Good morning. My name is Michelle, and I will be your conference moderator today. At this time, I would like to welcome everyone to the Legend Power Systems Q3 2023 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a Q&A session. If you would like to ask a question during this time, please press star one. Thank you. Legend Power, you may begin your conference.
Thank you, Michelle, and welcome to Legend Power Systems Fiscal 2023 Q3 Investor Call. We're pleased to have you join us on the call today, and we'll discuss our corporate progress and provide our fiscal 2023 Q3 update, representing three months ending June 30th, 2023. I'm joined by Florence Tan, who's our CFO, Paul Moffat, Chief Operating Officer, and Mike Cioce, who's VP Sales and Marketing. 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 more information about Legend's forward-looking statements and risk factors, please see our MD&A, which was filed on SEDAR today under our company profile at sedar.com.
Florence will provide a brief financial overview of Q3, Paul will address our operational progress, and Mike will update you on our various sales activities. Over the last couple of years, Legend has continued to transform from an energy savings company to build our brand as the Active Power Management solution for ensuring optimal power management for buildings. Our transformation rebranding has resonated with our target markets and major federal and state agencies, and leading commercial building owners either have or are planning to implement our Active Power Management solutions. We created a new category and market without any direct competitor, and our pipeline and order flow is growing, and we will make Legend Power a compelling public company. Also, after the quarter, we raised about CAD 2.5 million in equity to support our sales growth plans.
This capital, + 25% deposits on orders, are expected to provide cash for operations. I would now ask Florence to discuss Q3 financial information.
Thank you, Randy. During this quarter, revenue recognized was CAD 470,000, compared to CAD 1.02 million in Q3 FY 2022. Revenue recognized was based on 2 SmartGATE systems and 3 installations, compared to 12 SmartGATE systems and 6 installations, respectively. Deferred revenue as at June 30th, 2023, was CAD 210,000, compared to CAD 30,000 in the prior year. The backlog is healthy, and we will see the transition of these to revenue recognition as the orders are fulfilled. Gross margin in the third quarter of fiscal 2023 was 22%, compared with 5% in Q3 in the prior year. The increase in gross margin is due mainly to an increase in sales prices, as well as an inventory adjustment taken in the prior year.
On a year-to-date basis, gross margin for the nine-month period was 21%, compared to 9% year-to-date in the prior year. The company ended the quarter with CAD 522,000 in cash, no debt, and CAD 2.23 million in working capital. As Randy previously mentioned, we have recently raised about CAD 2.5 million, and with this working capital, we continue to proactively focus on the items critical to attaining our growth projections. We will continue to manage our capital resources, as we always have, to support our sales growth plans and deliver for our shareholders. I'll now pass it to Paul, our COO, for an operational update.
Thanks, Florence. Good morning, everyone, and thanks for joining the call today. I'm pleased to report that we have 12 systems in backlog as of today and are receiving the last of the required parts over the coming weeks. As these orders are device-only, that is, the customers are handling the installation, Legend will be able to invoice for the remaining 75% beyond the original 25% deposit upon delivery of the systems. That's upwards of CAD 1 million cash into the business in a short timeframe. Production has already begun and will be completed over the next few months. Operationally, our performance has improved overall across the company metrics. The last four systems shipped met 100% on-time delivery, and plans are in place to continue this record for systems in the backlog.
Regarding labor and overhead, we have seen lower costs and improved cycle times as efficiency and utilization increases with more frequent production builds. As well, cost of goods sold has decreased 5% due to efforts to negotiate lower material costs and source alternate but less expensive components, while increasing the overall quality and reliability of the product. Outsourcing of higher manual labor cables and harnesses has also lowered costs, as well as offsetting work from the factory, allowing for increased throughput. And application-wise, we have made some great improvements in decision-making reports from our inventory and MRP systems, and again, we are seeing workload offset and time to decision decreased. All of the above has helped to evolve our continuous improvement culture and optimize our business model. I'm very pleased with the morale and dedication of the team.
We all look forward to continued fulfillment of our growing sales orders. With that, I'll pass you over to Mike.
Thanks, Paul. Again, everybody, thanks for joining, and it's a pleasure to give you an update today. Sales efforts at Legend continue to push forward and continue to grow quarter after quarter. We have a very strong three-year pipeline, north of $150 million, due to our tremendous efforts to grow a brand-new category, as Randy mentioned. We're making a category here, and within the building technology space. All of our near-term deals are continuing to advance, with several more have moved to verbal agreements, and paperwork is being passed for review and execution. We have had 2 deals push out to future quarters due to the availability of larger-sized systems, but generally, the pipeline continues to strengthen. We have 11 deals for near-term closing, and based on these deal sizes, our 23 bookings goal is within reach.
So we're excited about that. Additionally, the sales team continues to add new brands to the pipeline every month. In fact, just in the past 30 days, we've added some of the largest companies in the world to our pipeline. Just for a general update on some of the notable events in the last 90 days. First of all, with New York City, the City of New York, we actually met with the design firms for the City of New York, to onboard them with how to work with the SmartGATE and how to work the SmartGATE into the design for the city going forward. What was really interesting about that is each of them not only was very supportive, but also had other customers they wanted to immediately take us to.
So that's just another example of the strategy of landing industry leaders to influence the general market is working for us. And an update on the GSA. We do have two facilities identified. In addition to that, we were recently asked to participate in a roundtable with the GSA administrator, Robin Carnahan. Robin was appointed to head the GSA by President Biden in April of 2021. We were asked to kick off the session based on our work with them and the positive momentum that we have with the GSA in general. You know, the very few other companies that were invited to participate were software information-focused providers.
Administrator Carnahan took the opportunity to reiterate that never before have we had the momentum and the money that we have in place today to pursue these critical endeavors. She also indicated that the focus is faster, better, and save money. Legend Power Systems' SmartGATE offering aligns very well with these mandates. She also pointed to a number of opportunities for accelerating an acceleration of the procurement process and leveraging the Inflation Reduction Act for funding. So we're really excited about the momentum we have with the GSA. Additionally, with new customers, our near-term pipeline includes a number of high-visibility, highly recognized brands. Additionally, our sales team's messaging is working and engaging even more highly respected brands. The big companies with the big buildings, with big emissions and big challenges, are looking for big solutions, and SmartGATE fits the big bill.
So we're excited about that. In fact, one senior executive we recently met with indicated in the past three months, he's had multiple powerful CEOs, politicians, and heads of foreign state becoming trapped in their elevators due to voltage fluctuations. Again, pointing to making the buildings work is just as important, if not more important, than saving dollars along the way. On a partnership front, we continue to add new partners to drive new momentum, new pipeline, and revenue growth. The response from these highly respected partners in the energy ecosystem, it's generally accepted that for the most part, the incoming power condition from the grid is well within standards, but presents many challenges for critical buildings. And mitigating these risks is quickly becoming a high priority for many top-tiered organizations.
When we combine all of that momentum with, from the City of New York, the GSA, new customers, with the momentum from our existing customers, we do have some exciting new customers and, but at the same point in time, our SmartGATE results have earned us new opportunities for new buildings with some of the largest multifamily brands in North America. Additionally, we were recently asked by a long-term supporter to present our latest SmartGATE offering and results to the operating committee of the Ontario Ministry of Education. This put our latest platform and results on display for 85 leaders from the Ontario education sector, who have already generated solid revenue for Legend Power Systems.
In the past few weeks, this has led to over 8 new opportunities in established markets for LPS, and our other multifamily sector customers are continuing to expand with new opportunities and new sales that are coming in the near future as well. So again, deals are advancing nicely. We expect a solid annual bookings number for fiscal 2023. Our pipeline continues to advance and attract new customers, and we have a lot of exciting things going on. I look forward to taking your questions in a few minutes. Randy, back to you.
Thank you, Florence and Paul, for your updates. We continue to see a massive shift of corporate mind space and effort to climate, environmental initiatives becoming top corporate objectives. We see the world is serious about taking steps to positively impact climate change. In all of Legend's markets, we see consistent and systemic change to make buildings less harmful to the environment, combined with improving efficiencies, reducing costs, and making a better tenant experience.... Federal and civic government are committed to making it easier for corporations to adopt electrical energy-saving technologies for commercial buildings. They continue to introduce programs that support Legend's solutions. We now would be very pleased to take questions you may have.
Thank you. Ladies and gentlemen, we will now begin the Q&A session. Should you have a question, please press star followed by the one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request. Should you wish to remove yourself from the queue, please press star two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Once again, ladies and gentlemen, if you do have a question, please press star one at this time.
Michelle, I have a written question from email that I can make as the first question, if you'd like. It's Randy.
Okay.
The question that was sent to me was that there seems to be good reports about progress, but it seems that the sales cycle is taking longer. Mike and I have talked about this numerous times, that obviously we're matching our sales cycle to the customer buying cycle. But I think the key thing that we have talked about in the past quarters is that, you know, deals are getting larger, they're getting more complex, they're involving many more levels of decision-makers. Also, the sales process continues to be streamlined as we install systems and build trust with new customers. By that, I mean that the customers that have the system, that have worked in their buildings, they're happy with it.
We get quicker time to next systems because we've gone through that process and understand how we deal with their logistics and procurement, et cetera. Also, the sales cycle begins when we earn the right to sell. I just want to remind people listening that we have to go through when you create a new category, making people aware of what you do, educating them on your solution, and moving them to the point that they're comfortable that you can start the sales process. So in a lot of these large, complex accounts in new geographical areas, et cetera, we're actually doing a lot of the marketing cycle upfront, which appears to be part of the sales cycle, but you don't really sell until you've earned the right to sell.
And I think finally is that, as we positively impact prospects, businesses, and actually selling solutions that they can see in their own environment working and delivering results, we see the process streamlining. So hopefully, that gives us a little bit better color on that, and hopefully, we have some additional questions, Michelle.
Thank you. We do have a question from Horst Hueniken, Hueniken Asset Management. Please go ahead.
Thank you. My first question is just to confirm that the bookings target is still CAD 15 million by the fall of this year.
Yes, we expect that booking for between now and the end of the year, absolutely. We've had a couple of things move out, and we've had some things move in, but yes, that is the target.
Thank you for that. My next question, I don't know if this is addressed to Florence or you, Randy. For modeling purposes, I'm trying to estimate the revenue in the fourth quarter and the upcoming first quarter of next fiscal year. You have indicated that you've got 12 systems, or Paul indicated 12 systems in the backlog. You're finally getting those missing parts, so obviously you can book that. But I'm wondering whether there's any other information you can provide for us to pin down what the revenues might be in the coming one, two, three quarters.
I would think that what we've disclosed so far is probably what we know at this point in time. Availability of parts of things affect the, the book... Sorry, the, the rev rec. The bookings is something we have some better feel to. So, I mean, really, right now, what we're looking at is cash contributions over the next quarter or two. By that I mean deals where we actually invoice and can collect cash out of the existing inventory of CAD 1.5 million of new Gen 3 inventory and actually have a positive cash impact onto the balance sheet. So we're looking at those things tightly, Horst, but as far as the exact rev rec numbers, et cetera, we haven't published any forecast numbers or anything, and it's something we're looking at, and will depend on availability of some components and things.
Okay. Thanks for that, Randy. My final question relates to the ESCOs. On the one hand, you disclose that you're talking to 50 of them. I'm wondering whether either you or Mike could just update me on how many ESCOs you're actually not just marketing to, but you've actually got agreements to work together, yeah, with.
Mike?
Yeah, sure. So, if you look at that 50 number, that was on the partnership side altogether, that's not necessarily just ESCOs. When we look at our partnership strategy, we are leveraging multiple members of the energy ecosystem. That includes ESCOs, that includes distributors, that includes consulting firms, that includes electrical contractors, everyone who plays a role. That when we look at that number of 50, that's the broader number there. We look at the number that we have actual agreements with. We are into the double digits. I'd have to go through and pull that number, and I'll follow up with you after this to give you that exact number.
Okay, thanks. That's all for me.
Thank you. Once again, ladies and gentlemen, if you do have a question, please press star one at this time. There are no further questions at this time. I will turn the call back to Randy Buchamer for closing remarks.
I'll just give it 10 seconds to see if anybody does have any last chance for questions. Okay, it doesn't appear so, so we'll we'll wrap up. I mean, basically, we continue to earn the respect of the target markets in our ecosystems, and we're making them comfortable that Legend Power is an innovative company to work with. We continue to build our brand. We're working with key ecosystem players to ensure they're not only aware, but ultimately support Legend decisions in their clients' buildings. And I think that's where we're seeing a lot of growth. The Legend Power leadership team is very positive about what we're doing and our future. We're very committed to making Legend Power a leading energy management company. We've got the committed, talented team.
We've got an outstanding Active Power Management platform, 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 buildings. The future has never looked better, and we believe for Legend and our stakeholders, it will continue to get better. The time for Legend is now. We're very excited about the business, and we thank you very much for your participation and support. Thank you again, and have a great legendary day.
Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your-