cover some of the supply chain issues. Can you maybe provide a bit of an update on where your customers are at with responding to that price increase and whether you think you need to do any more to cover off some margin?
spk04: Yeah, so to clarify the question, Go ahead. So to clarify the question, it's really how are the customers responding to the previous price increase, and do we see any additional price increases coming down the line? Is that the question? Yeah, that's correct. Okay, great. So I'll go ahead and cover off how customers were responding to it, and then I'll turn it over to Randy who can talk about the other part of it. As far as how the customers are responding, We did have some customers that just because a million-dollar deal turned into a $1.2 million deal needed to go through the budgetary process for some additional funding. We aren't seeing customers get scared away because of the new pricing because there's such high value associated with it. And when you combine the fact that there's high value today And the fact that the grid is changing. And again, we'll be publishing some research shortly, but really what we're, what we're seeing is where we see 20 to 30% of the buildings falling into the critical range today as we start to have those And that critical range means that there's greater than a 4% energy waste, there's a greater than a 20% degradation of life expectancy of the system, and the ability for the system, for the building to ride through the fluctuations that it hits is greatly lower than the ones that fall into the good range. We're going to see, as we get closer to 20 and 30% renewable energy sources, that that's going to more than double the number of critical buildings. Instead of seeing 20% to 30%, we're going to see 50%, 60%, 70%. And more and more building owners are realizing that. So it's taking some of the sensitivity off the simple payback. We've moved beyond the simple payback. Obviously, financial considerations always get taken into deals. But when we're able to articulate the value proposition today and then down the road as well, the customers are – we're not scaring any customers off with our recent price increase.
spk03: Okay.
spk06: And I would just add a couple points to that, Ian, just to give you additional color on it. You know, the direct question is, have you lost orders from any increased answers? No. We did discover, as Mike said, that once you have approval for X amount of dollars, and you have a change to that potential purchase order or actual purchase order, you have to go through the process again and get it approved. So we had some of that. We put an 18% increase originally on an internal view of that's the increased cost from COVID. And then we actually changed that pretty quickly because there's so much value add in the new Gen 3 product that it should be part of the value proposition that there's an increased price. And I think people appreciate that. And I think lastly is we do have an internal program with our engineering production and assembly teams. They have an incentive plan to reduce our cost of goods. So we're actively driving down our costs, how many hours it takes to put a system together. And that's part of the equation. Not only get the increased price, but get the increased margins. And we see continual quarter-by-quarter increase in our margins based on decrease in some supply components and also the learning curve of, you know, 200 hours to put a system together when the very first one was built, taking it right down to Gen 2 equivalent of a 40-hour input per product. And that's part of what Paul's doing is making us much more systemic and take those processes to do the talk. Because we need to take that and be able to take it to other regions and open up assembly plants in the U.S. So hopefully that gives you a little better idea of what we're trying to do.
spk03: No, that's really helpful. I appreciate that. I'll turn it back over. Congrats on getting the Gen 3 units out the door.
spk06: Thanks. Appreciate your support.
spk00: Please press star then the number one if you would like to ask a question. Your next question comes from the line of Jeff Cowell, a private investor.
spk05: Hey, Randy. Hey, guys. I had three questions, so if there's other people in the queue, just bump me and I'll get back in line. My first question is pertaining to you. You mentioned in the MBA that you have three individuals who now are making up your channel's sales team who have grown reseller and ESCO relationships. I was wondering if you could just briefly give us a little bit of color on what sort of experience those individuals have in dealing with resellers previously.
spk04: Sure. If you don't mind, we'll take them one at a time. And so the question is for the three channel sellers that we have, what's their experience base? Yeah, that's correct. Yeah. So if we look at those, First of all, the average experience level is north of 20 years. So these are highly experienced individuals that have come from the energy service company side that have traditional performance contracting, but they've also come from other equipment manufacturers as well as service organizations. So when we look at the, one of the individuals, for example, has personally sold over $100 million worth of projects to the federal government. And a lot of those projects that he's sold open up the door for additional Smartgate conversations. So again, incredibly experienced folks, not only from the ESCO space, but from the manufacturing space. Again, 20 plus years of experience in dealing with these complex energy solutions. So we're very confident and we're very excited about the results that they're generating. Again, just the deep experiences and the deep relationships that these new team members bring is tremendous. When we were at the recent NAESCO conference, it was difficult walking through the room without having to stop shake hands with everybody because they're so well connected in the industry. So yes, tremendous experience on the sales side as well as the growth side for ESCOs and manufacturers as well. Does that help, Jeff?
spk05: Yeah, that's good, Mike.
spk06: Jeff, before you go to the next question, the other thing I would just share that I think investors should be excited about is we use recruiters to find these people. We didn't have people that we put an ad and they sent in, you know, resume or whatever. These people were recruited and they were not people looking to move and they moved. And I was lucky enough to be part of the process with Mike on the recruitment side. Every one of them said, I'm making this change because I've been in lighting or whatever it might've been. That game is a commodity. This space is going to take off. I'm coming to London because the opportunity is huge and they left. jobs at senior levels to come to legend. So I just share that because I think that's an important point.
spk05: Yeah, no, that's good. They weren't sitting around on the couch waiting for their next gig. You were pretty excited to join. That's good color. Thanks, Randy. Question. Thank you. Question regarding this. And you outlined the next gen sort of three the way I took it at least three different, uh, avenues for, I guess, kind of remote access. Um, you know, the self service, the sales rep, like building a digital twin and then for the channel partners, I can't remember if it was in the press release or the NBA, but there was something that alluded to a remote upgrade feature. I'm curious if that is sort of what you just described in the conference call previously, or if that's kind of like if you own a Tesla and, you know, one day you wake up and you find out that it did like a software upgrade remotely. If you could expand on that, I'd appreciate it. Thanks.
spk04: Yeah, sure. So just to clarify the question, again, from the – commentary on the three different avenues for the calculator as well as the systems and the remote access and the capabilities there. I just wanted to take a moment and clarify because I think you may be potentially combining separate things. We have a new marketing calculator that's coming out that has three different modes. that is a self-service mode as well as a proactive mode for the sellers. And that's before a system is purchased on the marketing side. So we can cover that off. But the SmartGate itself does have definite remote capabilities and data capabilities that Mark can cover off as well. So if I can just clarify the question, that'd be great.
spk05: Yeah, no, I... Yeah, you're right. I did kind of combine the two. So, yeah, maybe we could just briefly unbundle it if we have some time between the insights and the SmartGate units itself as far as sort of the upgraded functionality.
spk02: Yeah, so I think I can run with that. So Mike kind of covered off the true cost of power calculator and how that's a tool that's up front. A lot of the investment we've made in technology in the last couple of years that Legend has been around, the infrastructure required for remote communication, cloud access, etc. We've initially pushed that out with our Insight system, so it's when we deploy an Insight metering system, we are connected to the cloud in real time and able to stream data back into our database and see exactly what's happening with that. We also have the ability to, you know, remote upgrade units, you know, control them from headquarters fleet, you know, similar to a Tesla type model. That same infrastructure and the investments we made in that is built into the core of the SmartGate system itself for those exact same reasons. So SmartGate has the ability to, you know, be cloud connected, push back performance data that we can display in dashboards, tie into customers' building management systems, But also there's a ton of data we can push back and do push back on the maintenance side of systems to see how they're performing behind the scenes, what they're doing. And there's a lot of reasons for that. And one of the key ones for us is to look at, you know, really understanding how the systems are performing, the electrical conditions, and using that to direct future feature sets, which can be rolled out, you know, by software. Sometimes it may be a hardware upgrade, but There's numerous things we can do on the software side because we've built this as a true platform to have this room to do further things. So it's very akin to the Tesla model where we could, you know, have a regime where we could, you know, approach customers with a highly targeted marketing saying, you know, we know you have X power quality problem. Here's the value we can provide. You know, we can do an upsell. We can go recurring revenue or, you know, you know, upgrade and enhance those units as we go. So it's not a single box sale, but it's a path to, you know, continuous engagement with the customer as we go forward. So hopefully that helps to put some color on it.
spk06: Yeah. Just to sort of monetize it, you know, the old model was sell something on a capital model. What was the margin you're done and hopefully sell another unit. Mark touched on it lightly, but the recurring revenue of this platform and the way that it's been designed is for us to be able to add additional feature sets, very high-margin software-based that can be remotely loaded and, again, cloud-based. So it opens up a whole new opportunity for us to increase share wallet with all our customers. And that's one thing from a CEO perspective. I've been impatient about getting to that point for the last couple of years. but we are there now. There'll be some exciting opportunities coming out and packages with different products and things like that. We can talk about another time, but the other side too is there's a huge opportunity. We're getting information, which is first data on all these buildings. We own the data and it is helping us to identify, first of all, first mover opportunities for problems that are happening in buildings that maybe even the building owners don't know what's happening. Secondly, It leads to channel opportunities to go to channel and say, here are opportunities for you to go and increase your service offerings or here's a region with these distinct challenges that are a huge revenue opportunity for you. It changes us from a product company that you physically had to go install and had to go and update and maintain to one that becomes a true platform cloud-based that puts us on an old fence for high-margin software services and value add, which we've never had the opportunity before to do. Okay.
spk05: Yeah, that's great. Sounds like an exciting product. I wish I owned a building that you guys could install a unit on for me. Hey, last question, guys. So from an inventory perspective, and sorry to harp on this, I know that Ian touched on this. I'm still not clear on this. And, you know, I'd appreciate if you could provide a little bit more color. So you have just over $1.6 million in inventory as of the numbers that you released this morning. Out of that $1.6 million, do you have all the necessary components to enable you to fulfill the 2020 units that you've previously disclosed of the next gen that you're going to ship out this quarter? I guess that would be the first part of my question.
spk06: Yeah, so let me just dig into that a little bit, because if you go to the previous quarter, and I'm going to be rough numbers because I'm going by memory, I think we last reported previously about 1.275 in inventory, next up to 1.6 on December 31st. About $785,000 of that is finished goods, about $385,000 is WIP, and $437,000 is components, etc., a combination of previous gen and some Gen 3. So that's where that breakdown of the number, first of all, comes from. Do we have enough to complete all the units that we said we would have to push out for the 20 units? We do, and we're in process now of building additional units against backlog of orders and forecasting. So you will see some of the inventory numbers creep up like you did the quarter over quarter. That allows us to one get better pricing because we are looking at some quarterly commitments to, to offset some of the COVID increases. And secondly, as we're going to carry a little more working capital commitments on the inventory side. So we can be timely and, and, and meet the order flow that we have. So we're right on top of that, Jeff.
spk05: Okay. Good. That's it for me. Thanks very much, guys. I appreciate it. Thank you. Thanks for your support. Appreciate it, Jeff.
spk01: At this time, there are no further questions. I would like to turn the call back over to Legend Power for any closing remarks.
spk06: Okay. If anybody has any last questions, feel free to ask. We'll just give you a second. I was going to add just a couple comments if they didn't come up. But I really just want to emphasize the question of what does Gen 3 enable for us? And as I said, that whole data, that whole information, that whole being a company that can take data and provide meaningful information to make decisions for channels and partners and us is something that we haven't really talked a lot about, but we will in future quarterly calls. And clearly, as we monetize that, one of the things we need to do at some point is get a data scientist that will help us do some modeling thing with the information to really, really take it to a proactive way to identify opportunities for growth. So we're excited about that. We're also really excited about next quarter talking to you about some of the growth, some of the sales successes. We're also really excited about talking to you about the recurring revenue models, not only just with the base of 300-plus systems, but how it will be an add-on to additional revenue new business and very high margin so the old way again i just want to emphasize the capital deal one deal done with margin we look at more as as the product goes in the platform it just opens up an ongoing revenue stream that's reoccurring that's that's a very profitable business for us and as we talked earlier you know the pandemic has affected most business revenue streams and You know, we are seeing significant sales activity growth and we're meeting or exceeding our sales activity goals. And I think you'll start seeing that quarter to quarter. And as we mentioned earlier, there's that huge 20 to 30 year transformational journey where companies are going to spend trillions of dollars a year, you know, and they need to protect the buildings from all the electrification, decarbonization challenges. And we just fit perfectly in there to be a core solution for that enormous business transformation. We have a committed and talented team, and we're getting stronger with each new hire. We've got outstanding active power management platforms, strong working capital. We've got markets with high energy costs, power challenges, ESG and climate change objectives, and they're seeking innovative ways to reduce their energy costs and improve the quality of their building's power. We've said it before, but we'll say it again. The future looks absolutely great for Legend, not only as team members, but our valued stakeholders. And we appreciate all of your investment to date, and we expect to hopefully look down the road and be talking about some significant paybacks on your commitment. So on that note, everyone, thank you, and have a great legendary day.
spk01: This concludes today's conference. You may now disconnect.
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