© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
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 2020 Financial Results Release and Conference Call. [Operator Instructions]
Randy, you may begin the conference.
Thank you. Appreciate the introduction. Welcome, everybody. I hope everyone is having a good morning, and we welcome to our fiscal Q2 investor call. I have on the call with me Mike Cioce, VP of Sales and Marketing; and Paul Moffat, our Chief Operating Officer. We're going to go through some bullet point highlights to share with you, and we've welcome questions as we feel the 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 to be then 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 puts 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 a 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 are 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 almost in how we're going to make it work over the next while. So we're really confident that what we're doing is 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 to 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 the electrification, the carbonation challenges and alternate energy, et cetera. And there's no question, like in from all people we talk to, we're perfectly positioned to be a leading solution in this enormous business transformation. So during Q2, we completed the passing of Gen3, and we began an aggressive build initiative to fill the backlog. And Gen3, just to remind you, it's been a 3-year project. And it was a project design 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 where the market is going. Product is transformational. It's a huge achievement progression. We shipped about 20 Gen3 solutions near the end of the quarter. You'll see most of those reflect 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 some questions about rev rec, but that is effectively where we're at with that. The installations of Gen3 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 with the product. We did hit our Insights 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 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 Insights analytics, and we're being written with a 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 is 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 make doing business in New York, in different places, the supply chain to cash flow, all these things, we continue to pivot and make the business modify it to make sure we can meet those demands. So 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 all is making an immediate impact to improve our operations and I thank them for that. So as a shareholder, 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 of both direct customers and new sellers 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 doing 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'd 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 the are thousands of salespeople that they have. We are very early in Gen3, but we're developing some customer testimonials and case studies. And as we see Gen3 success, we can share those results through case studies to help move some of the people who are waiting for Gen3 results to give us orders.
The Insight program is working. We're on track with our 90 Insight inside orders in the quarter. Again, next 45 SmartGATE sales within 12 months presenting the prospect with a power impact before. We're on target for that. We've had a few delays. Some people have written into next year budgets. Some people have delayed a few months here or there on different regions with the economy. But we expect to get those targets of conversion to SmartGATEs 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 Petersen and I were talking about every day, he can only recall one that we haven't had 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, and 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 [ offsetting to ] create efficiencies, reduce costs, increase margins. We are increasing our prices by 15% on June 15. Of course, here on the call. And we told you that we were looking at the last quarter, there was an 18% in September and 15% now in June 15. We're protecting the people that have orders and/or proposals up until June 15 but that will bring us up to a 51% product margin. So again, I know this is something that I 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 as I started by talking about the industry backdrop is never much stronger. The product set 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 cost down by $50,000 a month, last month to help. We analyzed the cash cycle, the outflows and make sure sales orders makes 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 changed our payment terms, 25% with the order, 25% on delivery, 25% after [indiscernible]. So that we at 50% margins is going to 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 unique meetings going on with Mike and his team. But just toughest to say the discussions with key industry players are ongoing. Our strategic sales team is working with some of the largest prospects in numerous industries. They are looking at hundreds and thousands of unit commitments over multiple years, and we expect secure those businesses.
And we know that you can expect positive news and some pending wins over the next quarter or 2. 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 million 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 Cioce says that they're leaning in on conversations now, so the strong interest. And the awareness will increase as we build the business cases out in SmartGATE and Insights and continue to illustrate value to our market. And we will -- I believe have we have shown you historically, we will continue to prudently manage our business like we have for the last number of years that we 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 continuous confirmation that the time is now for [ realizing them ] our solutions. So enough of my view of the world. The guy is in the fight every day and doing a great job and his team is Mike Cioce, VP, Sales and Marketing. And after Mike finishes, Paul Moffat will highlight our operational improvement initiatives. I'll circle back with a summary, and we'll take questions.
Mr. Cioce.
Thank you very much, Randy. I 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 Gen3 installations are getting done. And within, as Randy said, within a few weeks, we should have over 20 Gen3 systems in service, producing compelling results. And again, if you look at some of the early results that Gen3 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 going to 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 if 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 generated 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 emotions are impacting some of the cycle times. Time from signing to Insights engagement orders to presenting the report can actually very fairly significantly. Our 12-month target cost starts after we present the Insights powerpack assessment. Our timing on Insights presenting report, it can be as quick as 30 days and as long as 6 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 other -- some of those other key tasks to actually install the Insights can vary, which could potentially cause some delays.
So as a result, we're adding 2 metrics to our Insights reporting, and those are the Insights installs and the Insights reports presented. And this will allow us to continue to tighten the way 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 electric firm in many decades. And when we look at the customer journey from going from unaware to aware but skeptical to willing to get us to 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. And for example, we added our first ever true cost power estimated 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 active power management and addressing power issues. This is going to be a key driver to getting folks to move forward with power impact assessment. It gives them a strong idea of what the benefit 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, where we're going to be near term, the impact of renewables to the grid is incredibly eye opening.
Right now today, if you look at our variable renewable rates being under 10%, our average scores fall in at about 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 [ annual ]. When we fast forward and we go to -- once we get over 20% variable renewable, those average scores fall off the cliff, well into the critical range of 4.7. And while over 95% of buildings were going to be negatively impacted to some level. And the biggest key learning on that is that the number of fluctuations in events that are going to 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 renewable penetration is going to depend upon having active power management inside of each building in order to be able to protect it. So we're really excited about the new research and the way that we'll be presenting to the 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 round of Gen3s into all this information, we're able to incorporate our expected results in 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 from SmartGATE. So we're very excited about that, and we combine that with the 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, real estate investment trust, 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, the types of organizations that, as Randy said, can easily buy hundreds, if not thousands of systems going forward. That's where our strategic directives focused. When you 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, many as we continue to build our marketing strategies around the new offering with some of the ecosystem partners 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. But at the end of the day, this is leading to new orders from major ESCOs 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 Ground which opens the federal markets to us. So over the coming months, we'll be installing SmartGATE with federal buildings, and we've actually been told that there are a number of regional federal facilities that are looking to get SmartGATEs. So when we combine that with the results that we're getting from New York as well as the new systems that we 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 a team that have to have status for large buildings that's going to continue to propel us to very large tons of revenue in the very near future. So with that said, I'll turn it over to Paul and field questions afterwards.
Great. Thank you, Mike, and thank you, Randy. Yes, I'm 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, and building on a great foundation 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 1 to 2 years. So my focus has been definitely on lead times, on time lines and cost of build materials, cost of manufacturing, cost 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 investments and cash flow or expressing to our suppliers what our demands are and what our needs are going to be in the future. But we're carefully pulling and parts and orders partially so partial shipments initially. And as we win new business and preparing our 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 Insights tools that we use to improve our sales conversions. We want to make sure that sure those are available, those are replaced. As you 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 hopes the customers as that's a key driver of these sales conversion. That'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, we're looking at the overall business and the processes and the way we work together, everything from HR to IT to finance, 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, breath of actions for overall company 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. I 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. And Randy, I'll pass it back to you.
Thanks, guys. Appreciate the updates, well done. Before we go to questions, my last comment would be that we started the journey a number of years ago to prove a product, prove a market. A lot of that work has been done and not only the time to capitalize on it. And everything you 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. This is not $1 million orders. This is not $500,000 orders that we've had historically. This isn't $1.5 million 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 these we're doing now, companies can look at what's happening in the marketplace and wait. We're building is when it comes, we want to be ready. Not only are we doing things differently, but we're doing things in ways that allow us to build at much different company than we have it in the past. So for example, some people ask about how are you going to handle if you got an order for 300 or 400 systems et cetera, while we are 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.
[Operator Instructions] And your first question will be from Ian Gillies at Stifel.
I wanted to start the 20 units that are going to be installed either this quarter or maybe at least part of next quarter revenue rec. But I wanted to maybe focus in a bit on the 50 incremental units, the inventory that you've acquired there? And are you able to provide any goalpost of when you think that product may be moving out the door for installation?
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 cash. What Paul has done is rolled out based on lead times and costs and order flow against demand. What we're doing, 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%. We're after we get the next -- the 20 out, et cetera, and get the price increase in June 15, we'll be over 50%, as I mentioned earlier. So it's not a benefit right now to sell a whole bunch of orders that are low profit, low margin, high for cash, wait a year to get it back, we don't have the capital. There's no margin. So we're, we think, making the right decisions, which is be strategic. If someone wants to order 1 or 2 units and ask them a sacrifice a large reseller [indiscernible] 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 than 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 us in quarterly commitments, et cetera, making sure the order flow that we do have is additional large business opportunity and onesie-twosies. And those are things like I said, but I've not done before, but we want to make sure we can manage our cash not tied up in the business where it's a working capital, it 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 want better clarity on?
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, on track right now are allocated on some of the lower margin stuff that has been earned over the prior couple of quarters? Or will those units all be done under the new pricing arrangements?
High majority under the new, Ian, so I'll say a handful maybe. We, that 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 6 months, we could have a decent margin on it. Also, with the change in our policy, up 25% with the order 25% on delivery, 25%, 25% [ MD ] 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, depending where you looked at from order from when we delivered, et cetera. And in some cases, it was almost 120, 130 from the original order, too long to 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 [ led them ] in the macro world that people are making these adjustments to 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 to kick product without the tie-in 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-in cash on the install, what we're doing is also making some changes where we put the price the product out, improve the margins -- we're going to put -- 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 overall large deal if you're getting 25% on order, 25% 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 tied it 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 this product anyway. So that's where we got to go. -- and that helps our balance sheet and helps us at the cash to run the business.
As you think of both the reseller market, is there some sort of absolute number in units produced per month or per quarter that they need to see be willing to contact or sign up for orders?
I never heard anything about. I'll turn 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, ultimate ways to have outsourced products done in the hundreds of units a month if required with very little intervention involvement from Legend. Don't protecting our IP to bring our cost down, labor cost down by some cases 75%, and take out 3 months 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 it too much today it's in the discussion stage but we're going to make some significant improvements there. And 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 if the market is there. We know the product doesn't we want. We know that it's all going to break loose has been huge numbers for us. So we've got to make sure we make the right decision now to analyze the future, and that's what we're doing.
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?
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 fine or 50% of your total cash outlay earlier rather than waiting extended time, that really helps cash flow. But there are lots of opportunities of different things. As the CEO, in the scenario of additional capital, we ask -- I asked the team, and the team look at this way, how do you make the right decisions to demonstrably improve the product, the model and the business is there and growing for 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, and we will. And we have alternate routes of financing different products and things with partners, et cetera, 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 bad it was just ingenuous to try to make any commitment to any of those people. But with the increased volume and what we see happening, we become a legitimate company to work with some of the sources.
Next question will be from Horst Hueniken at Hueniken Asset Management.
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 Moffat. Right, your payment terms has changed, 25% on order, 25% on delivery, et cetera. How does this change the accounting, in particular, how the revenue is recognized?
Yes, Horst. 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 425 have not 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 forecast 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.
Yes, that's what I thought, but you've confirmed that cash flow cycle has changed as a result. And that's it 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 1 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 looked at the financial this 1 because I want to be careful whether you don't have any 2 forward-looking statements here. we see an EBITDA positive moment in mid-2023 as we get the margins and the volume hits in [ weeks ] some of the implementations of these changes that we're making impact in the business. So yes, the key thing for us, Horst, 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 change 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 that is not willing to work with us. And we had some people have waited for some products, et cetera. We have not had any cancel of 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 give more color on that once we have some more work done on it.
And at this time, gentlemen, we have no further questions registered to proceed with closing remarks.
Okay. If we get interrupted by a question, that's fine. What we're trying to do today is share with you. I mean it's great to see name [ Michael Faster and John Lansky ] and Horst Hueniken et cetera. They've been through this journey for a while. And the reason I mention these names is because we're writing the script as we go. We're not following an existing marketplace that as 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. That's really exciting, but it also has this moment or 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 ask it.
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, talk about all the articles and things that say where we're at is the face to be in if you've got a live to get there, and we're taking the steps that need to be taken to conserve cash, to build our valuation with demonstrable result. 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 in on for over a few years, so I'll take my name out of the half. But Mike ad Paul involve are professionals, they're doing the right things and they're 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 and releases and having good follow-up discussions as we know there's some very good and large lines happening that we will be able to share with you over the next while, and we're excited to do so. So the macro is there, the products there. We believe we've got people. We think the timing is right, and we think the pie 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, 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.