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spk00: Good morning, my name is Sylvie and I will be your conference operator today. At this time, I would like to welcome everyone to the Legend Power Systems Q2 2022 financial results release and conference call. Note that all phone 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 number 1 on your telephone keypad. And if you would like to withdraw yourself from the question queue, please press star then number two. Thank you. Randy, you may begin the conference.
spk06: Thank you. Appreciate the introduction. Welcome, everybody. I hope everybody's having a good morning. We welcome you to our fiscal Q2 investor call. I have on the call with me Mike Ciosi, our VP of Sales and Marketing, and Paul Moffitt, our Chief Operating Officer. We're going to go through some bullet point highlights to share with you, and we welcome questions, as we feel questions today may be the best way to address particular questions and issues, et cetera. So anyhow, feel free. We'll give you ample time at the end to engage with us. Mike, obviously, will talk about the sales team's progress, and Paul will talk about the general operations-related update and some of the progress we've made on supply chain and component parts, et cetera. So we've got some good news there. And obviously, I mean, everyone's aware of the macro challenges that most companies are experiencing right now. And we continue to try to make as much progress as we can in many aspects of the business. When we look at things now, we see opportunities to improve the company. We see opportunities that the macro side is growing for us. There is a real need for what we do as an organization. So all those macro signs I'm not going to get into a lot today because I think you're well aware that the macro side is in good shape. I think you're all interested in how we're going to make it work over the next while. So we're really confident that what we're doing as an active power management solution provider, we don't think the time has ever been better. We don't think that the quarter, as an example, speaks for where we are as an organization, and we'll give you some better color on that. We see the acceleration of that 20- to 30-year transformational journey where companies are going to spend trillions of dollars a year, and they're going to try to protect their buildings from de-electrification, decarbonization challenges, and alternate energy, et cetera. And there's no question, legend from all eras, people we talked to were perfectly positioned to be a leading solution in this enormous business transformation. So during Q2, we completed the testing of Gen 3, and we began an aggressive build initiative to fill the backlog. And Gen 3, just to remind you, it's been a three-year project, and it was a project designed to take our core offering of energy savings and make it much more, make it something that could address the common power problems. And it's spot on for where the market's going. The product is transformational. It's a huge achievement for Legend. We ship about 20 Gen 3 solutions near the end of the quarter. You'll see most of those rev-rec'd this quarter. Due to rev-rec conditions and rules, they must be received by the customer before we can rev-rec them. So I have had some questions about rev-rec, but that is effectively where we're at with that. The installations... of Gen 3 units began in Q3. We've had good success. It's very early, but the ones that have gone in performed extremely well, and we're really excited about the potential of the product. We did hit our Insight service commitment targets, and we've mentioned last update that we were looking at our first Insight order outside of the continental USA. We announced that and secured it, and that's led to a 70 Insight commitment over the next several months. Very exciting for us. Mike will talk about the reseller channels, but they're embracing both our SmartGate solutions, our insight analytics, and we're being written to numerous reseller customer proposals as we speak. We're also into numerous deals that will be announced over the next while. We're very happy, personally, what Mike and his team have done to get into the reseller channel and help with that pivot. from direct sales to reseller sales is going extremely well, although the public will get more information on that over the next few months, but there's some great things happening there. Paul's doing a great job getting through some of the supply chain challenges that are unique. And we continue to pivot to make, as the market changes to, you know, to make it doing business in New York and different places from supply chain to retail cash flow, all these things, we continue to pivot and make the business, modify it to make sure we can meet those demands. And we'll go into that in more detail a bit later. Deal flow pipeline growth is great. We're continuing to grow backlog. And we've added all new team members. And again, officially having Paul as a chief operating officer has been really, really something that we needed badly. And Paul is making immediate impact to improve our operations. And I thank him for that. So as a shareholder, you know, you stand back and you say, can you give me some proof points that exhibited during the quarter that I can get some comfort that we're moving ahead? And I would say that the interest in both direct customers and resellers just continues to increase. Mike will give some more color on that. But the transition from a direct sales model to a channel sales model is developing faster and bigger than expected. And the opportunity, in my own opinion, is so much bigger than I first anticipated. We're doing everything to drive the reseller channel. We're training both our own sales team. We're training resellers. We're educating them on the product. We have initial proof of concept installs, some announced, some not announced, but there are many that are with major organizations right now as we speak that will become public over the next few months, and I think you'll be very pleased with the progress we're making. The partner portal and the true cost of power was released this week. These are all tools to help us help our partners be better and represent legend in the marketplace with their thousands of salespeople that they have. We are very early in Gen 3, but we're developing some customer testimonials and case studies. And as we achieve Gen 3 success, we can share those results through case studies to help move some of the people who are waiting for Gen 3 results to give us orders. The insight program is working. We're on track with our 90 insight orders in a quarter. Again, that's 45 smart gate sales within 12 months of presenting the prospect with a power impact report. We're on target for that. We've had a few delays. Some people have written this into next year's budgets. Some people have delayed a few months here or there on different reasons with the economy. But we expect to hit those targets of conversions of smart gates for sure. And on follow-on orders with insights, we're hitting at or very close to 100% conversion when an insight goes in. And of all the insights we've done, and Mark Peterson and I were talking about this the other day, he can only recall one that we haven't had a positive experience moving forward out of the hundreds we've done. So I think that speaks well for itself. And we started to get annual maintenance contracts. which is new recurring revenue streams. That's just a new launch for us during the end of last quarter. And we secured some new business and we're out actively asking for maintenance contracts. Paul will talk about it, but we've done some great things on the production process to help offset higher component costs. And we look to recoup our near-term gross margin due to component cost increases. We're also evaluating options to increase efficiencies, reduce costs, increase margins. We are increasing our prices by 15% on June 15th. Horace, you're on the call. We told you that we were looking at the last quarter. There was an 18% September, 15% now on June 15th. We're protecting the people that have orders and or have proposals up until June 15th. But that will bring us up to a 51% product margin. So again, I know this is something that I've talked to a lot of people about. We will be back up to a 51% product margin. We are getting there. We're doing the things we need to do to make this business work. And, you know, as I started out talking about, the industry backdrop has never been stronger. The product shift is excellent. The macro indicators, the drivers, the messaging, is that we're in the early stages of something really big, and we're right there. We're also managing our cash carefully. We took our costs down by $50,000 a month last month to help. We analyze the cash cycle, the outflows, and make sure sales orders make sense. We're not going to be putting in a bunch of low margin deals and tying up our valuable capital, so we're being very smart with that. We change their payment terms, 25% with the order, 25% on delivery, 25% after an M&V, so that we, at 50% margins, can have 50% of our total cash commitment back to us by the time we install the product. So that's going to dramatically improve our cash collection cycle and the impact on our capital. We wish we could talk about some of the neat meetings going on with Mike and his team, but just something to say that discussions with key industry players are ongoing. Our strategic sales team is working with some of the largest prospects in numerous industries to They're looking at hundreds and thousands of unit commitments over multiple years, and we expect to secure those businesses. And we know that you can expect positive news and some pending wins over the next quarter or two. And I always like to touch on the fact that we've conducted significant market awareness over the last few years, and we're now benefiting from that marketing investment. And that probably has somewhere in the neighborhood of $6 to $8 million of investment that doesn't show as an asset on the balance sheet, for example. The target markets are aware of us. Mike Ciosi says they're leaning in on conversations now, so there's strong interest. And the awareness will increase as we build the business cases out with smart gates and insights and continue to illustrate value to our market. And we will continue I believe, as we have shown you historically, we will continue to prudently manage our business like we have for the last number of years so that we can come back to investors we have with new updates on partners, orders, and wins, and we will make the pivots and decisions we need to make to ensure the company will be successful. And before I turn it over to Mike and then to Paul, I really want to express to you that What's happening out in the macro, the world, is they're looking for products like ours and our Smartgate platform. You are going to see positive, demonstrable proof, quarter by quarter going forward, that there's some great things happening and this company is really going to be something. And combining our new platform with the exciting sales progress, which Mike will talk to, personally as the CEO of the company, I've never been more excited about the organization. We expect to see and act on continued confirmation that the time is now for a legend in our solutions. So enough of my view of the world. The guy that's in the fight every day and doing a great job in his team is Mike Ciosi, VP Sales and Marketing. And after Mike finishes, Paul Moffitt will highlight our operational improvement initiatives. I'll circle back with a summary and we'll take questions. Mr. Ciosi,
spk01: Thank you very much, Randy. Appreciate that. And there's definitely lots of exciting things to discuss on the sales and marketing front. So we're excited to have the opportunity to talk to you all today. Again, as Randy said, we are indeed making very solid progress in the market. Customers are definitely leaning in. Partners are leaning in. And we have backlog and we're adding new deals on a regular basis to that. Our Gen 3 installations are getting done. And within, as Randy said, within a few weeks, we should have over 20 Gen 3 systems in service producing compelling results. And again, if you look at some of that early results that Gen 3 is significantly outperforming the previous generation, in some cases, as much as 50% more energy savings. So at the end of the day, we're gonna get into the specifics of some of the progress we're making. While we are off targets in some areas, we are also ahead in other areas. We look at the critical areas. We are reaching our insights targets. And for the engagements that are reaching the 12-month mark from presentation, we are hitting our expected 50% or greater conversion rates. So we're definitely very excited about the progress and the results that the insights-led sales process is generating for us. Now that we have a full year of Insights-led sales process, we've learned a few things that can help us tighten our targets. The biggest key learning that we have is that our customer motions are impacting some of the cycle times. Time from signing to Insights engagement orders to presenting the report can actually vary fairly significantly. Our 12-month target clock starts after we present the Insights power impact assessments. Our timing on insights to presenting the report can be as quick as 30 days and as long as six months, or in some cases, even more. The key learning is that some of the timing on internal sign-offs, requirements, insurance reviews, insurance approvals, and some of those other key tasks to actually install the insights can vary, which can potentially cause some delays. So as a result, we're adding two metrics to our insights reporting, and those are the insights installed and the insights reports presented. And this will allow us to continue to tighten the ways that we manage the business. And that's all part of our customer journeys, right? Because at the end of the day, we are still making a market. This is still the most significant addition to the electric room in many decades. And when we look at the customer journey from going from unaware to aware but skeptical, to willing to give us a try, to getting comfortable, to being confident, and then getting to the point where they need it, That's what we're focused on. We're focused on how can we compress that customer journey by industry, by geographic area, as well as by customer. So we're continually improving the process, making adjustments and corrections to be able to make sure that we're compressing that as much as possible. We're addressing, we're changing our sales processes, our messaging. In addition, we've got some new research and materials that are really helping to accelerate the buying process. As Randy mentioned, we're also continually looking at other changes we can make. For example, we added our first ever true cost of power estimator. That gives not only building owners, but also resellers the ability to be able to go in and put in the attributes of an organization's portfolio to get an estimate of what kind of results they can expect from addressing actual power management and addressing power issues. This is going to be a key driver to getting folks to move forward with power impact assessments. It gives them a strong idea of what the benefits could potentially be. And that's all part of the partner portal, our partner materials, everything along those lines. We also have some new research that is incredibly compelling. When we look at it from the standpoint of where we are today, where we're going to be tomorrow, we're going to be near term. The impact of renewables to the grid is incredibly eye-opening. Right now, today, if we look at our variable renewable rates being under 10%, our average scores fall in at about a 7.2% with about 80% of buildings being negatively impacted. And the number of fluctuations and events that are happening and land at about 38 events annually. When we fast forward and we go to, once we get over 20% variable renewable, those average scores fall off a cliff well into the critical range of 4.7. And well over 95% of buildings were gonna be negatively impacted to some level. And the biggest key learning on that is that the number of fluctuations and events that are gonna be hitting buildings increases tenfold And that helps propel us from a nice to have to a need to have. The ability for buildings to operate as we increase our renewables, our renewable penetration is gonna depend upon having active power management inside of each building in order to be able to protect it. So we're really excited about this new research and the way that we're presenting to market and specifically the way the market is responding to this new messaging. So we're very excited about that new research. And when we add the compelling results from our first rounds of Gen 3s into all this information, we're able to incorporate our expected results into the power impact report and actually show them what those conditions will look like today and what they can look like with active power management. So we're from the smart gate. So we're very excited about that. And we combine that with a new website updates, new videos, infographics, and other client facing materials. We're getting that engagement and we're compressing that customer journey as much as possible. And that's producing the results. If we look at our strategic results, as Randy indicated, we are working with some of the biggest names in real estate and real estate investment trusts, real estate companies, and more on the strategic direct side. That's really allowed us to be able to focus on some of those larger opportunities of types of organizations that, as Randy said, could easily buy hundreds, if not thousands of systems going forward. That's where our strategic direct is focused. When we look at the channel side, we're engaging with more energy ecosystem partners than ever before, ESCOs, distributors, utilities, consultants, We even are in conversations with a couple of equipment manufacturers that are interested in how this can help protect the offerings that they're bringing to market. So we're very excited about that. At the end of the day, as we continue to build our marketing strategies around the new offering with some of the ecosystem partners, it is very compelling. Some are building their marketing strategies and the go-to-market strategies around this market, and some are incorporating it into their go-to-market strategies. So at the end of the day, this is leading to new orders from major ESCOs. It's leading to insights engagements in very meaningful ways. In addition to that, we've also been selected through a GSA program called the Regional Green Proving Grounds, which opens the federal markets to us. So over the coming months, we'll be installing SmartCase with federal buildings. And we've actually been told that there are a number of regional federal facilities that are looking to get SmartCase in. So when we combine that with the results that we're getting from New York, as well as the new systems that we've put in with the Department of Central Administrative Services for the City of New York, We have a tremendous amount of things that are going on. People are definitely leaning in and the future for legend continues to be very bright. And every month that passes, we move closer to attaining that have to have status for large buildings. That's going to continue to propel us to very large chunks of revenue in the very near future. So with that said, I'll turn it over to Paul and field questions afterwards.
spk03: Great. Thank you, Mike. And thank you, Randy. Yeah, I'm really, really glad to be involved in this great opportunity, as Mike and Randy have described, and to be a part of the team at Legend. So thanks for welcoming me. And I've now completed my 90-day plan. I'm really excited because what I'm doing is getting ready for the next big thing and building on a great foundation that that Legend has in operations. I've looked at the business. I've analyzed. I've made recommendations. So I'm now able to focus on taking the platform that we have to a new level to support the company's growth. And so this is a great problem for me to have. This is my sweet spot. And we're getting ready for lots of growth and preparing. Obviously, we've got some great challenges ahead of us. supply chain, as everyone knows, is a big challenge. And I think we'll see issues with price increases and increasing lead times for as much as another one to two years. So my focus has been definitely on lead times, on timelines and costs, costs of building materials, costs of manufacturing, costs of logistics, and looking at ways to optimize those, not just now, but for our growth and for the future. in terms of economies of scale. So it's, again, very exciting to see what's coming forward. And as Randy and Mike have explained, we've got some amazing opportunities ahead of us, and I'm going to make sure that we can handle those, we can produce those, and we can do that efficiently and effectively to optimize both our cash flow and our gross margins. Lots of work in building supplier relations. and partnerships for growth to enable and to balance between investment and cash flow. We're expressing to our suppliers what our demands are and what our needs are going to be in the future, but we're carefully pulling parts and orders partially, so partial shipments initially, and as we win new business and preparing the suppliers for the remainder. so that we can carefully bring in just what we need, manage our cash flow, but set our supply chain up for the demand that is coming. Definitely optimizing our insights is important. We have an installation team and we have a set of insight tools that we use to improve our sales conversions. We want to make sure those are available, those are in place. As you've heard from Mike and from Randy, there's a very high percentage of conversion when we use this sales tool. And I want to make sure that they're very timely, they're fully utilized, and that we're getting those results and the power impact reports done and out to the customers as that's a key driver of these sales conversions. It's very exciting. If you look at these reports, they're very insightful, very compelling, and they convert to wins. Production, logistics, bill of material, obviously all of these things require analysis and investigation in terms of overall cost reduction and optimization. That's something I'm doing and looking forward in terms of what is our future cost position looking like as it improves so that we can actually improve our gross margins and our proposals to our customers to increase our sales. In the background, obviously, I'm looking at the overall business and the processes and the way we work together, everything from HR to IT to finance and our overall business management system. I'm working on evolving that, improving that, tying everyone together, streamlining what we do, and ensuring that we have clarity of roles and responsibilities, process, metrics, corrective actions for overall companies. decision-making, improved decision-making in terms of the future and in terms of how we optimize our ability to deliver and ultimately our gross margins. So it's been a very exciting time. Extremely passionate and excited about what's coming up. I've seen the way the business works. It's on solid ground, a great culture. and it's something I'm building upon so that we can support massive growth as we go forward. Randy, I'll pass it back to you.
spk06: Thanks, guys. Appreciate the updates. Well done. Before we go into questions, my last comment would be that we started a journey a number of years ago to prove a product, prove a market, and a lot of that work has been done, and now is the time to capitalize on it and Everything you've heard from today is we're preparing for growth. The message that I would love you to hear today is we see and expect significant growth. And this is not million-dollar orders. This is not $500,000 orders like we've had historically. This isn't $1.5 to $2 million orders that we had last year. We really expect to see those numbers dramatically grow, and we're preparing for growth. And that's a lot of things we're doing now. Companies can look at what's happening in the marketplace and wait. We're building because when it comes, we want to be ready. Not only are we doing things differently, but we're doing things in ways that will allow us to build a much different company than we have been in the past. For example, some people ask about how you're going to handle if you've got an order for 300 or 400 systems, etc. Well, we're planning and doing that now. We don't need more space, more people. We're looking at ways to assemble systems at a much lower cost, more efficiently in large numbers. All those things that we need to have in place when it happens, and it will, we're doing now. So there's a lot to talk about, and it's a smaller group today. We would love to take any questions you would have, and I'll let the operator coordinate that. Thank you.
spk00: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please slowly press star followed by one on your touchtone phone. You will then hear a three-tone prompt acknowledging your request. And if you would like to withdraw yourself from the question queue, please press star followed by two. And if you're using a speakerphone, we do ask that you please lift the handset before pressing any keys. Please go ahead and slowly press star one on your telephone keypad if you would like to ask a question. And your first question will be from Ian Gillies at CFO. Please go ahead.
spk02: Good morning, everyone.
spk05: Good morning, Ian.
spk02: I wanted to start the 20 units that are going to be installed either this quarter or maybe they're at least part of next quarter revenue racked. But I wanted to maybe focus in a bit on the 50 incremental units and the inventory that you've acquired there, and are you able to provide any goalposts of when you think that product may be moving out the door for installation?
spk06: So what we announced was that we were ordering. We don't have 50 system components in place. It's a significant tie-up of tasks. What Paul has done is rolled out, based on lead times and costs, an order flow against demand. What we're doing actually, Ian, which is something I haven't done in business before, is actually focusing on bookings for future delivery. Why? Because our margins are increasing. We last reported 17%. After we get the next 20 out, et cetera, and get the price increase on June 15th, we'll be over 50%, as I mentioned earlier. So it's not our benefit right now to fill a whole bunch of orders. They're low-profit. low margin, tie up our cash, wait a year to get it back, we don't have the capital. There's no margin in it. So we're, we think, making the right decisions, which is be strategic. If someone wants to order one or two units and that's going to sacrifice a large reseller giving us an order for 50 or 100, it's not happening. We're not going to take that order. So we're doing some things I said differently from what we've done in the past. but we are absolutely looking at how we can maximize our return on our capital deployed in the business. That means not bringing inventory in large numbers, but committing it to it in quarterly commitments, et cetera. Making sure the order flow that we do have is additional large business opportunity and not onesies, twosies. And those are things, like I said, I've not done before, but we want to make sure we can manage our cash, not tied up in the business force and working capital that can't be deployed as cash. And those are things we have to watch very carefully, and we're trying to do it as best we can. I think that answers most of it. Was there any part that you wanted better clarity on?
spk02: No, that makes a lot of sense, and I believe you answered it, but I'll just reconfirm it. With respect to the incremental 50 units, would any of those be, I guess – contracted right now or allocated on some of the lower margin stuff that has been earned over the prior couple quarters or will those units all be done under the new pricing arrangements?
spk06: High majority under the new in. So I'll say a handful maybe. You know, we have after the 20, we have probably another 12 units or so that have to go out against order flow. But generally we're looking at There's no sense filling an order today when in six months we can have decent margin on it. Also, with the change in our policy of 25% with an order, 25% on delivery, 25% MV, et cetera, we get our cash back. And we've got to get that cash back quicker because our order to cash collection cycle was somewhere in the neighborhood of 92 days ago. depending where you looked at it, from order, from when we delivered, et cetera. And in some cases, it was almost 120, 130 from the original order. Too long, you tie up the cash. So we've made these changes. We haven't had pushback yet. And I think it's one of the things that's good about what's happening out there, it's not just legend in the macro world, that people are making these adjustments and becoming more normalized in the business environment So it allows us to engage and do some things differently that are advantageous to us that the customers now see as more normal business. But that's why we're doing it. And we'll keep changing that. I mean, I think every couple of weeks we do something slightly different based on market feedback, et cetera. We're also, on the inventory side, looking at ways that we can fulfill some large orders, but just products without the tying cash on installations. So you didn't quite ask about that. But what I mean by that, Ian, is rather than have a significant tie-up in cash on the install, what we're doing is also making some changes where we put the price of the product up, improve the margins. We are putting a project management fee on the project and direct billing from the electrical contractor to the customer, so we don't tie that up. So as you can see, in an overall large deal, If you're getting 25 on order, 25 on delivery, et cetera, and you're not tying up the money on the install and you're getting a project management fee, you've improved your margins. You've tied up, in some cases, 25% of the total cash outlay you would have on a regular deal. And as we go forward with the resellers, they'll want just product anyways. So that's where we've got to go. And that helps our balance sheet and helps us have the cash to run the business.
spk02: As you think about the reseller market, is there some sort of absolute number in units produced per month or per quarter that they need to see to be willing to contract or sign up for orders?
spk06: I haven't heard anything about that. I'll turn it over to Mike in a second, but I don't believe so. We've got people that are talking about large orders, commitments, some white labeling, et cetera, but we're not going to be able to fulfill those orders with the current paradigm. In other words, can I get asked this question? How many units can you do? Where would you get more warehouse space? Well, we're not going to. We will announce at some point alternate ways to have outsourced products done in the hundreds of units a month if required with very little intervention involvement from legend. Still protecting our IPs. but bring our cost down, labor cost down by, in some cases, 75%, and take out three bumps of shipping and duty of components coming all over the place, assembled in Vancouver, and then shipped to the customer. There's some good stuff happening there. I don't want to get into too much today because it's in the discussion stage, but we're going to make some significant improvements there. It's like I said earlier. We're not selling to schools in Ontario anymore. That's where we were to prove how we had a product. We're planning for significant growth. We know the market's there. We know the product does what we want. We know that it's all going to break loose in huge numbers for us. So we've got to make sure we make the right decisions now to handle it in the future. And that's what we're doing.
spk02: And in the absence of additional external capital being available to the business, Will the deposits on large system orders, do you think that will be enough to smooth out working capital demands for at least an intermediate period of time? Or how are you thinking about managing that part of the business?
spk06: Well, without any contribution, we're 12 months plus cash in the business. And with some of the changes we're talking about, obviously it extends out when you start getting your cash up front or 50% of your total cash outlay. earlier, you know, rather than waiting an extended time. That really helps the cash flow. But there are lots of opportunities of different things. As a CEO, in the scenario of additional capital, we ask, I ask the team, and the team looks at it this way, is how do you make the right decisions to demonstrably prove the product, the model, and the business is there and growing. So your cost of capital down the road is at an optimum level for the organization. So what that means is we're doing things today to make and show proof that the company's valuation is worth a lot more, and we have to deliver on that. We know we do, but we will. And we have alternate routes of financing different products and things. with partners, et cetera, that I'm not going to talk about today, but there are avenues or different financing companies who want to work with us, et cetera. We just haven't had the volume in the past, and over the last couple of years with things falling off the way it has, it was disingenuous to try to make any commitment to any of those people. But with the increased volume and what we see happening, we've become a legitimate company to work with some of those sources.
spk02: Okay, that's helpful. I'll turn the call back over. Thank you very much.
spk05: Welcome, Ian.
spk00: Next question will be from Horst Uniken at Uniken Asset Management. Please go ahead.
spk04: Randy, I'll start by saying that I'm glad to hear that your product prices are increasing. No surprise there. I have a question for Paul Moffitt. It was described that your payment terms have changed 25% on order, 25% on delivery, et cetera. How does this change the accounting, in particular how the revenue is recognized?
spk03: Yeah, hi. Hi, Horst. Thank you. Well, definitely what we want to do is ensure that we're reducing our cycle times and our lead times in all respects, including cash. We're pulling forward and ensuring that We are invoicing on time and we're collecting on time. We wanted to pull our cash forward as much as we could and the new terms of the 425s have now done that. So in our forecast and in our models, we now see all of that cash coming in earlier. It's extending our cash flow positive forecasts significantly. And the revenue is recognized generally at each of those invoicing points. So before where we were recognizing revenue or invoicing at a later point in time, we've now pulled that forward. Does that answer your question, Horst?
spk04: Yes, that's what I thought. But you've confirmed that the cash flow cycle has changed as a result. And That should also, and I can now understand that you're in a better cash position as a result. Perhaps you can't answer this question, but I'll give it a shot. If you do get one of these larger orders, say 50 units plus, presumably spread out over time, but does that put you into a cash flow positive situation? We have...
spk06: Looked at the financial, just one sec, because I want to be careful where we don't have any too forward-looking statements here. We see an EBITDA positive moment in mid-2023 as we get the margins and the volume hits and some of the implementations of these changes that we're making impact the business. So, yes, the key thing for us, Horace, is just managing that cycle between the customer expectation and the margin increase and conservation of cash. So we'll continue to monitor that and make the changes necessary. But we don't have anybody out there that I'm aware of that isn't aware of the shortage of components and parts and that is not willing to work with us. And we've had some people that have waited for some product, et cetera. We have not had any canceled orders. So on that premise, with those things in place and the changes we've made, that will conserve our cash, and it will move us into an EBITDA positive in 2023 in the mid-range, and we can get more color on that once we have some more work done on it.
spk04: That's helpful, and I'll keep my fingers crossed. Thank you very much. I'll turn it over to somebody else.
spk00: Thank you. And at this time, gentlemen, we have no further questions registered. Please proceed with closing remarks.
spk06: Okay, if we get interrupted by a question, that's fine. You know, what we tried to do today is share with you, I mean, it's great, you see the name Michael Basker, you see Jonathan Lansky, you see Horace Heineken, et cetera. They've been through this journey for a while. And the reason I mention those names is because We're writing the script as we go. We're not following an existing marketplace that has a leader and we're coming as a low-cost operator or the cheaper price product, whatever. We're having to adapt and twist and turn by what the market tells us. It's really exciting, but it also has its moments where it can be stressful. But what's important is we are making the changes necessary to win. And we're making the changes now before we have to. We're being very proactive. We see a lot of things happening out there that are extremely positive. I mean, we can go on and spend an hour talking about all the articles and things that say where we're at is the space to be in. But you've got to live to get there, and we're taking the steps that need to be taken to conserve cash, to build our valuation with demonstrable results, So your cost of capital down the road is at an appropriate level for the delivery of the business. And we're excited. I mean, having the new people in, hopefully. What you've heard today, you've heard me enough over the years, so I'll take my name out of the hat. But Mike and Paul are professionals. They're doing the right things. And they're just the tip of the iceberg of people we have in the organization. And we will continue to enhance the product. We'll continue to get some great wins. We really look forward to divulging details in releases and having good follow-up discussions because we know there's some very good and large things happening that we'll be able to share with you over the next while, and we're excited to do so. So the macro's there. The product's there. We believe we've got people. We think the timing's right, and we think the future looks great for us. We're very excited about it. We're all very committed. to make it work, and we know it will. On that note, thank you for all your support, and have a great legendary day. Thank you.
spk00: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending, and at this time, we do ask that you please disconnect your lines.
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